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Institutional investors appear to be shuffling their portfolios, but some of Wall Street’s largest tech giants are experiencing a curious trend. Microsoft (NASDAQ: MSFT) remains the most under-owned mega-cap tech stock among institutional investors, despite an increase in large-cap ownership during the third quarter of 2024, according to a report from Morgan Stanley.
The bank's analysis shows that the gap between mega-cap technology stocks' institutional ownership and their S&P 500 weighting has decreased by 17 basis points (bps), narrowing from -113 bps in Q2 to -96 bps in Q3. However, Microsoft remains an outlier, with a gap of -2.08%, despite seeing improvement quarter-over-quarter as the gap narrowed by 34 bps.
Microsoft Misses the Big Money
“MSFT remains the most under-owned mega cap tech stock we track,” the Morgan Stanley report stated. With its under-representation, analysts suggest that Microsoft could represent a lucrative opportunity for investors seeking to tap into undervalued holdings within the sector.
The bank identified Apple (NASDAQ: AAPL) as the second most under-owned tech stock, with its gap widening by 14 bps to -1.86% during the quarter. Nvidia (NASDAQ: NVDA), on the other hand, saw the most dramatic improvement in institutional ownership, with its gap narrowing by 72 bps to -1.4%, down from -2.12% in Q2.
Meta and Intuit Lead Over-Owned Stocks
While some mega-cap stocks remain underweight in institutional portfolios, others are perceived as overly crowded. Morgan Stanley flagged Meta Platforms (NASDAQ: META), Intuit (NASDAQ: INTU), and Adobe (NASDAQ: ADBE) as being over-owned, signaling potential risk for investors. Intuit tops the list with an ownership excess of +0.60%, followed closely by Adobe at +0.37%.
Salesforce (NYSE: CRM) also earned a spot on the over-owned list, with a +0.32% gap. Analysts warn that concentrated positioning in these stocks could leave them vulnerable to adverse market conditions.
The Opportunity in Under-Ownership
Morgan Stanley concluded that while the institutional ownership gap for mega-cap tech has decreased, Microsoft’s continued under-representation presents a compelling opportunity for investors. The bank emphasized that the tech giant's underweight status could be a strategic entry point for those looking to capitalize on its growth potential.
Conversely, the report advises caution around the over-ownership of Intuit, Adobe, and Meta, as this concentrated interest could limit upside potential.
Institutional Shifts Reflect a Changing Landscape
Nvidia’s significant improvement highlights shifting dynamics within institutional investment strategies. Once among the most under-owned, Nvidia’s rebound is seen as reflective of increased confidence in its long-term outlook, largely driven by its dominance in AI and chip manufacturing.
The Bottom Line
With Microsoft remaining under-owned despite narrowing gaps, and Meta facing concerns over over-concentration, the landscape for mega-cap tech stocks is ripe for strategic decision-making. Investors will need to weigh the risks and opportunities carefully as they navigate the complexities of institutional movements in 2024.
