Worse Than Finding a Worm in Apple: Half a Worm

TheStreet.com

NEW YORK (TheStreet) -- Investing should not be dictated by fashion. Running a public company is not like owning a private one.These are the only facts that matter concerning Apple AAPL , which our Rocco Pendola and the rest are once again going bi-polar on.

I wrote once, at Seeking Alpha, that the solution to Apple is simply to divide by 10, and it remains true. Apple was once $700, now it's $450. Split it 10-1, as I suggested, and you have a $70 stock going to $45. This happens all the time. It's part of the ebb and flow that makes the stock market so much fun. Sectors go into fashion, pass out of fashion, then return in predictable patterns. This is why technical analysis works.

Of course you don't need a class in stochastics to see the patterns. Right now entertainment stocks such as Disney DIS are hot, while 3-D printing companies including 3D Systems DDD are not. Cloud companies that produce services such as Google GOOG are hot, as our Chris Ciaccia notes, , while companies that produce products including Apple (and Dell DELL , Nokia NOK , Microsoft MSFT , HP HPQ , and on and on) are not.

These assumptions will change. They will reverse. We will all suddenly realize that we have always been at war with Eastasia, or have never been at war with Eastasia (for you fans of George Orwell's 1984.) I'm old enough to remember when the Los Angeles Clippers were a bad team and the Lakers a great one.

So Apple will announce something cool. Maybe it will be a TV, as Rocco Pendola believes. Maybe it will be a watch, as Business Week suggests. Maybe it will be a cheap iPhone for China, as Apple Insider has written. Maybe it will be all three -- a cheap TV-watch for China!

Point is, when something does get announced, all the things that looked wrong with Apple will look right, everyone will pile in and the escalator will go up again. I don't see any reason to panic.

Now, as to the second point, David Einhorn buying a big hunk of Apple shares and then trying to bully Apple CEO Tim Cook into giving more cash to shareholders. Reuters reports a judge sees a "likelihood of success" concerning Einhorn's legal gambit, as The Huffington Post reports , which is not at all the same thing as saying Einhorn is going to win his case.

But we have come to see all CEOs as kings, not as temporary leaders elected by the shareholders. To the extent that this is Einhorn's point, it's a good one. Shareholders in public companies do tend to get treated like union organizers at Wal-Mart WMT , and that should not be. We own the companies we invest in, not the CEOs and not the boards.

This is a point that is relevant to other companies besides Apple. Such as, for instance, Google, which is creating a two-class share structure as Business Insider explains, matching what Facebook's Mark Zuckerberg did before going public, as The New Yorker wrote, or the way News Corp. NWSA and Viacom VIA.B have been run since time out of mind.

Such structures are fine as long as things are working and the CEO is as young and healthy as Larry Page. But unlike corporations, real people die. Rupert Murdoch will die. Sumner Redstone will die. (For that matter so will Page and Zuckerberg.) Companies run as fiefdoms are also liable to make mistakes because there is no real control over what the CEO does other than what his lawyers can't convince a court to let him or her do.

Tim Cook hasn't inherited power from Steve Jobs. He is holding it for his successor. Corporate democracy doesn't always work but it's better than the feudalism infecting so much of Wall Street -- and Silicon Valley, for that matter.

It shouldn't take a 40% haircut to start a peasant's revolt. Now excuse me while I invest in pitchfork futures.

At the time of publication the author had positions in AAPL, NWSA, GOOG and DDD.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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