In response to my column yesterday, Consumer Reports Is No Fan Of iPhone 5, I received a large number of comments. Two contentions in these communications are worth addressing.
A large number of readers contend that Consumer Reports is biased against Apple. Some also contend that Steve Jobs rubbed Consumer Reports the wrong way.
I know nothing about Jobs instigating anything with Consumer Reports, but there is proof that Consumer Reports is not biased against Apple.
Proof positive lies in Consumer Reports' glowing review of iPhone 5 when it was launched. The tag line of the review was ‘Another winning smart phone from Apple, based on our initial review.’ Here is an excerpt from Consumer Reports' review of iPhone 5 in October 2012:
By boosting screen size, thinning its profile, and adding 4G LTE access, among other features, his newest iPhone shows every sign of being the most compelling yet. And even its biggest drawback, its beta-like Maps app, is likely to improve over time. The new phone is a worthy upgrade for owners of older iPhones who want a bigger screen and faster data access. Otherwise, iPhone owners might note that a number of the phone’s improvements, including the panoramic camera mode and the ability for the Siri voice assistant to control apps, are available by upgrading your iPhone 4S to the new iOS 6 software.
Over years I have received many emails alleging Consumer Reports bias against Apple. It has never been a rubber stamp and in my view their reviews of Apple products have been objective.
The biggest criticism of Consumer Reports comes from its coverage of ‘Antenna Gate’. Antenna Gate referred to iPhone 4’s externally mounted antennas malfunction when the gap between them was bridged. Steve Jobs admitted that holding iPhone 4 in a certain way attenuated the signal. In the end Apple ended up settling a class action lawsuit by making a payment of $15 each to aggrieved users.
When iPhone 4S was released, Consumer Reports plainly stated that the reception of iPhone 4S was better than that of iPhone 4. The big question is, “What changed between the October review and now?” The answer is that Apple’s halo effect is wearing off and reviewers are beginning to take an objective look at offerings by competitors.
High-end offerings based on Google Android and Microsoft Windows have simply caught up with Apple. Samsung will get another leg up as it introduces Tizen based devices to challenge Apple. (For background please see: Tizen Cued Up For Assault On iOs, Android.)
From an investment perspective, it is important to differentiate between a company’s products and its stock. A company with great products may not form a good investment. On the other hand a company on the ropes may form a superb investment. Take a look at Nokia (NOK). Nokia stock has returned more than 100% in a very short time. Similarly Research In Motion (RIMM) stock has performed exceedingly well. During the same period, Apple stock has lost considerable value.
Astute investors understand that stocks are simply pieces of paper or electronic entries in a data base. It is best not to fall in love with stocks.
There is still significant value in Apple stock. This is the reason that we continue to hold 20% of our original position although we have taken profits on the rest. Our plan is to add to the Apple position if hunt and destroy algorithms become active prior to Apple’s earnings report. (For details on hunt and destroy algorithms please see Beware Traders Who Want To Stop You Out Of Apple.)
About Me: I am an engineer and nuclear physicist by background. I founded two Inc. 500 companies, and have been involved in over 50 entrepreneurial ventures. I am the chief investment officer at The Arora Report, which publishes four newsletters to help investors profit from change. Write me: Nigam@TheAroraReport.com. Follow me here. Subscribers to The Arora Report are long Apple from $131 and have taken partial profits at $360, $525, $629, $568 and $610. Subscribers to The Arora Report are also long Nokia and Microsoft.
