Understanding Apple: Easy Loathing Debunked.

Malcolm is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Apple (NASDAQ: AAPL) is in a great retraction, and naysayers are celebrating. But to my surprise, fellow Fool G. A. Chester's recent article 3 Things to Loathe About Apple wasn't really about Apple or its products per se, but more what people say about Apple. The things he criticized about the company hardly seem to merit outright loathing.

DNA

Chester jumps on the fact that many Apple supporters, led by its CEO Tim Cook, like to say that “Innovation is in the company's DNA.” Chester writes:

It's a comforting idea for fans of Apple to believe that innovation is hard-wired into the business and that it will always continue to innovate, as if that's its biological destiny.
The idea is rubbish, of course…

Rubbish? Well, no. This is a metaphor, and I have not seen anyone try to indicate that it is anything more than that. Chester continues: "Nurture, not nature is responsible for innovation."

This is just what Mr. Cook is saying. It is precisely the 30-plus years of nurturing that has produced a company in which the cultivation of the innovative spirit has been so essential, so ingrained into the corporate culture, that it is as if it were in the DNA of the company. No one pretends otherwise.

Chester goes on to compare Apple to onetime giant British company ICI: "Innovation was in ICI's DNA -- except one day it wasn't, and the business went into decline."

This is, of course, true. It did fall, until it was eventually broken into pieces and gobbled up by other enterprises. But one example doesn't spell out an inevitable fate for all companies. And even if it is inevitable, that doesn't mean this destiny will happen to Apple anytime soon.

Loss of Steve Jobs

It seems to me that some people think that everything at Apple was done by Steve Jobs all by himself. Clearly Jobs was one of the most gifted corporate leaders of our time, but still he depended on many others collaborating to produce what he called “insanely great” products. Most of these people are still at Apple.

Chester is right in one thing: We need to wait to see whether Apple can continue to innovate or not. But if Apple can't innovate without Steve Jobs, how can any other company innovate, either?

Even if the argument is correct, I still see no reason in it to loathe Apple.

Poor Investment

Complaining that the “City experts” [i.e. Wall Street analysts] still rate Apple highly, Chester states, "I prefer to see the market and the analysts bearish on a company before rating the stock a possible 'darkest-hour' contrarian opportunity."

Ah! So here we have it. The author is a contrarian, and refuses to back a stock until everyone hates it. This is fine as a personal method of investing, but I am sure that – even if it works many times – it also misses many stock runs. I'm also sure that as a sole method of analysis, it will lead you to many losing stocks. Sure, there are many instances in which the analysts have very good reasons for predicting a stock will fail.

Even Chester himself points out that Apple stock is supported for the simple reason that it presents a mere 10.8 forward P/E for 2013 – and that does not even account for the $153/share in cash.

Conclusion

Yes, there are some people who loathe Apple. Many claim their products to be overpriced gadgets sold only to sheep, or lament the “walled garden” of Apple’s iOS. Yet to most reasonable people, Apple provides high quality, innovative, products that make their lives easier. I see nothing to loathe here.


Jaan Seunnasepp owns shares of Apple. He has a masters degree in Computer Science, and worked for 14 years in development, technical publications and software quality assurance. He has been investing for 20 years.

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