I’m going to attempt something a little odd today, Fools. Even though Apple Inc. (NASDAQ:AAPL) makes up 6.2% of my real-life holdings, and I recently considered buying shares of Apple stock, I’m going to be giving you two reasons to consider selling shares of the company today.
Why am I doing this?
Recently, Nobel Prize winner Daniel Kahneman visited Fool headquarters in Virginia. While visiting, he talked about how a number of different biases can lead us to believe we can predict the future with relative certainty. In reality, he argued, we’re just deluding ourselves.
It got me to thinking about how I don’t write enough about the risks of owning the stocks I own. So, although I don’t plan on selling my Apple Inc. (NASDAQ:AAPL) stock anytime soon, I think it’s healthy for me to practice and model this behavior.
1. No sustainable competitive advantages
Anyone who has watched Apple Inc. (NASDAQ:AAPL)’s remarkable comeback from near bankruptcy over a decade ago would argue that Apple has tons of competitive advantages. But the key word here is sustainable. In other words, what might Apple Inc. (NASDAQ:AAPL) have going for it — that others don’t — that will likely remain for years to come?
When I look at Apple Inc. (NASDAQ:AAPL)’s competition, I see lots of sustainable competitive advantages. Google Inc (NASDAQ:GOOG) has such a wide moat through the ubiquity of its search engine, which is bolstered by the global dominance of the Android operating system, that Charlie Munger once said, “Google Inc (NASDAQ:GOOG) has a huge new moat. I’ve probably never seen such a moat.”
As Amazon.com, Inc. (NASDAQ:AMZN) has grown, it has become a one-stop-shop for e-commerce. That network effect, combined with the buildout of wildly expensive — but equally important — fulfillment centers has made it virtually impossible for another company to offer the value proposition Amazon.com, Inc. (NASDAQ:AMZN) has
Even Microsoft Corporation (NASDAQ:MSFT) has the protective moat of its ubiquitous Office Suite. In 2012, 31% of Microsoft’s revenue came from people buying access to use Microsoft Word, PowerPoint, Excel, and the rest of the products in the Suite. The necessity of these products isn’t going anywhere anytime soon.
Apple simply doesn’t have this type of advantage. The growth of the iEmpire was based upon continually out-innovating the competition, whether through the iPod, the iPhone, or the iPad.
The sustainable advantages that Google, Amazon, and Microsoft Corporation (NASDAQ:MSFT) have are incredibly important. While Apple innovates new products, these three can come along and create knock-off versions — like the Nexus, Kindle Fire, or Surface tablets, respectively. The tablets can be offered for less than Apple charges because all three companies have money coming in from other sources, and those sources have sustainable advantages.
That means that all Apple is left with is innovation. While that innovation has been beyond impressive, there’s nothing sustainable — like a search engine, network of fulfillment centers, or a popular Office Suite — to let investors know that this advantage will be around for the next decade.
Which brings me to my second point: