No. of Recommendations: 6
Tinker:

Every class of stock or industry segment has its own peculiarities. It's hard to discuss them all in one post.

Of the stocks we follow, again I will mention Twilio. Twilio is currently valued on its story, but it is not demonstrating any material pricing power.

What is Twilio? A bunch of software code that's very easy to use with no "switching costs" that I can detect. From their website, this is all you need to use it for Sending an SMS:

<?php
// Sending an SMS using the Twilio API
// Get the PHP helper library from twilio.com/docs/php/install
require_once '/path/to/vendor/autoload.php'; // Loads the library
use Twilio\Rest\Client;
// Your Account Sid and Auth Token from twilio.com/user/account
$sid = "AC5ef872f6da5a21de157d80997a64bd33";
$token = "your_auth_token";
$client = new Client($sid, $token);
$client->messages->create(
"+16518675309",
array(
'from' => "+14158141829",
'body' => "Tomorrow's forecast in Financial District, San Francisco is Clear.",
'mediaUrl' => "https://climacons.herokuapp.com/clear.png",
)
);

No proprietary file formats like WORD, no complicated learning curve, the receiver does not have to be on the same platform as the sender*, no network effect, no switching costs. Anyone who can hire a dozen coders and buy some hardware can replicate Twilio. No pricing power.

Biotech is an entirely different animal. Nassim Nicholas Taleb calls it a "good" black swan sector -- sooner or later one huge winner will more than offset a dozen losers. But there is no telling who that winner will be so you buy a large number of them.

In retail selling to the poor masses is usually better than selling to small rich elites. Walmart, Amazon, Ross Stores. And retailers have to follow demographics. Sears was railroads, A&P was urban selling, shopping malls are suburbia.

NPI is great if you want to spend a lot of time studying stocks but if you want the results of good NPI stock picking without the work and the hassle, settle for a few high tech ETFs. I haven't had them long enough to be a reliable guide but they are outperforming NASDAQ which is outpacing the DJI and the S&P 500. Maybe ETFs is the way to diversify in biotech. I haven't checked how the sector is performing but healthcare is second to only to high tech.

Denny Schlesinger


My high tech ETFs: BOTZ (robots & AI), FDN (internet), ROBO (robots and automation), XSD (semiconductors)

* This was also a problem for Qualcomm's CDMA. All telephones have to be able to talk to all other telephones. You use CDMA, I can use pink monkeys -- no network effect. CDMA can never have the network effect of Office, if I send you a WORD document you had to use WORD to open it -- until it was finally commoditized -- but it had a nice run!
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