There’s a catch, though: One stock alone accounts for the overwhelming bulk of that increase. In fact, of that $282 billion, some 83 percent of it comes from gains in shares of Apple Inc., now the highest-valued company in the world. Many mutual fund managers can attribute most of their recent success to large positions in Apple. But is a large current stake a ticket to further outsized gains? Or is it an increasingly risky bet that could quickly sour? Apple is the most widely held stock among the 465 growth funds followed by FactSet Research, said Michael Amenta, an analyst at the firm. And that poses pressing issues for many fund managers. “We’re sensitive to letting a mutual fund get too outsized a position,” said Ryan Jacob, manager of the Jacob Internet fund. When his fund’s Apple holdings neared 9 percent of assets, Mr. Jacob decided to “trim a little bit.” Until quite recently, selling Apple often led to remorse. “Every sale has been a bad sale,” Mr. Jacob lamented. “Up until a couple of months ago,” he added, referring to Apple’s decline from an April high. Today, fund managers must weigh Apple’s distinct performance and potential against some equally distinct risks. On the positive side, Apple is a sales juggernaut seemingly immune to the slowing growth that often afflicts giant enterprises. In its fiscal year ended Sept. 24, revenue grew by a remarkable 66 percent, to $108 billion. Sales in the quarter ended March 31 soared again — by nearly 59 percent from the year-ago period. Apple shipped more than 35 million iPhones during the quarter, accounting for 58 percent of revenue. And Apple has consistently vaulted expectations. “Over the last 30 quarters, Apple earnings have exceeded analyst estimates in all but one of the quarters,” marveled Scott Callahan, manager of the Icon Information Technology fund. FURTHERMORE, Apple never has been about the numbers only. As the leading purveyor of techno-chic, Apple has a branding history that would please Don Draper. Early on, Apple pitched itself as the anti-establishment alternative to I.B.M. Now it is pouring ad dollars into convincing a gadget-loving public that it’s cool to chat with Siri, the iPhone cyber-assistant. Among those delivering its pitch is the actor John Malkovich. But Siri does have doubters. A new report issued by a Piper Jaffray analyst said that in many hundreds of inquiries delivered on a noisy street, Siri could accurately answer just 62 percent, and that even in a quiet room, it could accurately handle just 68 percent. Apple has backed up its slick branding with striking design, technical innovation and strategic ingenuity — and the company’s creativity seems to make its customers feel creative, too. It was once said that nobody was fired for buying I.B.M. Today it can be said that nobody ever lost self-esteem by buying Apple. But the company’s success has produced a gaping vulnerability for investors. Stellar sales performance has lifted its share price and market capitalization, swelling its weighting in indexes like the S.& P. 500 and the Nasdaq 100. In late June, it represented a remarkable 18.9 percent of that Nasdaq benchmark. Why is this important? It matters because a host of index funds and exchange-traded funds mimic such benchmarks. As investors plow more money into these funds, the E.T.F.’s have had to add Apple shares — pushing share prices still higher, and in turn prompting even more buying. This circularity works great in a rising market. But what if Apple stock — or even the broad market — were to suffer a sharp decline? Index funds recently held 9.6 percent of Apple’s outstanding shares, according to FactSet. Five of Apple’s seven top shareholders were E.T.F.’s or index-style funds. One of these, the PowerShares QQQ Trust, had almost 19 percent of its portfolio in Apple shares. This kind of situation poses two threats. A sharp decline in Apple’s share price would lead to reduced index weighting, setting off E.T.F. and index fund sales of the company’s shares. A broad market decline could also spur redemptions, requiring funds to raise cash. With their heavy weighting, Apple shares would have to be unloaded. Just as Apple’s rise was accelerated by its growing weighting in market indexes, its decline would be amplified by that weighting. “You can get a cyclical thing that feeds on itself,” said Kevin Landis, manager of the Firsthand Technology Opportunities fund, where Apple is the leading stock holding. “It’s a potential risk,” allowed Mr. Callahan, the Icon fund manager. Even companies enjoying outstanding growth can see their stock tumble when profit margins erode. Apple is not immune to margin pressure, reasons Edward Zabitsky, chief executive of ACI Research in Toronto. Though many analysts see Apple continuing its ascent, Mr. Zabitsky is far less sanguine. “It can go to about $460” within the next six months, he said of Apple shares, which ended the second quarter at $584. He has a longer-term target of $270.
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