Elon Musk’s guest spot on Saturday Night Live didn’t give Dogecoin (CRYPTO:DOGE) fans the result they expected. Instead of soaring after the multibillionaire and self-proclaimed “Dogefather” hosted the late-night TV show, Dogecoin’s price sank. In the “Weekend Update” mock news part of SNL, Musk even admitted that Dogecoin is “a hustle.”
But having a prominent supporter fail to boost the price isn’t the biggest weakness for Dogecoin. There’s another key issue for the popular cryptocurrency. And Dogecoin’s biggest weakness is arguably the greatest strength for Intuitive Surgical (NASDAQ:ISRG) and Vertex Pharmaceuticals (NASDAQ:VRTX).
Biggest weakness, greatest strength
So what is Dogecoin’s biggest weakness? Warren Buffett might argue that it doesn’t produce anything. However, there are several types of assets that belong in that category, yet investors still buy them. I think that Dogecoin’s biggest weakness is that it doesn’t have something else that Buffett looks for — a moat.
Just as a medieval castle had a moat to protect it against invaders, the Oracle of Omaha prefers that anything he invests in has strong competitive advantages that help fend off rivals. Dogecoin does have low transaction fees and fast transaction speeds. However, those pluses by themselves aren’t enough to prevent another cryptocurrency from dominating.
It’s a different story with Intuitive Surgical and Vertex. Intuitive pioneered robotic surgical systems and stands as the 800-pound gorilla in its market. Vertex enjoys a monopoly in treating the underlying cause of rare genetic disease cystic fibrosis (CF).
The market dominance that Intuitive and Vertex have established won’t be easily overcome. However, Dogecoin’s success depends largely on public acceptance, which can be fleeting, especially with so many other cryptocurrencies vying for attention.
Much different dynamics
Both Intuitive and Vertex face rivals, as well. However, the competitive dynamics for the companies are much different than what Dogecoin is going up against.
Healthcare giants Johnson & Johnson and Medtronic hope to achieve success in the robotic surgical-systems market. While the big companies could carve out a niche for themselves, dethroning Intuitive is likely to 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 using 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 claims a long track record and huge installed base that gives it a strong moat.
Other companies are developing drugs that target the underlying cause of CF as Vertex’s four approved drugs already do. However, the most advanced of these potential rival therapies are only in phase 2 testing. These experimental drugs are at best a few years away from even possibly threatening Vertex’s franchise, and the company thinks that it will command a leading market share in CF through the 2030s.
Dogecoin’s potential edge
There’s one major potential edge that Dogecoin has over Intuitive Surgical and Vertex Pharmaceuticals: The cryptocurrency could make a person rich quickly. Even with the steep declines over the last several days, Dogecoin is still up well over 7,000% year to date. Intuitive’s shares are barely in the black so far this year, while Vertex’s shares are in negative territory.
However, that edge can cut both ways. Dogecoin can lose a lot of money quickly. Investing in any cryptocurrency isn’t for the faint-hearted.
Don’t be surprised if Intuitive Surgical and Vertex outperform Dogecoin in the years to come. Over the long term, moats matter.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.