Two Reasons to Sell IPG Photonics Corporation (IPGP) Stock Today

Page 1 of 2

IPG Photonics Corporation (NASDAQ:IPGP)I’m going to attempt something a little odd today, Fools. Even though IPG Photonics Corporation (NASDAQ:IPGP) — a company that makes fiber optic lasers — makes up 5% of my real-life holdings, I’m going to be giving you two reasons to consider selling IPG stock today.

Why am I doing this?

Recently, Nobel Prize winner Daniel Kahneman visited Fool headquarters in Virginia. While visiting, he talked about how a number of different biases can lead us to believe we can predict the future with relative certainty. In reality, he argued, we’re just deluding ourselves.

It got me to thinking about how I don’t write enough about the risks of owning the stocks I own. So although I don’t plan on selling my IPG stock anytime soon, I think it’s healthy for me to practice and model this behavior.

Let’s go over the three points.

Disrupting the disruptor
When I purchased shares of IPG Photonics Corporation (NASDAQ:IPGP) last April, I used this chart as the basis for my investing thesis.

Source: Author, based on The Innovator’s Dilemma by Clayton Christensen

This is my own representation of an idea gleaned from Clayton Christensen’s The Innovator’s Dilemma. The book demonstrates how new technologies eventually usurp standard technologies. Just as important, while standard technologies usually maintain the same price point, newer technologies become cheaper with time.

For decades, the standard technology in the laser industry has been the carbon-based laser. In reality, these lasers are still commonly used, and sold in bulk by the likes of Rofin-Sinar Technologies (NASDAQ:RSTI) and Coherent, Inc. (NASDAQ:COHR). They are used largely for precision cutting of large pieces of metal.

But starting in the 1990s, when IPG Photonics Corporation (NASDAQ:IPGP) was founded, a new type of laser began developing. Though IPG’s fiber optic lasers were at first far too expensive, and not powerful enough, to gain wide acceptance, that has changed with time. Now, IPG’s lasers are more efficient, and powerful, than their carbon-based partners, and can compete on price to boot!

The problem, however, is that there could be further disruption right around the corner. I am far from being an expert in lasers — and I’m guessing the same is true of many Fools. Because of that, it’s going to be very difficult for me to see a newer laser — one that’s even cheaper and more powerful than fiber optics — coming to the market. If that does happen, IPG Photonics Corporation (NASDAQ:IPGP) could quickly lose market share.

The downside of vertical integration
While IPG Photonics Corporation (NASDAQ:IPGP) was the first on the scene with fiber optic lasers, it’s no longer the only company with skin in the game. Rofin-Sinar Technologies (NASDAQ:RSTI) and Coherent, Inc. (NASDAQ:COHR) now offer fiber optic lasers along side their carbon lasers. Furthermore, JDS Uniphase Corp (NASDAQ:JDSU), which focuses much more on the communications industry, has entered the fray by offering clients fiber optic lasers.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!