Why This Fund Manager Is Reducing His Exposure To Apple

In the last six months that shares of Apple Inc.

have jumped up around 25 percent, it has made many participants nervous. Not because they are negative on the company, but due to the sheer size of the company they expect the law of large numbers to sooner or later catch up. Channing Smith from Capital Advisers Growth Fund was on CNBC Monday to talk about why he is trimming his exposure in the company. Tough To Grow "We like Apple for the long-term, but it used to be a 5 to 6 percent weighting for us, top holding, but really we have cut that back and the main reason is that where we are in technology cycle," Smith said. "If you look at the numbers from Comscore, we have about 75 percent penetration rates for smartphones." "If you look at IDC, we are growing at about 9.8 percent probably for the next couple of years. So, we think we are at that mass adoption stage where it's going to be tougher for Apple to grow with such a large installed base." He continued, "So, we think that a lot of that purchases will be more dependent on replacements and we think that the pricing and just where we are in the industry, it becomes a lot more difficult going forward." Law Of Large Numbers To Catch Up When asked if Apple is over owned, Smith replied, "I think you have seen a lot of institution buying, we think that it's still a great name. Look, we think Apple is going to perform well, but it's up 20 percent over the last month and it's one of the largest market-cap, you are going to get into this law of large numbers, but it's also going to be much more difficult for them to grow. Smith also remarked that, "Apple enjoyed gross margin of about 40 percent, we think that'll probably be the high really for the next couple of years."