The Foolish Ninjas are back

My reply to the ALGN post

Comparing Align Technology with TTD makes no sense, apples to aardvarks. TTD’s staying power has little to do with being a software company. Microsoft and Oracle had plenty staying power despite being in software.

P/E ratios for high growth companies cannot be evaluated by standard security analysis methods. When I was investing in retail I used to compare P/E ratios of similar businesses. Maybe Align Technology can be compared to ISRG and other such healthcare related stocks.

What is clear is that management is pursuing the business aggressively

Align Technology Expands Distribution for iTero Element(R)and Enhances Same-Day Dental Restorations With Glidewell Dental

•November 17, 2017Comment
SAN JOSE, CA–(Marketwired - November 17, 2017) - Align Technology, Inc. (Align Technology) announced an agreement with Glidewell Dental to distribute the iTero Element® intraoral scanning system in North America with the newly unveiled™ In-Office Solution, a chairside restorative ecosystem designed to simplify the process of prescribing and delivering laboratory-quality dental restorations.…

I like to evaluate business models. These are some of the ideas that come up:

  • Invisalign is disrupting the wire braces business. The fact that teenagers love the product is a great Peter Lynch type of recommendation.

  • Low tech clear trays cannot compete with high tech ones except for the low end of the market. And Align Technology has a foothold even there via SmileDirectClub.

  • Align Technology is making good use of modern technology via 3D printing and high tech imaging of patients. We used to discuss who the real beneficiaries of high tech would be on the NPI board. The consensus was the users, not the providers. Align Technology is a heavy user of high tech.

  • The middle classes who can afford orthodontics is growing fast in developing economies like China. These people want the best, the same as westerners have.

  • There is no comparable competitor visible on the horizon.

Denny Schlesinger
Long Align Technology (I only wish I had bought more)


Long Align Technology (I only wish I had bought more)
me too.

I wonder what kind of fake FUD event could hit a company like this. It may take a bear market to bring it down to a more reasonable price.

The TAM is huge, they probably only are addressing single digits now
. In some classy (ie expensive) K-12 private schools in my city a very high percentage of kids have them, it is almost a status symbol. Like an iPhone. Nary an Android can be found…

I am told conventional braces can often be hidden in the back of the mouth now, avoiding the car grill look. But Align is the future.

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Hey Denny!

I agree! Congrats on being long ALGN!

I just want to explain why I brought TTD into the mix. Comparing ALGN to TTD is definitely not traditional and that’s why I said “Just for fun, let’s inappropriately” compare the two based on the numbers.

But I wanted to do it just as an exercise in valuation. If I’m not wrong, the value of a company is the discounted future cash flows. I know the companies we are looking at cannot be valued with a DCF and even based on PE’s because they are innovative, fast growing, and somewhat unpredictable, plus ALGN and TTD cannot be compared directly, you’re 100% right. But just looking at their financials and weighing the competitive advantage periods, it just allowed me to contextualize things a little bit better. Just trying to think outside the box, maybe too far though.

Thank you for your thoughts!

Very best,


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If I’m not wrong, the value of a company is the discounted future cash flows (DCF).

You are perfectly right, in theory. The problem with DCF is that no one has the data to get it right, it’s all based on guesstimates. Can you guarantee that the interest rate you are using is going to be valid for the next few years? Impossible. People talk about intrinsic value and we all know what it means. We just can’t calculate it. I’ve gone through Graham and Dodd two or three times looking for the magic formula. It’s not there. As a matter of fact, as they wrote new revisions of their bible, they changed their approach to valuing securities. Early in his career, Ben Graham considered stocks speculation, only bonds were investments. They could be calculated, the only risk was default, all the other numbers were plain to see.

Over the past few years I’ve come to the conclusion that one should not invest based on traditional “security analysis” or so called fundamentals. I invest based on business model and past performance. My use of fundamentals is to find reasons NOT to invest in a company, stuff like excess debt, client concentration (low pricing power), stock option abuse, unjust voting rights (Google), excessive Good Will, and so on. These are all red flags.

Just trying to think outside the box,

That’s always a good idea!

maybe too far though.

What works, works. :wink:

Denny Schlesinger


I have noticed over the years that it is not a good idea to be outside the box when almost everybody is outside the box. At such times, the place to be is firmly inside the box.