Saluki Posted February 15 Posted February 15 I was doing a lot of thinking about companies that are getting creamed (like Constellation) and it occured to me that some might benefit because they have regulatory moats (banking etc), but also it would be hard to disrupt companies that rely on software but have a hardware element. You might be able to replicate someone's code easier than before, but that doesn't help you if you need to integrate it into the hardware to do the tasks that you need it to do. The obvious ones are Amazon (AWS) and Google, which have cloud stuff and data centers. But here are some others that occurred to me: Hardware and Government/Utility Contracts (long sales cycle). VRRM (red light and speeding cameras, requires RFPs, bids etc) Tantalus (smart meters, utility approval) Virtra (shooting simulators for police, city contracts) Hardware and Regulatory Barriers to Entry TableTrac (kiosks and casino software requiring approval by gaming commissions) NextNav (3d gps requires city government contracts, FCC approval) Tantalus (Smart Meters. Requires State PUC/ Utilities) Hardware but No Regulatory Barriers Bewhere (IOT for trucking companies) Waymo (Self driving cars need software + auto integration with LiDar etc) Feel free to suggest names that I haven't thought of.
tnathan Posted February 15 Posted February 15 Roper fits in these categories in many of its businesses, hence why I think the AI insulation is greater than what the market is currently pricing
formthirteen Posted February 16 Posted February 16 Great out-of-the-box thinking to come up with that list. My brain automatically tries to catch falling knives, Constellation Software, Wolters Kluwer, RELX, etc. The more barriers to entry (moat) a company has, the less disruption risk there is. Here's a random list of moats: - Software (just use AI) - Hardware (just order from China) - Regulation - Data - Trust - Reputation - Politics - Location - Capital - Skills (just use AI) - Focus (no AI disruption) - Agency (no AI disruption) I don't know if there's any moat in software or hardware anymore. A quick scan didn't help much: ISRG (Elon said robots will be better than surgeons within three years) INSP (short of float 18%) IRTC (short of float 8%) This task needs focus and agency. I'll
formthirteen Posted February 16 Posted February 16 start researching. https://www.morganstanley.com/im/publication/insights/articles/article_roicandtheinvestmentprocess.pdf I'm not sure this research
formthirteen Posted February 16 Posted February 16 is helpful when data is in the rearview mirror and Mr. Market sees "Few Software Firms Surviving AI": https://finance.yahoo.com/news/fund-beating-99-peers-sees-090000453.html Quote “We don’t believe current prices reflect the terminal value uncertainty or the pressure on free cash flow,” he said. Quote Recent results from infrastructure software companies Datadog Inc. and Fastly Inc. showed that demand for the plumbing for the internet is soaring. Datadog shares rose over 10% last week, while Fastly more than doubled. I will
formthirteen Posted February 16 Posted February 16 continue looking. This is what I found: Vertical SIC Codes NAICS Codes Hardware Included Gaming Equipment 3999 339999 Slot machines, lottery terminals, arcade cabinets, coin-op mechanisms. Traffic Control 3669, 3829 334290, 334519 Traffic lights, pedestrian signals (3669); Toll booths, turnstiles, vehicle counters (3829). Utility Meters 3825 334515 Smart meters, watt-hour meters, demand meters (for the grid, not the utility company). Medical Devices 3841–3845 339112–339115 Surgical instruments, orthopedic braces, X-ray apparatus, MRI, electrotherapeutic devices. Defense Electronics 3812, 3669 334511, 334290 Search/Navigation (Radar/Sonar), missile guidance, encrypted comms hardware. Payment Terminals 3578 334118 Point-of-Sale (POS) terminals, ATMs, card readers, cash registers. Public Safety 3669, 3829 334290 Fire/burglar alarms, sirens, emergency call boxes, radiation detectors. Aviation Parts 3724, 3728 336412, 336413 Aircraft engines (3724) and auxiliary control surfaces/landing gear (3728). And some further ideas that I didn't fact check: Vertical Best ROIC Hardware Company Ticker Avg. ROIC (Est.) Primary Hardware Aviation Parts TransDigm Group TDG 40%+ Proprietary Components Public Safety Motorola Solutions MSI 30%+ LMR Radios & Cameras Medical Devices Intuitive Surgical ISRG 25%+ Robotic Systems Utility Meters Badger Meter BMI 21% Water Meters Gaming Aristocrat Leisure ALL.AX 18% Slot Cabinets Payment Pax Global Tech 0327.HK 16% POS Terminals Traffic Jenoptik JEN.DE 12% Speed Cameras/Sensors Defense L3Harris LHX 9% Comms & Avionics
formthirteen Posted February 17 Posted February 17 Was looking at Itron, Inc. (ITRI) yesterday when researching. Up 14% today after earnings. Companies that make physical things are probably a great theme this year.
