A constant theme of this blog has been the importance of barriers to entry in value creation. Designing a cool new product will not create value if others can easily copy it. In that vein, there were four key posts on this site. It is time for a retrospective.
A post on September 25, 2014 was entitled “GoPro Investors Have Gone Crazy.” GoPro is a prime example of a company that introduces a cool new product for which there are no significant barriers to entry (in the case of GoPro an action camera). The market apparently failed to appreciate this fact because on the day of post the stock was trading at $81.31 with a massive P/E ratio. As competition arose, the stock price tumbled. Friday it closed at 11.16 down over 86%.
A similar example is Fitbit which markets watch-like fitness trackers. Fitbit was trading at $37.09 on October 22, 2015 when I wrote my post, “Not So Fitbit” which argued that the market was wide open to competition including major companies like Apple. Friday the stock closed at $8.71 down over 76%.
Tesla has been a common focus of this blog. The last post was on April 2016, entitled “Tesla is Over $250 – Again,” argued that the auto industry is just too competitive for Tesla to traded at multiples an order of magnitude higher than the competition. At the time of the post, Tesla was trading at $255.47. Friday the stock closed at $190.56 down over 25%.
Finally, on November 20, 2015, I posted an article entitled, “Don’t Be Square.” The argument there was that payments technology was becoming a hotly competitive business with companies like Apple and Samsung, among others, entering the fray. On that day Square opened at $13.92. Friday the stock closed at $12.18 down a meager 12.5%. In my view, however, this stock has further to fall. The market has yet to appreciate how fierce the payments battle is likely to become.