I don’t know who to thank for bringing Align Technology (ALGN) to the board’s attention. I only got to research it this morning after reading strelna’s post.
strelna sold on valution concerns. The Klein chart concurs:
http://invest.kleinnet.com/bmw1/stats16/ALGN.html
redsox2005 has some very keen comments:
I’ve been interested in buying for the last couple of months and haven’t pulled the trigger - yet. What is very interesting is that they only have roughly 6% penetration of the teenage market and doctors are now more than 12 months ago to use their procedure as they are more comfortable with it. High valuation - yep; own the market; yep; disruptive - I think so; faster than traditional - yep. I am waiting for the next earnings release to make the decision as I view this as a very long term play.
Market penetration is a key metric metric in the growth story. My guide is that the curve in the hockey stick is put in at around 15% industry wide market penetration. Maybe 6% is too early.
The bear case for Align Technology cites many patents expiring soon which will allow more competitors to enter the market. Align has not been resting on its laurels, they have lots of new patents in their pipeline. Link courtesy a Fool walled board:
https://patents.justia.com/assignee/align-technology-inc
But patents by themselves don’t make a sufficient moat. On the other hand, being “the market leader” makes a huge difference in creating the network effect to keep them in that position. Colgate toothpaste is a good example. How difficult is it to make toothpaste? What then keeps Colgate toothpaste as the market leader year after year besides being the market leader? One reason is “positioning.” The human mind does not store all the information it collects. Marketers have found that we have a ladder that allows us to recall maybe two or three names in each category. The test is asking who was the second flier to cross the Atlantic non-stop. Most people, including myself, are stumped! More mundane reasons for keeping the leadership position are “if it ain’t broke, don’t fix it” and “you can’t lose your job buying IBM” (back when it was still true).
The above creates a conundrum: is ALGN overbought (valuation issues) or is ALGN painting the curve in the hockey stick (opportunity)? One safe way to approach the conundrum is to buy a tiny starter position for the purpose of staying focused on the stock. I’ve added ALGN to my wish-list.
My portfolio is heavily health oriented: one drug stock, one medical equipment stock, one food and animal safety stock, one food additives stock, and on the wish list one housekeeping and food preparation stock. While all are health oriented they are quite well diversified. What I find interesting is that these health stocks are among the long term fastest growing stocks I could find*. High tech has some much faster growers but with short histories because there is a lot of creative destruction in that fast developing industry. My participation in high tech is limited to four ETFs.
But what is the point I’m making? That in an affluent but aging society healthcare is a major industry because people can afford to try to stay healthy and alive. And people can afford to make themselves look their best with straight teeth. As a kid I too wore braces, my dad could afford them.
Denny Schlesinger
- I also own one health destroying company, Monster Beverage Corporation (MNST) which is growing even faster than the health promoting stocks, an incredible 35% over 20 years!
http://invest.kleinnet.com/bmw1/stats20/MNST.html
and it’s no fluke, a competitor, National Beverage Corp. (FIZZ), is not far behind. It was mentioned in the comments section of a SeekingAlpha article about MNST