About a month ago, hell froze over. 

I put a bullish CAPScall on Apple (Nasdaq: AAPL). And thus far it's been very "profitable" position, beating the market by 16% in one month!

Lots of Fools -- 25,289, to be exact -- have put made a bullish CAPS pick on Apple. But what makes my CAPScall special is that my first article for the Fool was a bearish take on Apple and a bullish piece on Microsoft (Nasdaq: MSFT). 

While I still stand by my bullishness on Microsoft (valuation, valuation, valuation), I now concede that I was wrong about Apple. 

So to Eric Bleeker, Tim Beyers, and Rick Aristotle Munarriz: I concede that you were right and I was wrong about Apple. I'm throwing in the towel. Well played, good sirs. Very well played indeed. 

Enjoy it while it lasts, because it's a comparatively rare occurrence, since (shameless bragging alert) my accuracy in Motley Fool CAPS exceeds more than 90% of all other participants.

So why the change of heart? In a word, valuation. Apple is now absurdly cheap. When I wrote my original article, Apple made $16 billion in free cash flow. The very next year, in 2011, Apple about doubled to more than $30 billion.

And that makes a difference. When you take into account the company's $100 billion cash hoard, the stock is trading at 13.5 times free cash flow. And that figure doesn't even take into account Apple's last quarter, in which it generated more than $16 billion in free cash flow, or roughly its entire total from fiscal 2010! That low valuation more than takes into the account the risks I spoke of in the original article. 

Furthermore, I took to heart my Foolish colleagues' argument that the company really doesn't depend that much on innovation. The company's major advantage is that its products, well, actually work the way they're intended. 

And that's the truth of it. Apple doesn't make money selling products with the most GHz or the most megabytes. It does it by making products that do whatever the heck they're supposed to do. It then backs that up with class-leading sales and service representatives in its Apple Stores. (I've always considered the Apple Stores the company's secret weapon. Even in the digital age, bricks and mortar still matter when your computer dies at 3 a.m.)

In short, Apple has become the world's most valuable company the old fashioned way -- by actually deserving it! To paraphrase The Simpsons' Kent Brockman: I, for one, welcome our Cupertino overlords. 

A confederacy of dunces: Apple's competition 
The other thing I underestimated when I wrote my article was just how incompetent Apple's competitors really are. These guys couldn't find their way out of a phone booth, much less dial long distance on their own smartphones. 

You'd think Research In Motion (Nasdaq: RIMM) (still a deep-value CAPScall for me) and other flailing competitors like Nokia would realize that people simply want something that (a) works, (b) looks pretty, and (c) is backed with great customer service. 

But no. They continue to think that people actually care what arbitrary doohickeys and features their phones have compared to Apple. But people don't care. They want something that was designed for people and not for engineers. They want something that was built with pride and not a cynical exercise in short-term profit maximization or job promotion. They want something that doesn't feel like plastic. 

Why is this so hard for them to understand?

If these guys had done their job right, I wouldn't be here apologizing to Eric, Tim, and Rick. And Apple wouldn't be making freakin' $30 billion a year.

Bottom line: The purpose of capitalism is give people the products they want at the lowest cost. And Apple does this. Its competition doesn't.

Amazon rising 
But at last there does appear to be one competitor that gets it: Amazon.com (Nasdaq: AMZN) and CEO Jeff Bezos. The Kindle has been a smash hit, it looks relatively pretty, and it actually works. 

Going forward, Amazon will probably be Apple's greatest threat. Like Apple, it's building a real platform around its tablet, the Kindle Fire, which could be a threat for Apple down the road. 

Netflix (Nasdaq: NFLX) is another possible threat, especially in the battlefield for how to shape the future of television. Reed Hastings seems to be the rare CEO who doesn't let a focus group undermine his focus. Fortunately for Apple, however, a partnership looks to have strengthened with a deal between the two on the new Apple TV box. So for right now they're friends -- or at least frenemies. 

Besides, Apple has enough cash on its balance sheet to buy them both. 

Problem solved. 

I'd actually have trouble seeing an antitrust case against Apple here, though its recent spat with the Justice Department over e-books is an ominous sign. There are plenty of competitors in the content and tablet space other than Amazon. It's just that Amazon is the only other competent competitor. But that shouldn't be held against Apple. (Remember Oracle vs. PeopleSoft?)

Amazon is trading at a rich valuation, but a lot of its costs could probably be eliminated in an acquisition, and the combined entity could raise prices. (If you work for the FTC, ignore that last sentence).

Netflix would be harder to justify to the regulators, though there's always Hulu. But can you imagine a trio of Tim Cook, Reed Hastings, and Jeff Bezos? That would be unstoppable. So get going already! A trillion dollars is but a trifle away. 

Finally, if you're looking to stay updated on Apple, make sure to add the company to our free My Watchlist service. It'll deliver all the latest Apple news and analysis in one central place.

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