The NYT had a piece on the precipitous fall in the price of Apple's stock since last September. It explained the decline in part by the fact that an unusually large portion of its stockholders are individual investors. These investors were overly enthusiastic about the stock last year and now, according to the piece, excessively pessimistic. It tells readers;

"At its current price, investors are betting that Apple will grow more slowly than the average American company. And they are ignoring the enormous pile of cash that Apple has built up, which it could hand out to shareholders tomorrow if it wanted."

These two sentences actually are in direct contradiction. Apple has accumulated an extraordinary amount of cash precisely because it does not see good investment opportunities. That is good reason to believe that its profits will grow less rapidly in the future than other companies. Rather than ignoring this cash, investors are likely focused very much on the fact that Apple does not seem able to find good places to use its money.

There is one other point that is worth making about the stock price. It is plausible to tell a story in which Apple's stock price would be driven to extraordinary levels by ill-informed individual investors. (Although large investors could counter this run-up by shorting Apple stock.) It is less plausible that the price would be driven to irrationally low levels.

Institutional investors do own large amounts of Apple stock and in fact they have considerably less money in Apple today than they did eight months ago. If they viewed Apple stock as being seriously under-valued at its current price then they would rush in to take advantage of a bargain. The fact that this does not appear to be happening suggests that it is not just individual investors who view Apple's stock price as being too high. The big institutional investors must share this view.