Saluki Posted February 17 Author Posted February 17 29 minutes ago, formthirteen said: Was looking at Itron, Inc. (ITRI) yesterday when researching. Up 14% today after earnings. Companies that make physical things are probably a great theme this year. They weren't on my radar, but it looks like they are in smart meters too. Things that help upgrade the grid (like smart meters and transformers) are probably going to be a reliable, boring, bright spot, like the picks and shovels vs All or nothing people digging for gold.
Cod Liver Oil Posted February 17 Posted February 17 (edited) Companies like Nintendo and Apple wrap hardware and software around a tight ecosystem that will contain the AI Gorgon effectively. Edited February 17 by Cod Liver Oil
dpetrescu Posted February 18 Posted February 18 (edited) What about Tyler? This was at one point Charlie Mungers holy grail of moats. It has taken a significant price cut. Even with all the AI advancements, courts and public agencies might be last in line to leapfrog software with AI. Maybe also DJC? Edited February 18 by dpetrescu
formthirteen Posted February 20 Posted February 20 BAND Bandwidth: Quote Founder-led CPaaS company that owns the underlying carrier network other CPaaS players (including Twilio) depend on. Down 92% from 2020 peak, but just reported a breakout quarter and issued aggressive 2026 guidance. The only network-owning CPaaS company: - CLEC licenses in 48 US states — originates and terminates calls on its own infrastructure - Tier 1 messaging aggregator with direct carrier connections - Customers include Microsoft Teams, Google, Zoom, AWS, RingCentral, Genesys, Five9 - Non-GAAP gross margin: 58% (82% incremental gross profit on cloud revenue) The AI voice infrastructure play: - Maestro orchestration platform attached to every million-dollar-plus deal in 2025 - AI-powered calls generate 3-4x revenue vs standard calls - OpenAI Realtime API integration, Google/Cognigy AIBridge - Third-party AI developer engagement quadrupled in 2025 - Software services at ~$15M run rate (above $10M guidance) Anyone had a closer look at this company?
Spekulatius Posted February 20 Posted February 20 On 2/18/2026 at 4:26 PM, formthirteen said: They have expertise in ceramics and produce electrostatic ceramic wafer chucks (carriers). Electrostatic chucks reduce backside contamination and reduce breakage (I think). I noticed this a while ago and while a small business, they make insane margins with this. Should have bought some shares then.
gfp Posted February 20 Posted February 20 26 minutes ago, Spekulatius said: They have expertise in ceramics and produce electrostatic ceramic wafer chucks (carriers). Electrostatic chucks reduce backside contamination and reduce breakage (I think). I noticed this a while ago and while a small business, they make insane margins with this. Should have bought some shares then. I was also aware of this and didn't make an investment. Oh well. By far my favorite toilets. Why are they so expensive in the US?? (The toilets, not the seats). I like the little button on the wall that can make sounds like a babbling brook or tweeting birds. Plus a toilet that knows you have entered the room and prepares itself
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