Mailbag: Lessons Gained From Bad Investments

Q: What’s the worst financial investment you’ve ever made? And what did you gain from the experience?

A: Don’t fall in love. My big error was that I fell head over heels for the Nano.

What the heck is a Nano?

It used to be the “world’s least expensive automobile.” It was underpowered, under-equipped, under-automated and under-engineered. However because it was likewise underpriced, I willfully neglected all those other not-so-good “unders.”

The Nano was made by Tata Motors. The Indian company prepared to make an inexpensive cars and truck for the young however rapidly broadening middle class in India prior to rolling it out to other establishing countries. It seemed like a winning formula to me.

When it went into the Indian market in 2008, it cost about $1,500 That cost captured my attention. As a young guy, I enjoyed driving my Volkswagen Beetle, an underpowered but hugely popular vehicle in the U.S. and dozens of other nations. Because, by god, it got you from point A to point B.

Tata stated that with local low-priced engineers and factory employees, it could construct a vehicle that would enable countless Indian residents to graduate from motorcycles, scooters and India’s notorious three-wheeled vehicle rickshaws to a cars and truck that wasn’t elegant but DID THE TASK.

Just it didn’t get the job done. The Nano was pestered with production, safety and crash test concerns. It was also known to ignite at unfavorable times (which asks the concern, when is a great time for an automobile to explode into flames?).

Tata had an excellent product to market to a blossoming market at the right rate.

BUT IT DIDN’T EXECUTE. Plain and easy.

And the stock lurched from low to lower, as it totally deserved …

I found out the hard method that the most dazzling product idea can’t conquer horses ** t execution.

I never ever forgot that lesson. And a number of years later, I even expanded upon it: Fantastic ideas can’t overcome poor execution, however terrific execution can often times get rid of less-than-brilliant item concepts.

Remember, you can not “hear” great execution. You will not understand if a start-up will have excellent execution based upon a slide deck. And above all, great execution can not be presumed. It must be shown and demonstrated in the here and now.

If it isn’t, you’re taking a big possibility.

+ Andy Gordon, Co-Founder, Early Investing

Q: What do you consider Beyond Meat?

A: I believe Beyond Meat has revealed incredible development, however the stock is way too pricey. My thinking is quite basic.

Beyond Meat did $165 million in sales over the past year. Yet the business is presently valued at $7 billion. That gives it a cost– to- sales ratio of 42, meaning it is presently valued at 42 times its yearly sales.

The business is growing at an extraordinary 287% year-over-year speed. So it definitely is worthy of a premium assessment. But 42 times sales? That’s insane. And I’m not buying unless it gets a lot cheaper.

Today, the stock is priced like it’s safe. However there are threats to consider. The huge one is competitors, which is going to become a much bigger problem soon. Impossible Burger and countless brand-new entries into the sector are all contending for market share. Tyson Foods, Nestlé and Kellogg– just to call a couple of– all want a piece of this market. And Beyond Meat’s amazing success will make the competitors much more fierce. There’s a bull’s- eye on its back.

I think that Beyond Meat is a truly terrific company which it’s doing plant-based hamburgers the proper way– non-genetically customized organisms (GMOs) and without soy. However I can’t make sure Beyond Meat will come out on top. Impossible Hamburger’s genetically customized plant-based burger might end up winning, simply since a lot of people don’t appear to care about the GMO problem.

I ‘d definitely think about purchasing Beyond Meat in a market crash circumstance, but for now I’m steering clear.

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