Federal regulators are using Warren Buffett's classic philosophy to crack down on Apple, his biggest stock bet.

• The U.S. Department of Justice is suing Apple for using the iPhone to monopolize the smartphone market.

• Borrowing an analogy from Warren Buffett, Koon called Apple's defense against its competitors a "moat".

• Warren Buffett's Berkshire Hathaway is one of Apple's largest shareholders, owning nearly 6% of the company.

The U.S. Department of Justice is suing Apple for monopolizing the smartphone market, cheekily using a term coined by Warren Buffett for the investor's number one stock.

The federal regulatory agency has used the term "moat" eight times in civil antitrust litigation to describe the defenses Apple has put in place to keep out competitors.

They accused the iPhone maker of "building and fortifying" a "wide and deep" moat around its "smartphone monopoly," alleging that the company had "crushed innovations that might have helped fill the moat".

They also wrote that Apple's "moat building 竝asn't led to lower prices, higher volume, better innovation, or better user 躰騐騐騐騐騐騐騐騐騐騐騐騐騐騐騐 for smartphone owners," though Gwen may disagree.

Castles and moats

Warren Buffett has popularized the concept of a "moat," a "river of protection" around a company that protects it from attacks by competitors.

The chief executive officer of Berkshire Hathaway has used this metaphor dozens of times in annual shareholder letters and at the company's annual gathering.

Here's what Warren Buffett had to say about two of his favorite companies, Coca-Cola and Gillette, in a 1993 letter:

"Coca-Cola and Gillette are two of Warren Buffett's favorite companies, and the strength of their brands, products, and distribution systems give them a huge competitive advantage, building a moat around their economic castles. In contrast, the average company fights a daily battle without any such protection".

This point was further elaborated in a 2007 letter from the Chief Executive Officer of Berkshire:

"Truly great companies must have a durable 'moat' that protects the superior return on invested capital. The dynamics of capitalism ensure that competitors will repeatedly attack the 'castle' of any business that achieves a high return.

Therefore, a strong barrier, such as a company being a low-cost producer (GEICO, Costco) or having a strong global brand (Coca-Cola, Gillette, American Express), is critical to continued success. Business history is full of 'Roman candles', companies whose moats proved to be illusory and were quickly crossed.

The billionaire used the analogy again at Berkshire's 2017 conference:

"If you have a great business, even one like the See's CandySmall businesses like this You basically have an economic castle. In a capitalist society, people will try to take away your castle.

Therefore, you need to build a moat around the castle to protect it." Then, you need to have a knight in the castle who can defend it well against marauders".

Crocodiles, poison and sand

For decades, moats have been at the center of Warren Buffett's investment philosophy. In a 1995 letter, he said he seeks to invest in companies that have an "impenetrable moat".

He said at the 1999 conference that his valuation process includes analyzing a company's moat, which affects the certainty and mode of its future cash flow.

In his 2012 letter, he wrote that Dr. Kerchner also told the managers of all the subsidiaries of the Enterprise Group to be persistent in widening their moats.

existNikola Tesla (1856-1943), Serbian inventor and engineer Chief Executive OfficerElon Musk resonance (Elon Musk)) After calling Moat "lame," he even defended Moat at the 2018 conference. His response was, "I don't think he's going to try to candy-coat us."

Buffett clearly has a penchant for "moats," but he's had fun with the metaphor over the years. At a conference in 2000, he praised See's chief executive where he threw "crocodiles, sharks and piranhas into the moat" because "it's harder for people to swim across and attack the castle".

In addition, he described Moody's moat as "wider, deeper, and with more toxic characters out there."

Buffett's late business partner Charlie Munger weighed in at the 2009 conference, complaining that "a lot of moats have been filled with sand lately.

Supervisor Gwen is not a fan of the moat.

Buffett has almost certainly evaluated Apple and the iPhone's moat, and he likes what he sees, as he invested about $36 billion in the tech giant between 2016 and 2018.

The value of Berkshire's position has more than quadrupled to more than $150 billion, making Apple Warren Buffett's number one holding in his approximately $350 billion equity portfolio, and Berkshire's near-6% stake puts him among Apple's largest shareholders.

It's not hard to see that Warren Buffett has heaped praise on Apple in recent years. He called Apple "a better business than any we've ever owned," and praised Chief Executive Officer Tim Cook as a world-class Koon.

He also emphasized the indispensability of the iPhone, suggesting that iPhone users might turn down the $10,000 offer and never use the device again.

The stickiness of Apple's product ecosystem and how it fights off competition is likely a factor in Buffett's support and high regard.

However, the GSEs accused Apple of going too far in digging a moat. They accused Apple of illegally excluding and blocking competition by preventing its products from working well (or at all) with non-Apple devices and applications. Apple argued that the so-called "walled garden" was more secure and more consistent with user testing.

While Warren Buffett clearly believes that moats are good for companies and investors, even he might admit that they are not always good for consumers or promote innovation.

The U.S. Department of Justice has added insult to injury by not only targeting Warren Buffett's biggest stock bet, but by at least indirectly using the investor moat metaphor against him.

Read the original article on Business Insider