Has anyone thought of buying stock in irobot?

[3kids4me Super Moderator and Super Mom Find all posts View Profile Close 3kids4me]

Just wondering...since we are all talking about the roomba. It looks like the stock has been recommended by some analysts....

Sharon

[bigfrank Administrator Find all posts View Profile Close bigfrank]

I did not know they had stock. Wish I knew from day 1,

[3kids4me Super Moderator and Super Mom Find all posts View Profile Close 3kids4me]

It's not too late. Many years ago I thought about buying stock in Visx, the makers of the laser machine that does lasik. I figured the bubble was over, but I was very wrong....

Sharon

[lawren2 Malibu Beach Barbie & A Super Moderator Find all posts View Profile Close lawren2]

If you bought in at the IPO you wouldn't care for it.

HOWEVER if we had bought in July we'd be sitting pretty.

It has crossed my mind to buy some as there numbers are very attractive.

http://finance.yahoo.com/q/bc?s=IRBT&t=1y

Symbol = IRBT

[T. R. Oglodyte Moderator Find all posts View Profile Close T. R. Oglodyte]

Lots of people bought stock in Netscape, figuring that this whole internet thing was going to be big.

Lots of people bought stock in Atari, figuring that video gaming was going to be huge.

Lots of people bought stock in IBM when IBM made their first PC, figuring that PC's were going to overwhelm mainframes.

Lots of people bought stock in Wang and Digital, figuring that desktop computer terminals were going to overrun centralized computing centers.

*****

To go back almost a century, you could have been prescient and seen that automobiles were going to take over the world. But, out of the dozens of automobile companies in existence in the early 1900's, how would you have known that the company to invest in was Buick?

Or, to consider a more recent example, let's say that in 1980 you knew that PC's were going to take off. You knew it was risky to try to identify what company would manufacture PCs, so you smartly decided to reduce your risk and invest in something that all manufacturers would need - investing in the "gozinta", not the product. (And that is a great investment strategy, by the way. Instead of prospecting for gold, sell prospecting supplies.)

One thing all computers need is an operating system. But in 1980 there is almost no possible way you would have considered a funky little system call "DOS", and even if you did it wasn't available for public investment. No, people who were jumping into operating systems all put their money on CP/M produced by Digital Research.

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Getting back to irobot ...

With a P/E ratio of 88.52 and a market cap of $441 million, the stock market is valuing irobot as if it were already a highly profitable, established business enterprise.

IOW - to justify that valuation, the company has to do almost everything right and very little wrong. The reality, of course, is even the best companies seldom perform at that level of inerrancy. But when the stock is priced as if the company will exectue almost perfectly, a major price adjustment is inevitable. If investors are lucky, the adjustment is simply a correction. As many dot.com investors learned, the correction is often bankruptcy.

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The large companies that are major successes in a market are almost never the companies that create the market. The market is usually created by some innovator, but is built by someone else who is better at delivering that product into the market. GM did not create the market for automobiles. Microsoft did not create the market for computer operating systems, nor for software to run on computers, nor for Windows styled operating systems. Dell did not invent the PC. Boeing did not invent the airplane. George Bush did not invent creative thinking. (Just threw that in there to see if you were still reading.)

So if you believe that home robots are going to be a big future market, it's most likely that the big success in that market will not be irobot, but some successor that comes in behind irobot.

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If I bought irobot stock, I would do so only with money I've set aside for frivolous purchases. But that's the same money I use for buying and selling timeshares, and I think buying and selling timeshares is a lot more fun and a lot more likely to be profitable.

[lawren2 Malibu Beach Barbie & A Super Moderator Find all posts View Profile Close lawren2]

***

Getting back to irobot ...

With a P/E ratio of 88.52 and a market cap of $441 million, the stock market is valuing irobot as if it were already a highly profitable, established business enterprise.

IOW - to justify that valuation, the company has to do almost everything right and very little wrong. The reality, of course, is even the best companies seldom perform at that level of inerrancy. But when the stock is priced as if the company will exectue almost perfectly, a major price adjustment is inevitable. If investors are lucky, the adjustment is simply a correction. As many dot.com investors learned, the correction is often bankruptcy.

****

The large companies that are major successes in a market are almost never the companies that create the market. The market is usually created by some innovator, but is built by someone else who is better at delivering that product into the market. GM did not create the market for automobiles. Microsoft did not create the market for computer operating systems, nor for software to run on computers, nor for Windows styled operating systems. Dell did not invent the PC. Boeing did not invent the airplane. George Bush did not invent creative thinking. (Just threw that in there to see if you were still reading.)

So if you believe that home robots are going to be a big future market, it's most likely that the big success in that market will not be irobot, but some successor that comes in behind irobot.

***

If I bought irobot stock, I would do so only with money I've set aside for frivolous purchases. But that's the same money I use for buying and selling timeshares, and I think buying and selling timeshares is a lot more fun and a lot more likely to be profitable.

Steve all excellent points!

iRobot also makes defense robots that search for mines etc. So they are not just consumer based. I don't know what kind of success they have with that side of the business although they have reportedly saved lives of our military in Iraq and Afghanistan..

[3kids4me Super Moderator and Super Mom Find all posts View Profile Close 3kids4me]

Of course, all of the points Steve just noted could have been said about Visx too...but I still wish I'd jumped on that one!!

Sharon

[tonyg Goomba & Super Moderator Find all posts View Profile Close tonyg]

In the vacuum cleaner industry many innovators looked really good, but then the big boys saw sucess and jumped into the market wiping out the promising little guy. You don't have to go back far to see an example- Phantom with its hepa filter and bagless collection is gone after Hoover, Eureka and others jumped on the idea. Of course here we have an example of some diversification, but with a P/E that high- I would be very nervous buying the stock.

[T. R. Oglodyte Moderator Find all posts View Profile Close T. R. Oglodyte]

In the vacuum cleaner industry many innovators looked really good, but then the big boys saw sucess and jumped into the market wiping out the promising little guy. You don't have to go back far to see an example- Phantom with its hepa filter and bagless collection is gone after Hoover, Eureka and others jumped on the idea. Of course here we have an example of some diversification, but with a P/E that high- I would be very nervous buying the stock.

Early in the days of the automobile, some people were making a good living installing radios in automobiles. But then Ford and others started selling cars with factory installed radios.

**

That turned out to be a pivotal anti-trust case. The car radio installers sued Ford, claiming it was illegal for Ford to add extra features to automobiles if someone was already in the business of providing that service themselves. The Supreme Court sided with Ford, agreeing that someone who develops a product is free to add extra features to the product to make their product more attractive to customers.

Later, Microsoft used the same argument that it was free to add features such as Internet Explorer to it's operating system.