Apple Shares Could Fall as Part of Annual Russell Index Recalibration

According to an analysis from Credit Suisse, Apple’s stock price could continue its decline, thanks to a projected net sell-off of $1.3 billion Apple shares at the market close on Friday when the reconstitution of the Russell indexes take effect, reports Reuters.

Since Apple has been buying back and retiring its stock, outstanding shares have dropped from $5.8 billion (reported last June) when the Russell indexes have been recalibrated to $5.5 billion this year just ahead of the scheduled reconstitution of the widely followed index.

Credit Suisse points to Apple’s position in the Russell index: thanks to its stock buyback and smaller market capitalization, the company’s weighting in the Russell 1000 will roughly fall to 2.52% from 2.77%.

Adding to the selling pressure, Apple will be classified as both a value and a growth company at Russell. After the close on Friday, 92 percent of Apple will be considered “growth” and 8 percent “value” according to index provider FTSE Russell, splitting it between two Russell subindexes.

The move matters because value managers that peg their investments to the Russell indexes will be buying Apple while growth managers will be selling. Because there are more assets benchmarked to growth than to value, there will be net selling of Apple, said Meera Krishnan, U.S. index strategist at Credit Suisse in New York.

Despite trimming its stake in Apple, Graham Tanaka, portfolio manager of the Tanaka Growth Fund in New York, said Apple is a “growth and value stock,” adding that they are waiting now to see some growth from the company: “The question is when and how Apple can reaccelerate their growth rate. We’re playing the waiting game.”