Warren Buffett has been a big fan of Apple (AAPL 0.96%) in recent years. However, some might think he's not as enthusiastic about the stock as he used to be. In the fourth quarter of 2023, Berkshire Hathaway trimmed its position in the tech giant.
This transaction was made before the U.S. Department of Justice (DOJ) announced that it, along with 16 state and district attorneys general, were suing Apple because the company allegedly violated antitrust laws. Will Buffett sell more Apple stock because of the DOJ antitrust lawsuit -- and should you?
NASDAQ: AAPL
Key Data Points
Why the DOJ is suing Apple
U.S. Attorney General Merrick Garland said in the press release announcing the DOJ lawsuit, "Consumers should not have to pay higher prices because companies violate the antitrust laws." He added, "We allege that Apple has maintained monopoly power in the smartphone market, not simply by staying ahead of the competition on the merits, but by violating federal antitrust law."
How does the DOJ think Apple is violating antitrust laws? The department's complaint filed in the U.S. District Court for the District of New Jersey listed several specific allegations against Apple, including that the company:
- Blocked iPhone apps that would make it easier for consumers to switch to other smartphone platforms.
- Blocked the development of mobile cloud streaming services that would allow consumers to play video games without having to purchase costly smartphone hardware.
- Excluded messaging apps on iPhones that work well across multiple smartphone platforms.
- Limited the functionality of rivals to the Apple Watch.
- Limited rival digital wallets by preventing apps from allowing users to tap to pay.
Apple disputes all of the DOJ's allegations. The company responded, "This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets." Apple also said, "We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it."
Will Buffett now sell more Apple stock?
Could Buffett sell additional shares of Apple because of the DOJ lawsuit? Sure. Will he do so? I doubt it.
Buffett has stood by some of his favorite companies in the past that faced antitrust scrutiny. For example, European Union and U.S. antitrust regulators have investigated Coca-Cola. However, Berkshire Hathaway didn't sell any of its position in the food and beverage company.
More importantly, Buffett told Berkshire Hathaway shareholders at their annual meeting last May that Apple was "a better business" than any others that the conglomerate owned. I don't think the DOJ's allegations would shift his view, especially so quickly.
And maybe, just maybe, Buffett didn't decide to sell Apple shares in Q4 after all. One of Berkshire's other two investment managers could have made the recent sale. The sale of roughly 10 million Apple shares could also have come from Berkshire subsidiary General Reinsurance's portfolio, which Buffett doesn't directly control.
Should you sell Apple stock?
I think there are some legitimate reasons to consider selling Apple stock. The company's growth has slowed considerably. Its valuation is arguably too steep in light of this sluggishness, with shares trading at a forward earnings multiple of 26x.
However, it's way too soon to sell because of the DOJ lawsuit, in my view. Apple will almost certainly mount a strong defense against the antitrust allegations. The lawsuit could be more of a distraction than anything else.
I also believe there's a compelling reason to hold on to Apple stock. In February, Apple CEO Tim Cook stated that the company is "investing significantly" in generative AI. He also said, "Later this year, I look forward to sharing with you the ways we will break new ground in generative AI, another technology we believe can redefine the future."
The company's annual developers conference is scheduled for June 10 through 14. Like many others, I expect Apple will reveal its artificial intelligence (AI) strategy at this conference.
The DOJ antitrust lawsuit will likely take years to play out. Apple could have big AI news on the way soon. I intend to hold on to my shares of the tech giant. I suspect that Buffett will too. And I think that any investor who sells before Apple reveals its AI strategy could regret doing so.
