- Microsoft, Xerox and IBM were all hit with antitrust charges in the past.
- Microsoft’s stock rose 260% in the first two years of its investigation.
- It then fell 60% as the antitrust case dragged on.
Last week’s Big Tech antitrust investigation by the Department of Justice (DOJ) came almost exactly two years after I started warning about this hidden threat.
The breadcrumbs were all there:
- Amazon’s ill-fated purchase of Whole Foods.
- Google’s multibillion-dollar fines from the European Union.
- Apple’s efforts to milk its App Store for all it’s worth.
Big Tech was bound to draw too much attention from regulators and from both sides of the congressional aisle.
So if you’re a shareholder of a “market-leading online platform” (as the DOJ put it in its press release announcement last week), what do you do?
For now, nothing.
The Calm Before the Storm
Tech antitrust investigations take several years, at least. Historically, the share price of the companies at the center of them do well as the cases wind their way through the federal court system:
- Microsoft is a good example. The DOJ filed its antitrust case against the software giant in 1998. But the investigation didn’t deter the stock from rising another 260% in the following two years.
- Xerox is another one. The Federal Trade Commission opened its investigation of the company in January 1972, alleging it unfairly dominated the market for copy machines. The company’s stock rose another 40% over the following year.
- IBM was hit with federal antitrust charges in 1969 that claimed it attempted to monopolize the market for mainframe computers. The shares rose another 40% through 1973.
But as the cases drag on, the threat of a breakup or restructuring tends to weigh on the shares, alongside the inevitable worries over bear markets and recessions:
- Microsoft’s stock fell 60% between 2000 and 2001, when its antitrust case officially drew to a close.
- Xerox’s stock dropped more than 60% between 1973 and 1975 before the company entered into a consent decree with the DOJ.
- IBM’s shares fell 50% in roughly the same time frame.
(Source: Capital IQ)
But there’s a second action you can take as Google, Apple, Amazon and others go under the antitrust microscope…
Winning the War Against Amazon
You can look for the proverbial “next big thing” and start redeploying your capital in that direction.
Which companies are winning the war against Amazon, for instance? I have several in my Total Wealth Insider portfolio.
Think about Microsoft in 2000. The company’s real threat wasn’t tech antitrust regulators. It was Google, smartphones and cloud computing.
The real threat for IBM in the 1970s was Intel — then a nearly unknown Silicon Valley company — and the rise of faster, cheaper and smaller computing systems than the room-sized mainframes IBM sold back then.
Best of good buys,
Jeff L. Yastine
Editor, Total Wealth Insider