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Apple, Google Suffer from Hedge Fund Woes, Fear of High Multiples

Posted Sep 09, 2008 11:02am EDT by Aaron Task in Investing, Computers, Electronics, Internet
Related: AAPL, GOOG, YHOO, DELL, GLW, ^NDX

All eyes are on Steve Jobs Tuesday as he's slated to host Apple's "Let's Rock" event in San Francisco today. Speculation is swirling about whether Apple will unveil something more than "just" an upgrade to its iPod line, as is widely expected.

But Apple, and fellow tech titan Google, were in focus Monday for other reasons: Being notable laggards amid the broad market's embrace of the Fannie-Freddie bailout plan.

Todd Harrison, CEO of Minyanville.com and a former trader at Morgan Stanley, Galleon Group, and Cramer Berkowitz, said investors much separate "good stocks from good companies" when it comes to Apple and Google, which was also hit by news of a Justice Department investigation into potential antitrust violations.

Harrison says these and other high-beta stocks are suffering from:

  • Multiple Compression: Which is a function of traders being less willing to pay up for high P/E stocks because of a lack of faith in their earnings growth or general economic concerns, or both.
  • Hedge Fund Selling: For a long time, hedge funds were "hiding" in tech stocks like Apple and Google as a way to shelter themselves from the credit storms and rising commodity prices, Harrison says. Now those trades are coming off for a variety of reasons, including falling commodity prices and hedge fund blowups unrelated to tech.

For these and other reasons, Harrison is generally bearish on tech stocks, which he does not think has priced in the recent bad news from Dell, Corning, Ciena, and others.

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