The Mega-Caps are the most under-owned in 16 years – MS

[Big Tech Media]
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Morgan Stanley analysts have found that mega-cap tech stocks – (GOOGL [https://seekingalpha.com/symbol/GOOGL]), (AMZN [https://seekingalpha.com/symbol/AMZN]), (AAPL [https://seekingalpha.com/symbol/AAPL]), (META [https://seekingalpha.com/symbol/META]), (MSFT [https://seekingalpha.com/symbol/MSFT]), (NVDA [https://seekingalpha.com/symbol/NVDA]) and others – are the most under-owned among actively managed funds in more than 16 years, with the gap between portfolio and S&P weightings significantly widening in the second quarter.

During a CNBC interview, Morgan Stanley’s Erik Woodring suggested this could actually be positive for the sector.

“Investors, active managers are underweight of the mega caps – even the Nvidia’s (NVDA [https://seekingalpha.com/symbol/NVDA]) of the world that have obviously had their amazing run,” Woodring said.

He noted that these stocks represent very large weightings in major indices, creating concentration risks for portfolio managers who might own several of them simultaneously.

For Apple (AAPL [https://seekingalpha.com/symbol/AAPL]) specifically, the under-ownership stems from tepid top-line growth and various geopolitical and regulatory headwinds the company has faced. “On a look-back basis, the underweighting is clear. Why institutional investors would be there?”

However, Woodring expressed a more optimistic outlook for the iPhone maker, citing three key factors: “One is obviously dodging major risk in Section 32 tariffs. That could have been up to 10% EPS downside. Instead, it’s effectively a nonevent.”

Additionally, he pointed to better-than-expected earnings in both products and services, and emerging signs of an AI strategy, including increased capital expenditures and a potential second generation of AI technology.

Woodring also highlighted performance disparities among tech giants, with Microsoft (MSFT [https://seekingalpha.com/symbol/MSFT]), Meta (META [https://seekingalpha.com/symbol/META]), and Nvidia (NVDA) outperforming the S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]), while Alphabet (GOOG [https://seekingalpha.com/symbol/GOOG]), (GOOGL [https://seekingalpha.com/symbol/GOOGL]), Apple (AAPL), and Amazon (AMZN [https://seekingalpha.com/symbol/AMZN]) have underperformed.

“Meta (META) has actually been over-owned relative to its index weight for the majority of the last four years up until the second quarter,” he said. “It is now under-owned relative to its weighting, as it’s had quite a nice run.”

Overall, mega cap tech stocks are underowned by approximately 140 basis points as of the second quarter, an increase from 115 basis points at the end of the first quarter, he added.

“We are more under-owned than three months ago,” he concluded, suggesting potential room for increased institutional investment in these stocks going forward.

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