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Morgan Stanley analyst Erik Woodring notes that several mega-cap tech stocks are under-owned by major institutional portfolios.
The research showed that “the spread between active institutional ownership and S&P 500 weighting for the largest technology companies (by market cap) – AAPL, AMZN, FB, GOOGL, and MSFT – was -80bps exiting 1Q22, while it was +22bps for the rest of large-cap tech.”
Mega-cap tech names are under-owned when compared to the S&P 500 but large-cap software and internet names witnessed their ownership increase in Q1.
Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Nvidia (NASDAQ:NVDA), Google (NASDAQ:GOOGL), Cisco (NASDAQ:CSCO), and IBM (NYSE:IBM) are the most under-owned stocks that Morgan Stanley tracks.
Out of these several stocks, “only AAPL, NVDA, and CSCO saw their under-ownership gap widen in 1Q22,” Woodring added, while many other internet and software stocks saw this gap narrow in the first quarter.
“A quant analysis on this historical data indicates that on average, after adjusting for market cap and earnings beats, there is a statistically significant relationship between low active ownership relative to the S&P 500 and future stock performance. While larger cap stocks tend to have larger ownership gaps – this is just one of many idiosyncratic factors affecting future stock performance,” Woodring explained in a note.
Apple’s active institutional portfolio weighting was 5.75%, lower than the 7.07% weighting in the S&P 500. Microsoft’s active institutional portfolio weighting was 4.15%, compared with its S&P 500 weight of 6.04%.
