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Here's a list of companies that at one time were considered to have an undisputed and unassailable moat. It was assumed that these were absolute rock-solid safe investments that could do nothing except grow in perpetuity:
Xerox, Cisco, Worldcom, Kodak, Sears Roebuck, US Cotton, Bethlehem Steel, Nortel, Blockbuster, Nokia, Polaroid, Compaq, Borders Group, Lehman Brothers, Washington Mutual, Pan Am, Chicago Gas, Pullman, Ford, Bear Stearns, Lincoln Savings and Loan, BCCI, Motorola, Singer, General Motors, Lucent Technologies, KMart, Sun Microsystems, Control Data Corporation, Blackberry, America Online, A&P, EF Hutton, Radioshack, Palm Computing, Standard Oil, Arthur Andersen
The post could just end there, but the message to take away is that the fact that moats, bottlenecks, picks and shovels are all the things protecting the pricing power and profit margins of these companies, and therefore their stock valuation, is exactly the same thing that attracts the greatest amount of innovation and competition.
Whatever gives a company a moat or a bottleneck is actively being innovated on and competed for market share. The rest of the economy do not just passively take it when the moats/bottlenecks exercise their pricing power to demand more and more money. It can take months or years, but moats are **there to be attacked**.
Furthermore, the stock valuations of such companies are buoyed by the trade itself being extremely crowded, as everybody wants to own the narrative, the moat, the bottleneck, the picks and the shovels. This self-reinforcing momentum is incredible for trading, but is a point of vulnerability if you're a long-term investor.
When I see people rushing into an extremely crowded trade, late, with a significant position size or even 50-100% of their portfolio because "it's the bottleneck picks and shovels play of AI with a wide moat", I just hope for their sake that they have really good risk management in play.
It's true that those companies are critical and essential and profitable, it does not mean their stock will necessarily perform well **in relation to the price you bought the stock at**. Risk management is essential.