I guess you didn’t understand what I said.
I know Christensen’s work well. Disruption can be like you said but it may not necessarily be.
I get you are enthused by Arista, and so am I. I am just not as sure as you are about its stock.
tj
Mr. Mushroom -
OK, I’ll comment. Here’s just a wee bit of relevant background. Though it was many years ago, at one time I sold real estate in the Seattle metro area. I am a home owner and a handy-man which adds up to I do almost all of my own home maintenance and upgrades. My home was built in 1958, it’s a custom built, mid-century modern home (I have copies of the original architectural drawings).
When Saul first posted his interest in LGIH, I felt it was not such a good idea and I posted my misgivings. You posted about the LGIH product, the houses are modest tract homes. The focus on this product is key to their marketing. LGIH are priced at such a level that a person with a reasonable credit rating will be able to buy a new LGIH home for approximately the same monthly payment as it costs to rent a home in the same area. This was one of the main points of contention I argued against this company as an investment. My point was that after you add maintenance costs to the mortgage payment the purchase is in fact considerably more than rent. I forget who, but someone replied to me that new homes require very little maintenance during the first 10 years. A valid point which I forgot to consider in that I have only purchased older homes with considerable deferred maintenance.
Unlike K-B homes (and other large builders) LGIH does not build homes in a broad spectrum of price points. LGIH builds a fairly limited number of designs all targeted to the same price point. Containing design variation supports vendor negotiations such that their costs are comparable to the costs of some of their much larger competitors. It also allows their sub-contractor crews to come down the learning curve quickly by virtue of the fact that there’s less to learn.
I’m not sure I’ve answered your question:
… are these guys really that much smarter than all the other people in the home building business? Are they offering a product that is special in some way?
But the facts (as I see them) are that maybe they aren’t smarter than their bigger brethren in the home building business, but they are able to focus on a specific niche. And they are offering a product that is special in an important way.
And it so happens that presently the stock is on sale.
brittlerock
long LGIH
2 Likes
I find another way of looking at these stocks to be of value