Someone who reads the blog sent me an email asking how Quan and I judge qualitative factors like a company’s durability.
For most stocks, you can easily imagine a future condition that would obsolete the entire business model.
I’ve decided to make this post nothing but a series of examples.
Open access journal articles.
There is a whole Wikipedia page about this one. The idea here is that someone else will pay the cost of publishing journals in place of the subscriber.
Dieters will use free apps like MyFitnessPal to count calories instead of going to meetings or using websites like Weight Watchers.
Without aggressive marketing aimed at old people – would this product even exist? You can read about the FCA (a U.K. regulator) fine imposed on HomeServe and the reasons for it here.
Ark may not renew its leases because the casino or other landlord would want to charge a lot more rent now that the location and the restaurant is a proven success. So, Ark as a corporation has a finite lifespan except insofar as management reallocates capital to new sites.
Traditional supermarkets have 3 durability risks people raise: 1) Online groceries 2) Wal-Mart 3) Organic and fresh competitors: The Fresh Market, Whole Foods, etc.
America’s Car-Mart sells used cars so it can collect interest on high risk auto loans. The difficult parts of the business are underwriting and collecting loans. If this could be centralized – as it is in lower risk subprime auto loans – then the loans would become commodities.
Online dog food.
The two concerns here are that places like Wal-Mart can sell more dog food and websites like Petflow can sell more dog food.
Guyana can take away their monopoly.
British shoppers will stop frequenting high streets. Or, they will eat healthier food instead.
Self-driving cars will eliminate accidents and therefore the need for auto-insurance.
Babcock & Wilcox
U.S. utilities will shift away from coal power plants – which use boilers – toward natural gas, wind, and solar power plants which don’t use boilers.
The U.S. Navy could stop using: nuclear powered aircraft carriers, nuclear powered ballistic missile submarines, and nuclear powered attack submarines.
People will wear products like the Apple Watch instead.
Same. Plus, Michael Kors may be a fad.
Online competitors like Xoom can replace agent location based money transfers.
Big box retailers like Home Depot and Lowe’s can sell blinds in their stores. Blinds can be sold online. As a result, people will stop going to the independent dealers that Hunter Douglas gets all its sales through.
Smart keys and push to start ignitions can eliminate the need for locks and keys used in car doors and the steering column.
The cloud will eliminate the need for storage area networks.