What about the tons of businesses that don't have a Moat?
I am so tired of hearing the phrase "moat" used in the context of every damm company. Same with "competitive advantage". I get this is text-book Porter / Sources of Power, etc. style, but how would we look at businesses that don't have any obvious moat but still function well for decades?
I wont mention any specific examples but I've seen tons of businesses had great success entering or being in a market where they had no significant moat/differentiator. They were just in the market with a good enough product.
Nowadays when I look at businesses people always try to prompt "what makes it unique, what is the moat, how is it special" as if any goddamm company on this planet has to be SAP / Meta / Google kind of company dynamics. I don't get it.
Well the argument would be that if there's no "MOAT", other companies would enter and compete away the profits. If there are barriers preventing that from happening e.g. large capital expenditures required to enter then that is a MOAT
This conversation needs specific examples to be productive
My IC to stop overpaying for them - Challenge: Impossible
Survivorship bias
Also wouldn't quality of MOATs be reflected in ROIC and I guess incremental ROIC projections?
Ya don’t be shy on examples here brother
Wow, thank you for posting this. I play in LMM so use that as context for my post - and I have a whole rant about this...
For businesses in our range, I think moats are kind of stupid to overthink because they are never as defensible as they seem. Even chunky companies...
Google seemed like it had a great moat until AI! Now AI driven search is likely to annihilate Google. I have access to a ton of 1P site data and can see the # of AI driven search referrals increasing week over week. I seriously think Google will be decimated by competitors on the search end. Advertisers (like me) fucking hate them and would love to throw money anywhere else.
Anyways, who could have seen AI NUKING Google from orbit? I didn't! (Note - I have a relevant short position)
Personally, I focus on protecting my capital as much as possible and being able to pull CASH out of the company I've invested in as fast as possible.
Do I miss out on some upside? Probably but I don't think it makes sense to put TOO much thought into imaginary moats.
Again, I’m small potato so I don’t need a company to have the capacity to reinvest into a beautiful moat or whatever uncle Warby Buffet loves.
Also had a google short thesis for a while... opted for sqqq since mid february (was planning to short google feb earnings but opted for that instead) ... do you have a naked short or are you using puts? Just curious as I agree with the points you were making.
Ok well google bc of its moat earned ridiculous economic profits for multiple decades. This argument just says no moat is insurmountable which is true. So fine, have a diversified portfolio of moat businesses like Berkshire and add/remove as circumstances change. Moat still better than no moat / weaker moat
Google actually still had a MOAT with AI. Its MOAT transformed into its research capabilities, data and its platform once Google scaled. Google literally created the transformer as we know it today which is the base of all AI models. Google just didn’t realize it was a viable business opportunity yet which is a story of falling asleep at the wheel more so than losing its MOAT
My MD would love the book on those yeah
No moat but popular = car wash, consumer residential HVAC services
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