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Brian Colello: There are always a lot of fast-moving industries in the tech sector, but underneath all the news of new devices, we think companies are creating more sustainable competitive advantages.
We think Apple is a good example of a company with a widening moat. It has a narrow moat and a positive moat trend in our view. Historically, in the handset business companies like Nokia and Motorola were leaders, but customers were able to switch back and forth because all of the devices did the same thing.
Apple is doing a much better job than handset makers in the past of creating reasons for customers to stick with the platform by creating switching costs. Whether its services like FaceTime and iMessage, whether it's the ownership in media content, or whether it's the syncing between multiple devices using iCloud, we think Apple is growing an increasingly loyal customer base. And as that base grows and grows over time, we think Apple's moat is widening.
Barring a couple of massive product flops, we think Apple's moat will continue to grow as long as the size of this loyal customer base grows as well. We have a $570 fair value on Apple stock, so we think there is a little more upside at this point.