There was no Elon Musk guest appearance on Saturday Night Live Dogecoin (CRYPTO: DOGE) Fans the result they expected. Instead of floating after the multimillionaire and self-proclaimed “Dogefather” hosted the late-night TV show, the price of Dogecoin fell. In the SNL mock news “Weekend Update” section, Musk even admitted that Dogecoin is “a hustle and bustle”.
But having a prominent backer who doesn’t raise the price isn’t Dogecoin’s biggest weakness. There is another key problem for the popular cryptocurrency. And Dogecoin’s greatest weakness is arguably the greatest strength for Intuitive surgery (NASDAQ: ISRG) and Vertex Pharmaceuticals (NASDAQ: VRTX).
Greatest weakness, greatest strength
What is Dogecoin’s biggest weakness? Warren Buffett could argue that it doesn’t produce anything. However, there are different types of assets that fall into this category, but investors continue to buy them. I think Dogecoin’s biggest weakness is that Buffett isn’t looking for anything else – a moat.
Just as a medieval castle had a moat to keep it safe from intruders, the Omaha Oracle prefers that whatever it invests in has strong competitive advantages that will help stave off rivals. Dogecoin has low transaction fees and fast transaction speeds. However, these pluses alone are not enough to prevent another cryptocurrency from dominating.
It’s a different story with Intuitive Surgical and Vertex. Intuitively pioneered robotic surgical systems and is widely recognized as the 800 pound gorilla in its market. Vertex has the monopoly in treating the underlying cause of the rare genetic disorder cystic fibrosis (CF).
The dominance of the market that Intuitive and Vertex have established is not easy to overcome. However, Dogecoin’s success largely depends on public acceptance, which can be fleeting, especially with so many other cryptocurrencies vying for attention.
Much different dynamic
Both Intuitive and Vertex face rivals as well. However, the competitive dynamics of the companies differs significantly from that of Dogecoin.
Healthcare giants Johnson & Johnson and Medtronic I hope to be successful in the robotic surgical system market. While the big corporations could carve out a niche for themselves, dethroning the intuitive will be extremely difficult.
More than 6,100 of Intuitive’s da Vinci systems are in use worldwide, and well over 8.5 million procedures have been performed with its robotic surgical systems. More than 24,000 peer-reviewed articles have been published about its technology, including over 3,000 articles in 2020 alone. The bottom line is that Intuitive has a long track record and a huge installed base that gives it a powerful moat.
Other companies are developing drugs that target the underlying cause of CF, as Vertex’s four approved drugs are already doing. However, the most advanced of these potential competing therapies are only in Phase 2 testing. These experimental drugs are a few years away from any potential threat to the Vertex franchise at best, and the company expects it to reach a leading market share in CF by 2030.
The potential benefit of Dogecoin
There is one major potential advantage Dogecoin has over Intuitive Surgical and Vertex Pharmaceuticals: the cryptocurrency could make a person rich quickly. Despite the sharp drops in recent days, Dogecoin is still up well over 7,000% since the start of the year. Intuitive stocks are barely in the black this year, while Vertex stocks are in negative territory.
However, this edge can cut in either direction. Dogecoin can lose a lot of money quickly. Investing in cryptocurrency is not for the faint of heart.
Don’t be surprised if Intuitive Surgical and Vertex outperform Dogecoin in the years to come. In the long term, moats are important.
This article represents the opinion of the author who may disagree with the “official” referral position of a Motley Fool Premium Consulting Service. We are colorful! Questioning an investment thesis – including one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.