Let's Capitalize On 2014's Dumbest Apple Article

NEW YORK (TheStreet) -- We're only four months into the year, but I don't believe I will read a worse article on Apple (AAPL) than the one written by Forbes contributor Peter Cohan.

In a story written Monday, Cohen offers four reasons why investors should avoid Apple stock. Other than reciting popular talking points, Cohen fails to demonstrate any real understanding of Apple's business, at least to the extent that his knowledge exceeds someone who's never glanced at headlines.

The first mistake Cohen made was rely on the same old tired argument that Apple's innovation is dead. Whenever an article cites Jobs' death as a reason for Apple's demise, it's a sign that the author has very little material at her/his disposal to make the case.

Cohen began by pointing out that Apple stock has lost 25% of its value since peaking in September 2012. Factoring Monday's close of $523.47, he would be correct. But he ignored that Apple stock has been up 36% since its bottomed around $385.

Next, Cohen points out Apple's $159 billion cash reserve. But while he notes Apple's net profits margin of 21.3%, Cohen goes on to say that Apple posted an "11% drop in profit in the last year." That's actually incorrect. In the January quarter, Apple posted quarterly net profit of $13.1 billion, or $14.50 per diluted share. This was no worse than flat on a year-over-year basis.

Cohen's article offers no credit to Apple's management for achieving its net profit margin of 21.3%. Nor does he cite Apple's strong gross margin of 37.9%, which is still the highest among hardware vendors, especially in a period of low average-selling prices. Not to mention, Apple's revenue growth has slowed to just 5.6% year-over-year.

And when you consider that the increased competition from Google (GOOG) and Samsung (SSNLF) has contributed to everyone's bear arguments, CEO Tim Cook never gave into pressure to lower prices for the sake of market share. Cohen ignored this fact as well.

While talking about Apple's lost market share, he also forgot that Apple sold 51 million iPhones in the January quarter, an all-time record. Likewise, Apple sold 26 million iPads, another quarterly record. While Cohen was busy calling Tim Cook a "railroad operator," he forgot that it was Cook who reminded investors that Apple is not in the junk business.

Cook knows that consumers are willing to pay premium prices for differentiated products. His fortitude is the reason Apple is in this strong financial position. All Cohen acknowledged was that Cook has yet to introduce a new "industry-transforming product." Except Cohen failed to mention what his standard of a "industry-transforming product" is.

While lamenting Apple's "weak product portfolio," he failed to reference a company that has produced the "next big thing." And he says these things as if he's completely unaware of how secretive Apple is about its product pipeline. Nothing gets out unless it gets "leaked."

Last but not least, Cohen ended his article with the absolute dumbest line I have ever seen. He said:

"When it comes to profit growth, it is difficult to see why Apple's Price/Earnings ratio of 13 makes sense. After all, its earnings are expected to grow a relatively modest 8% and 9% in 2014 and 2015 respectively."

Well, where do I begin with this one? Recall, Cohen started off by citing Apple's $159 billion in cash. Anyone who understands valuation metrics will tell you that even when stripping out this cash, Apple's stock would still trade over $500 per share. So, given Monday's closing price of $523.47, Apple's P/E would be mid-single digits.

I don't know Cohen personally. And he seems like a nice guy. He just doesn't understand his content very well. What he actually did was make a case why investors should seek shelter in Apple and avoid everything else. For this, he owes his readers an apology. And for the extra recognition he'll receive from this mention, he owes me a favor.

At the time of publication, the author was long AAPL and held no position in any of the stocks mentioned.

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

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