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Retail investors are set to throw in the towel and finally sell if Apple and Tesla stumble, says Vanda Research

Retail investors are set to throw in the towel and finally sell if Apple and Tesla stumble, says Vanda Research

Shares of Apple and Tesla are increasingly important to retail investors’ portfolio performance, and any stumble in the two stocks could trigger another wave of selling, according to Vanda Research.

The firm estimates that Apple and Tesla together make up 34% of the average retail investor’s stock portfolio. This concentration has actually helped the performance of retail investors, as both Apple and Tesla have significantly outperformed the S&P 500 YTD and over the past year.

While the S&P 500 has fallen 15% over the past year, Apple and Tesla have generated positive gains of 3% and 8%, respectively. And year-to-date, while the S&P 500 is down nearly 25%, Apple and Tesla are down just 18% and 21%, respectively.

Vanda believes this outperformance was due to Apple’s status as a defensive, high-quality company favored by institutional investors, while Tesla’s meteoric rise over the past few years has attracted a large base of retail shareholders and led institutions to be weary of shorting the electric vehicle . producer.

But while Apple and Tesla have both meaningfully outperformed recently, any big drop in their share prices could be the last straw for retail investors’ portfolios, forcing them to throw in the towel and unleash a new wave of stock market selling. according to Wanda.


“Positional vomiting in these two stocks could be a stroke of grace for PnL retail investors,” Vanda said.

Apple is starting to sell off heavily following reports that it is cutting production of its iPhone 14 amid demand concerns. Shares fell more than 1% on Wednesday as the market rallied, and were down about 4% in Thursday trading.

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According to Vanda, Apple’s selloff could eventually spread to Tesla and continue to drag the stock market down.

“The danger is that reversing Apple’s production plans risks causing significant unwinding, leading to secondary effects for Tesla,” Vanda said.

The only silver lining in capitulation by retail investors is that it tends to be a contrarian indicator that occurs at or near the bottom of the stock market.

“Although there is still some room to go, [retail capitulation] is approaching levels that would mark the bottom of equity capital. The typical path to retail capitulation is sudden and fast; therefore, we pay close attention to possible further deterioration [market] guts,” said Vanda.

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