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

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

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!