(Bloomberg News) William Danoff might want to send a thank-you note to Steven Jobs, Apple Inc.'s chief executive officer.
Danoff's $78 billion Fidelity Contrafund got 13 percent of its return over the past two-and-a-half years from its stake in Apple. The fund, a portfolio with 494 stocks as of June 30, is one of six among Apple's 10 biggest U.S. mutual fund holders who can credit at least 13 percent of their return since 2009 to the technology giant, data compiled by Bloomberg show.
Apple, the maker of iPhones and iPads, has risen five-fold since early 2009, powering the stock market rally and attracting top mutual-fund and hedge-fund managers searching for returns. As the company's weight in the market and in many funds has grown, stock pickers need to be wary they don't become overly reliant on a single stock, said John Buckingham, chief investment officer at Al Frank Asset Management, which oversees $500 million.
"With the history of high flyers that have crashed and burned, the last thing a fund manager should do is let a position grow too large," said Buckingham, who won't let a stock get beyond 3 percent to 4 percent of the portfolio. "I don't see how you can take more risk than that no matter how much you like Apple."
Buckingham, whose company is based in Laguna Beach, California, has owned Apple since 2002 when the shares averaged less than $10, according to data compiled by Bloomberg. He said he has trimmed his Apple holdings in the $102 million Al Frank Fund regularly over the years. At the end of June, Apple represented 1 percent of the fund.
'It Takes Courage'
Apple closed above $400 a share for the first time on July 26, up from $78.20 on Jan. 20, 2009, when the combination of a recession and shaky credit markets drove almost all equities lower. Apple closed yesterday at $388.91. The stock has added almost $300 billion in market value over those 30 months.
Since Jan. 20, 2009, when it reached a low during the credit crisis, Apple has been responsible for about 7.3 percent of the gain in the Standard & Poor's 500 Index, more than twice the contribution of the runner-up, Armonk, New York-based International Business Machines Corp., according to data compiled by Bloomberg.
"It takes a lot of courage to build up a big position the way he has," James Lowell, editor of Fidelity Investor, a Needham, Massachusetts, newsletter, said in a telephone interview, referring to Danoff. "If the stock had gone the other way it could have ended up tarnishing a career."
Driving the Market
Danoff, 51, last year celebrated his 20th anniversary as manager of the Contrafund, which had $300 million in assets when he took it over. In the 20 years ended June 30, the fund returned 12 percent a year compared with 8.7 percent for the S&P 500 Index. Danoff was named Morningstar's domestic stock-fund manager of the year for 2007.
Apple represents 3.1 percent of the S&P 500, second only to Irving, Texas-based Exxon Mobil Corp., which has a weighting of 3.3 percent. Danoff's Contrafund had 6.8 percent of its assets in Apple, owning 16 million shares as of June 30, making it the largest mutual fund holder of the stock. Apple accounted for 13 percent of the fund's gains since Jan. 20, 2009, according to Bloomberg calculations.
The other funds among the 10 biggest holders that got at least that much help from Apple were the $17.7 billion Fidelity Advisor New Insights Fund (13 percent), the $7.8 billion Fidelity OTC Portfolio (14 percent), the $26.7 billion T. Rowe Price Growth Stock Fund (15 percent), the $8.7 billion Janus Twenty Fund (28 percent) and the $5.5 billion Janus Forty Fund (23 percent).
Beating the Index
Bloomberg portfolio analysis allows measuring how much an individual stock contributes to a mutual fund's performance over any given period of time. Because the fund data is gathered on either a monthly or quarterly basis, the calculation is approximate, not precise. The analysis cannot be done on mutual funds that own both stocks and bonds.
While it has helped performance, owning Apple is no guarantee a fund will outperform peers. The two Janus funds equaled approximately the 69 percent return in the S&P 500 between Jan. 20, 2009, and Aug. 1, 2011.
The other four funds did better, with T. Rowe Price Growth returning 89 percent and Fidelity OTC gaining 126 percent. The two funds managed by Danoff, Fidelity Contrafund and Fidelity Advisor New Insights, rose 74 percent and 72 percent, respectively.