Buy Apple Next Time It's Downgraded on 'Morals'

NEW YORK (TheStreet) -- On Monday morning, investors were greeted with a rather interesting -- possibly never before seen -- downgrade that initially took shares of Apple (AAPL) lower. 

In fact, the downgrade seemed somewhat significant at first, as Apple dipped below its 50-day simple moving average. It's generally considered bearish when a stock closes below its 50-day, possibly signaling that it has lost momentum. Shares however, closed above that mark. 

Before we look at the price action, let's consider for a minute the actual downgrade. The rating agency, Standpoint Research, downgraded shares of Apple to sell from hold, citing moral reasons as their justification.

Since when the hell did morals contribute to the bottom-line, effect margins, or really change anything? 

Now, you could point the finger at unsympathetic, not-give-a-damn me. Accusing, without even knowing me, that I could care less regarding the well-being of other human beings. (This truly, is not the case).

Or you could step back for a second, and consider that "morals" were the reasoning behind a stock downgrade of all things. Here is an excerpt from the research note:

"For Apple Computers to pay their workers $2 an hour while they have $150 billion in the bank is nothing short of obscene. They have workers who are doing back-breaking and eye-burning work in depressed states of mind and in many instances have already committed suicide. Instead of treating their employees like human beings, they are treated like animals. If it were not for their employees, Apple would not be where it is today. But instead of giving these people a better life, they give these people the bare minimum and defend this action with the argument that the wage is higher than the average there and in-line with what their competitors are paying."

Full disclosure: I am not all that familiar with Chinese regulations, minimum pay levels or competitive rates within the regions. However, it would appear as though Apple is following the law based on a few quick Google searches. Here is a video of Ronnie Moas, founder and director of Standpoint Research, discussing the call on CNBC's "Fast Money" TV show. 

Moas suggests that Apple underpays its "Asian employees" -- which I will assume he is referring to Foxconn's employees, since that is who builds the company's products. Furthermore, he suggested Apple should pay them a dividend, rather than its shareholders. 

For the record, I completely agree that there is a humungous imbalance between the rich and the poor. Be it globally or domestically. It's a problem. But targeting a single company makes no sense. For what it's worth, the beloved Amazon (AMZN) was included in his tirade as well. 

The show's host, Melissa Lee, had little difficulty poking holes in Standpoint Research's rationale. Targeting its source about $2 per hour wages, (which was poorly defended by Moas in the video). 

Apple's morals, or lack thereof, have absolutely nothing to do with business operations. In a sense, it's actually Apple's lack of morals that keep shareholders happy, since profits are maximized and margins are fat. If you want to blame somebody, blame the shareholder base, for which they are the ones pressuring management. 

Let me direct this question to Standpoint Research: If Apple were to triple the hourly wage of its (read: Foxconn's) workers, will it then upgrade the stock? 

Only answering that question with a yes, would it make a ratings change more illogical than the downgrade we saw on Monday.

And going beyond that, why not downgrade just about every company that operates off of American soil.

Did Standpoint downgrade shares of Nike (NKE), which is constantly under fire for its wage and work practices in emerging markets? How about Wal-Mart (WMT), Intel (INTC) or International Business Machine (IBM). I'm sure Samsung pays every one of its employees amazingly. 

Deep breath. Exhale. 

It's not that I don't think people should be treated fairly. Nor do I think giant companies should operate as slave owners over their corporate plantations. 

But that's just the way it is. Apple -- along with hundreds of other companies -- have been running things the same way for a while now. This isn't anything new. We've all heard about Foxconn and potential regulation infringements. 

This changes nothing. It doesn't bring anything new to the surface. Some guy was sick and tired of global corporate practices, and decided to knock a few billion dollars worth of market cap off Apple for it. The stock was down more than 1% in early trading on Monday. That's when I tweeted the following: 

Shares muddled along in the red, until about 10:30 a.m. EST, when they began to shoot higher. Around 11:00 a.m. shares turned green, and almost exactly at noon, Apple went green for the rest of the day. 

Apple crushed it during the holiday quarter. We don't have the first quarter's results, nor do we know the exact figures. But it's quite obvious from simple observation that the tech company killed it this year. 

Also, see TheStreet's Rocco Pendola's No Tablet War: Apple Stock Will Soar in 2014.

To me, this downgrade was a hoax. A gimmick. It shows that some analysts will say and do anything to try and get their way, no matter how illogical it is. 

So next time you see Apple trading lower on "moral reasoning," it's more than likely just another opportunity to buy. 

At the time of publication, the author was long AAPL. 

-- Written by Bret Kenwell in Petoskey, Mich.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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