Why AQR Capital increased its position in Apple in 2Q14

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AQR Capital and Apple

AQR Capital Management added new positions in AstraZeneca (AZN), Navient Corp. (or NAVI), and Equinix (EQIX). It sold positions in Tableau Software Inc. (DATA) and Geo Group Inc. (or GEO). AQR increased positions in Apple (AAPL) and DIRECTV (DTV).

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AQR Capital increased its position in Apple from 0.86% in the previous quarter to 1.24% in the fund’s second quarter U.S. long portfolio.

Overview of Apple

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Apple is based in Cupertino, California. It designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players. It also sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.

Apple’s products and services include iPhone, iPad, Mac, iPod, Apple TV, iCloud, and the iOS and OS X operating systems. Apple also has a consumer and professional software applications portfolio. It has a variety of accessory, service, and support offerings. The company sells and delivers digital content and applications through the iTunes Store, App Store, iBooks Store, and Mac App Store.

Apple unveils new products

Apple unveiled new products at its September 9 event. It unveiled two new handsets and the Apple Watch. The new iPhone 6’s screen measures 4.7 inches. The iPhone 6 Plus’s screen measures 5.5 inches. The watch will start at $349. It will be available in early 2015.

The company also plans to launch a new payments solution—Apple Pay. It’s expected to be an alternative for physical wallets, credit cards, and other mobile payment services. Apple said that Apple Pay supports credit and debit cards from the three major payment networks—American Express, MasterCard, and Visa.

There were reports of security concerns over iCloud accounts. There was also the recent “bendgate.” These issues impacted Apple’s stock this month.

Is the iOS market share declining?

In August, the International Data Corporation’s (or IDC) second quarter Worldwide Quarterly Mobile Phone Tracker noted that Apple’s iOS saw its “market share decline despite posting 12.7% year-over-year shipment growth.” However, the release also noted that with the introduction of new large screen devices, third quarter volumes could be higher as a result of new device shipments.

The IDC added that iOS’s rival, Android, shipped a total of 255.3 million Android-based smartphones in 2Q14. This was up 33.3% year-over-year (or YoY). Samsung accounted for 29.3% of these shipments. However, it was down from its 40% share two years ago. Increased competition in the smartphone and tablet space impacted Apple and Samsung’s market shares.

Apple devices account for the majority of mobile commerce transactions

This week, Market Realist noted that the majority of mobile commerce transactions occur through the iPhone and iPad. The report said the iPhone accounted for ~54% of all mobile commerce transactions in the U.S. as of 1Q14. Samsung (or SSNLF) accounted for ~30% of mobile commerce transactions.

To learn more about Apple and its future in e-commerce transactions, please read our series “Why Apple devices continue to dominate the mobile commerce market.”

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