By Kevin Kelleher
On December 8, 2012

For a company at the peak of its game, Apple sure had a dismal week. The stock slumped 9 percent without any negative news, and in the midst of what could be its strongest quarter ever.

In fact, Apple’s stock is down 24 percent since Sept. 21. Months after people started predicting Apple would be the first trillion-dollar company in the world, the stock’s market value is having trouble holding above $500 billion. That’s still a massive figure, but it’s also cheap: Apple’s price-earnings ratio of 12 is as low as it’s been in ten years.

What happened? That question is driving a lot of speculative theories about Apple. But the reality is, sad to say, much more mundane.

On Wednesday alone, Apple’s stock fell 6 percent. At first, nobody could come up with a convincing explanation. But the financial press, like nature itself, abhors a vacuum. And soon enough the market’s confirmation-bias engine was running in high gear. It must be the last sentence in this otherwise bullish story on a Taiwanese web site! Or it must be this IDC report restating the obvious, that the iPad’s share of the tablet market will edge down (to 50 percent from 54 percent over the course of four years)! Or that the stock was approaching the dreaded “death cross” on technical charts!

The most likely explanation was a boring one. Some stock-clearing firms were raising the loan deposits necessary to buy Apple shares on margin. That would not only decrease speculative demand for the stock, it could prompt investors to sell shares if they didn’t want to pay the extra deposit. But the reason for raising the margin requirement was telling: Clearing firms had a “high concentration ” of Apple shares on margin – more shares in a single stock than they were comfortable with.

And that gets to the real reason behind Apple’s stock blues. Its market cap had gotten just too freaking big. Fund managers don’t like having too high a percentage of their holdings in a single company, even if that company is Apple. They diversify to limit the risk of one company tumbling. Because, should Apple’s stock start to drop, it has a disproportionately large effect on their fund’s performance. And Apple’s stock is dropping.

Funds don’t even have to have bought Apple heavily for it to make up a significant portion of its total holdings. Let’s say a mutual fund buys enough Apple shares to fill up 10 percent of its portfolio. If Apple’s stock doubles, that figure could rise to 18 percent. Between September 2009 and July 2011, Apple’s stock did double to $350 a share. And it doubled again to $700 a share between July 2011 and last September. In our theoretical portfolio, Apple would now be 31% of its holdings.

That’s nice as long as Apple keeps rising, but it makes investors especially anxious if Apple’s future looks uncertain, or if the stock falls. They may trim their Apple holding even if there’s no tangible bad news, simply to limit their fund’s exposure to future declines. Meanwhile, potential buyers may not emerge, since many other funds feel they’re already stocked up on one of the world’s biggest stocks.

Of course, all this could change in a single day of trading if a critical mass of investors becomes convinced there is good news ahead. Some of the remaining Apple bulls defending the stock believe this could well happen. Brian White of Topeka Capital noted stronger than average sales among Apple’s suppliers, suggesting “the strongest new product ramp in the company’s history.”

Apple’s stock has become a victim of the company’s success, growing so large it’s now a single-stock proxy for the entire consumer-tech industry. It’s a longtime seller of computer hardware, but it’s also created two major software platforms, both popular with developers. With iTunes, it’s become one of the world’s biggest media businesses . And with iCloud, it’s an early player in the emerging market for cloud services. Its reach spans from mobile devices to e-commerce to digital content.

With no single sector driving Apple’s success – as search ads, for example, do for Google – the issues driving Apple’s stock are the ones affecting the tech industry at large. And again, all of these issues involve unresolved questions: Will talks over the fiscal cliff lead to a recession next year? What new innovations or products will generate future growth? Will increasing competition in markets like mobile devices cause profit margins to dwindle? These are questions for Apple, and for tech in general.

As the chart above shows, Apple’s stock performance this year has resembled the trajectories of broader tech indexes. With one difference: Apple’s stock rose more during the first part, and declined more in the past few months. Much of the gain was the result of the quarterly dividend Apple announced in March . Investors love a dividend party, but if Apple doesn’t hand out extra party gifts, they will clear out. So far, Apple hasn’t indicated whether an increased dividend is coming. In other words, more uncertainty.

Apple is still planning to buy back shares during the next three years. And it still has years of strong growth ahead. All of that is a given, yet the stock remains in a slump. It turns out the reasons for that are fairly pedestrian — concerning technical factors like liquidity and vague specters like uncertainty, and not so much reflecting the health of its business operations.

Such matters make for boring headlines, and so we can expect silly theories about why Apple’s stock is ailing. Blame it all on Apple Maps, if you must. But the reality is much more mundane.

Apple iTV

Adding to recent Apple iTV rumours , a new report from analysts at Morgan Stanley has suggested Apple’s first television set will boast a wealth of innovative technology, including a smart context-sensitive implementation of 3D.

The analysts have pored over Apple’s patents and predicted which ones will make it into the company’s long-predicted television (which they claim will be launched very soon). So it’s more informed opinions than straight-up fact, as is frequently the case with analyst predictions.

The 3D patent is one of the more interesting aspects raised. Filed in 2005 and granted in 2011, it involves a “groundbreaking” 3D display system that can identify the position of human viewers in a room and their movements, and is able to project virtual objects onto a display area as well as provide audio and visual feedback. Sounds very much like a UI to us.

They also predict that the Apple iTV will have a 3D remote controller, which will allow a cursor to appear on the screen depending on the position and orientation at which the user holds the remote.

The TV will support Siri for voice control and search, and access a huge database of metadata that allows users to look for content across iTunes, Netflix , IMDB, Amazon and social networking sites.

Apple has also been granted patents for a high refresh rate TFT-LCD screen which would reduce eye fatigue, and a network that would allow viewers to monitor athletes’ heart rates, body temperature and other measurable stats via on-screen updates during live sporting events.

The analysts’ predictions are based around the assumption that Apple will want the Apple iTV set to show itself as distinct from the rest of the HDTV market by virtue of a number of exclusive features.

Are you on board with the analysts’ predictions for the Apple iTV, or do you think they’re clutching at straws? Share your thoughts on the matter via the Trusted Reviews Twitter and Facebook feeds or through the comments section below.