Why Buffett will never buy an 'Apple'?

Apple Inc. The company is without doubt the most valuable and profitable in the world. And only a great company with great products can get there. Be it product design, manufacturing or distribution, Apple excels on all important parameters. All these factors indicate that the company has a very strong competitive advantage, or 'moat', as Warren Buffett likes to call it.

Even then, Buffett would never buy the stock we believe. The reason is that while looking at moat, the important thing to look at is its durability. Investors need to ask whether a company's moat could endure over the longer term.

And this is exactly where Apple may leave you with a pinch of doubt. An article in Business Insider suggests that Apple is already losing its edge. For a major part of the last five years, Apple led the world in smartphones, tablets, gadget market share and cloud-based services and applications. In fact, it even enjoyed the best pricing power. But a lot has changed in the last two years. Apple has lost its lead in some areas, whereas in others it has fallen even further behind. Competitors such as Samsung and Google have posed a strong challenge to Apple's dominance in the smartphones market. In the mass smartphones market in emerging economies, Samsung has taken a significant lead over Apple. It's hardly surprising that Apple's stock price is down 25% from its peak.

Investors must understand that the problem here is not with Apple. The problem lies in the sector in which it operates. As Buffett himself says, "Technology is based on change; and change is really the enemy of the investor. Change is more rapid and unpredictable in technology relative to the broader economy." It is this changeability that poses the biggest risk to the durability of Apple's moat. On the other hand, a company like Coke still makes and sells the same products it did half a century ago. No wonder the soft drinks giant has seen its moat getting stronger and stronger over time.

So while making your investment decisions, do not solely focus on the company's current competitive position. If the future of the business seems uncertain or the sector is exposed to too many changes, it would be best to avoid such stocks. Buy stocks with durable moats and long term earnings visibility