Is Investing in Apple a Sin?

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Apple (NASDAQ: AAPL  ) hasn't been a stranger to analyst downgrades since margins began slipping and it began yielding market share to Android products. However, it was treated to one of its more colorful markdowns this week when Standpoint Research analyst Ronnie Moas knocked the stock on ethical concerns.

Moas downgraded the stock -- from hold to sell -- arguing that it's wrong for Apple to be paying its workers $2 an hour while it's hoarding away nearly $150 billion in cash and marketable securities. Moas argues:

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.

To be fair, $2 an hour is roughly what Foxconn -- the Chinese contract manufacturer that makes smartphones for Apple and its rivals -- is shelling out to its employees. Under that argument, investors should be avoiding most of the leading makers of consumer electronics. After all, it's not just Apple. 

Sure, just because everybody's doing it doesn't make it right. That's not much of a counter to Moas' bearish thesis. However, Apple is a company that sells products worldwide. Why should it be obligated to piece its components together in the country with the most expensive labor rate?

It's not even just about the money. President Barack Obama pleaded with Steve Jobs to bring production back into this country at a dinner three years ago.  

"Those jobs aren't coming back," Jobs reportedly responded. Forget about how much more all smartphones would cost to assemble closer to home. Jobs argued that Asia offers shorter lead times and a greater pool of skilled factory workers. Money issues aside, it would take longer to roll out new products that were made domestically. 

Apple isn't Ebenezer Scrooge. Apple Store locations in this country pay far more than the other retailers in the same mall. Apple's iPhone kicked off the smartphone revolution that keeps many wireless carrier stores in business. 

Foxconn isn't perfect. Apple is no saint. However, it just seems wrong to be talking down the Cupertino giant because it makes too much money. 

There's certainly a place for social investing, and there are plenty of Fools around here who are passionate about that. However, the best social investing stock ideas come from companies where the practices result in stronger operations. You don't just buy into Chipotle Mexican Grill (NYSE: CMG  ) because of its "food with integrity" mantra. Chipotle's a winner because the queues are long with burrito-seeking fans and its high standards create tastier eats. Chipotle's thought process is admirable, but it's not the secret sauce behind years of consistently positive quarterly comps.  

One can always argue that Apple can do more, and that's probably a fair assessment of every single company. However, to downgrade a stock on moral grounds when outsourcing production to a more expensive contract manufacturer wouldn't necessarily result in a better product or improve consumer perception is just sloppy analysis.

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Read/Post Comments (14) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On January 08, 2014, at 3:32 PM, jdmeck wrote:

    I agree with Chaim

  • Report this Comment On January 08, 2014, at 4:08 PM, Waldo wrote:

    The Free Market dictates where products are made, not stock Anal-ists. Does Ronnie Moas only buy Union Made in the USA products. HIGHLY doubtful.

  • Report this Comment On January 08, 2014, at 4:08 PM, ThorsHammer wrote:

    Oh, so you mean like Nike and thousands of other companies ?

    or the "Immigration" worker working Produce and Chicken Packaging?

    The last I heard - wasn't Apple building and moving some jobs to US for Assembly ?

    You have a Glass and it is half filled with water - people look at this glass in different ways ….

  • Report this Comment On January 08, 2014, at 4:15 PM, JbUps wrote:

    It's incredible what crap they will come to keep this company down. Why is Apple so hated. Someone please explain this to me.

  • Report this Comment On January 08, 2014, at 4:33 PM, Waldo wrote:

    To JbUps, the same reason some people hate Porsche drivers. They can't afford the product and assume those that can are insolvent uppity elitists. Read the Yahoo comments about any Samsung or Apple article and you can actually feel the anger.

  • Report this Comment On January 08, 2014, at 4:34 PM, LADJ wrote:

    Apple IS moving manufacturing of certain items to the U.S. Moas' analysis is inaccurate and totally biased. Apple's billions are spread out around the world. Much of it is in Europe. Apple DOES NOT employ factory workers in China. Nor does it set the Chinese social agenda, nor does it value the Chinese Yuan relative to the US dollar. Apply his logic to all who sub-contract manufacturing to China and we would have virtually zero computer technology in this country. Investors, analysts and journalists should know all of this and quickly marginalize a commentary like Moas' to the point of irrelevance. If he has a point to make, it needs to be made vis a vis all US manufacturing (and business relations in general) in China. To single out Apple for it is an obvious act of bias on his part. The downgrade was a price manipulation. It worked for a day. And now people who know better are speaking up. Wish they had been on point from Day One.

  • Report this Comment On January 08, 2014, at 4:34 PM, Waldo wrote:

    Should be insolent. Not insolvent. Autocorrect.

  • Report this Comment On January 08, 2014, at 5:07 PM, aktanf wrote:

    I congratulate Wall Street crowd in becoming the new benchmark in moral authority.

  • Report this Comment On January 08, 2014, at 5:08 PM, OpenThreads wrote:

    Investing in Apple is not a sin. Here are some examples of sin: Adultery, Murder, Coveting your neighbor's wife, stealing, etc.

  • Report this Comment On January 08, 2014, at 6:21 PM, ScottAtlanta wrote:

    What would Jesus or Buddha do? Yeah. It's a sin.

  • Report this Comment On January 08, 2014, at 6:32 PM, Mathman6577 wrote:

    If this stuff keeps up every company and its stock will have to be vetted to meet the approval of social advocates and short-sighted analysts. My recommendation is to not pay attention to this gibberish.

  • Report this Comment On January 08, 2014, at 6:32 PM, johnestromjr wrote:

    Ronnie Moas might be interested to know that jobs with FoxConn are considered very good and well paying jobs compared to what other tech firms are paying - plus you can't compare the standard of living in China with that in the USA. Moas seems to have an axe to grind and rather than pointing out that the market place decides how much an employer has to pay in compensation, he just decides what, in his mind is "fair". I think Ronnie Moas is being paid too much. Cut his pay.

  • Report this Comment On January 09, 2014, at 7:41 AM, jdmeck wrote:

    ScottAtlanta, Very arrogant of you to assume what Jesus would say.I think the bible would not back you up.

  • Report this Comment On January 16, 2014, at 4:37 PM, ScottAtlanta wrote:

    @jdmeck -- lol. oh? Jesus and Buddha or the Bible would advocate stockpiling 145 Billion in Cash? Hmm, what verse is that?

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Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

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