ETF Investors Didn't See This Coming With Apple

Markets Benzinga

Shares of Apple Inc. (AAPL) plunged nearly 8 percent during Tuesday's after-hours session after the company's earnings win streak ended at 13 years. Adding to investors' disappointment, California-based Apple reported its first ever drop in iPhone sales.

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Apple reported fiscal second-quarter results of $1.90 per share on sales of $50.56 billion. Estimates called for EPS of $2.00 and sales of $51.97 billion. The company sees Q3 sales of $41$43 billion vs. $47 billion estimates. iPhone sales came out at 51.2 million, about 1 million above estimates but was the first sales decline in the product's history. iPad sales came out at 10.3 million, while MacBook sales came out at 4 million, Benzinga reported after the close of U.S. markets Tuesday.

Flows data indicate some exchange-traded funds investors did not see the disappointment coming from Apple. While there are roughly 100 ETFs that hold Apple shares, just five of the non-leveraged members of that group feature double-digit exposure to the stock. Four of them are widely followed.

Related Link: Don't Expect Apple Catalysts To Materialize Until Late Summer, Says JPMorgan

The Four

In no particular order, that quartet is the Technology SPDR (ETF) (XLK), Vanguard Information Technology ETF (VGT), iShares Dow Jones US Technology (ETF) (IYW) and the PowerShares QQQ Trust, Series 1 (ETF) (QQQ), the NASDAQ-100 tracking ETF.

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On month-to-date basis, XLK, IYW and VGT have hauled in about $615 million in new assets combined with XLK, the largest technology ETF by assets, accounting for $523.6 million of those flows. Subject the almost $606 million shed by QQQ and the funds also known as Apple ETFs are still flows positive for the month of April.

It is not as if investors those ETFs lacked warning to depart prior to Apple's earnings announcement. The stock is down more than 5 percent since April 13, and last week, Google parent Alphabet Inc (GOOG) (GOOGL) and Microsoft Corporation (MSFT) lost $30 billion in market value after their earnings updates. Google and Microsoft are also marquee components of the aforementioned ETFs, in most cases only trailing Apple in the funds' lineups.

The $2.49 billion IYW has the largest Apple allocation of the aforementioned ETFs at nearly 17 percent. Combine, Apple, Microsoft and two classes of Alphabet stock are almost 49 percent of IYW's weight.

To their credit, investors have been skittish with tech ETFs this year, pulling a combined $2.6 billion from IYW, QQQ and XLK on a year-to-date basis.

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