For a long term investor, it seems a very tricky moment to be picking individual names. On one hand, technology is clearly the future, and any company/industry that can't realign itself with the digital age is doomed. On the other hand, historically few "tech companies" have even reached profitability, and even fewer have managed to last long enough to become mature/stable companies.
Due to the internet/cell phones, the entire pace of life (& churn of culture) has rapidly increased over the last 15 years. Furthermore, factor in moore's law, and it's tough to form any confident projections/expectations more than a few years out.
Even for the companies most likely to still be here 10-20 years down the line -- aren't minimal margins almost a certainty? Technology = efficiency, but doesn't accurately projectable efficiency = extremely tight margins due to competition?
For example, a perpetual online price war (between amazon & walmart) on every item in the universe is seemingly inevitable. So even if you're certain the future of all retail is online (and confident it will largely flow thru those 2 websites), how do you identify a proper current valuation? -- considering online retailers will forever be forced to price-compete (to the cent) or lose market share in a world where comparison shopping is 1 click away. And what's stopping google (or a start-up) from developing a shopping app that optimizes your entire shopping list between online sellers? That's gotta be in the pipeline. So go ahead and compress the sum of future retail margins to almost nil.
What else is there on the internet that actually makes $? FB & Google? I already question the value of advertising to someone who can search the internet for unbiased info on any product / instant price comparisons for all sellers. But particularly in a future world where the majority of retail goes thru 2 main web stores, where is the need for advertising? If they're already competing to the cent on price, where is the value to amazon to pay FB to remind you about the laptop you've been considering buying? Most customers are gonna do a comparison price check -- the ad might have just reminded them to buy, except the the sale goes to a cheaper seller. (Incidentally, the seller with the lowest ad budget, can afford the slimmest price margins.)
Other sectors like media have transformed from strong moats (borderline monopolies), to distribution models which are so easily duplicated online that customers have expectations of free (or at best questionably enough to turn a profit).
The only consumer companies I can imagine maintaining a substantial margin are the BRAND NAMES. Apple, for example, can name their price (to an extent) because their product isn't a commodity. Even if reseller's margins were compressed to the point that Iphone's go for nearly wholesale cost, Apple could still make a nice profit selling direct. I know they've got MSRP's, but if the internet is 1 big mall with 1-click purchasing, at what point does somebody like Apple just say fuck it, "we're gonna put our own store in the mall & collect retail on every Iphone sold"? AND..."we're gonna lower our retail price to nearly wholesale, so we can offer a superior product at an equal/lower price to samsung, etc."
Anyway, I don't know shit, I'm just thinking. Overall it seems like a great future for consumers -- just not sure about investors. Please educate me, if you have a strong grasp on this topic.
Submitted August 21, 2017 at 08:04PM by erdt http://ift.tt/2wrULSr
