When in Doubt, Buy the Industry Leader

Every industry will have several players. Depending on the structure of the industry, there may be dozens of players or just a few. The ease of entering the industry and successfully competing can make a big difference.

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  • That’s why the restaurant industry has dozens of options. But the credit card networks have just four players due to the high cost of entry and building a network. Today’s tech companies often have just a handful of players.

    That’s because these companies can successfully build a network and become the most-used in their industry before competition can set in.

    When competition does set in, it’s often a far distant second place to the industry leader.

    Ride-share industry leader Uber Technologies (UBER) just took a hit following a surprise loss in earnings.

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  • While investors were expecting a profit, this kind of quarterly fluctuation is normal for a company.

    Even with the recent drop, Uber shares are still up over 80% in the past year.

    Action to take: Investors willing to hold volatile tech names may want to build a stake in Uber following its recent drop. The drop has now taken shares back to a low last seen in February.

    For traders, the August $70 calls, last trading for about $4.40, can likely see high double-digit returns in the coming week from a bounce off the earnings season drop.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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