How ETF Investors Can Calibrate Apple’s $3T Milestone

How ETF Investors Can Calibrate Apple’s $3T Milestone

We highlight some of the options to consider in owning this superstock.

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Reviewed by: Lisa Barr
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Edited by: Daria Solovieva

Apple Inc. stock made history last week, as its market capitalization crossed the remarkable $3 trillion mark. That Apple is the most valuable company on planet Earth is not a surprise. For many people, the company has transformed added ease and efficiency to everyday tasks and changed how many people work, play and communicate with each other. 

Still, the stock is running at a level that makes longtime market watchers shake their heads. In June alone, the value of Apple’s stock grew by $263 billion, which is more than the total market value of 95% of the stocks in the S&P 500.  

Apple’s run presents some unique investment decisions. The stock could remain invincible for a while, and it is easy enough to own directly. However, exchange-traded funds offer a wide variety of ways to calibrate the role that a $3 trillion Apple has in their portfolio in the second half of a strange but profitable 2023. 

Apple’s AAPL ticker symbol is somewhat ubiquitous in the ETF world. According to etf.com’s ETF Stock Finder tool, 433 funds include the stock in some form.  

Here’s a trio plucked from that list to help investors to determine how much Apple to allocate within their portfolio’s overall diet.  

ETF Exposure  

The Technology Select SPDR Fund (XLK) is an obvious place to start. The S&P 500 breaks down into 11 sectors, and tech is one. XLK represents the S&P 500 components in that sector, and they are weighted by market capitalization. That makes Apple the largest holding, with XLK owning nearly 60 million shares of the current incarnation of Steve Jobs’ vision.  

Apple comprises a whopping 23% of this $48 billion ETF, followed closely behind by Microsoft, which makes up nearly as much. Microsoft’s market capitalization is over $2.5 trillion, so it is currently the other half of a mega-cap duopoly with Apple. In a market that doesn’t seem to pay much attention to valuation, XLK’s portfolio sells 8x book value, more than double that of the S&P 500 on that measure. 

The iShares S&P 100 ETF (OEF) is a more moderate Apple-infused option, with an 11% position in the stock. OEF has $8.2 billion in AUM. It carves out the top 100 stocks within the S&P 500. At a time when the market continues to reward a smaller number of stocks and the big get bigger, OEF represents an interesting compromise for those who like the idea of owning “the market” but don’t insist on owning an S&P 500 ETF to get there. 

For those investors looking to own Apple but limit their allocation to it in this environment to around 5%, there are several ETFs to deliver that. One is the Avantis US Equity ETF (AVUS), a $4.3 billion actively managed fund that will celebrate its four-year anniversary this September. AVUS allocates to the megacaps, but at smaller allocations than the indexes, effectively underweighting the most popular stocks by surrounding them with plenty of smaller companies. 

As a result, its P/E ratio sits around 14x, half that of XLK. Still, with more than 2,400 holdings, this is a heavily quant-driven ETF, just with a more inclusive portfolio than most funds that include stocks like Apple. 

With the company entering the $3 trillion market cap club last week, every investor should include in their research a decision about how much exposure they want to this era’s top “super stock.” 

Rob Isbitts was an investment advisor for 27 years before selling his practice to focus on ETF research and education. He is based in Weston, Florida. Contact him at  [email protected] and follow him on LinkedIn.