Seeing Beyond Visx, Part 1

Many thanks for the feedback to last month's column on Visx (VISX Quote). (OK -- it wasn't all positive!) There were so many questions, in fact, that I'm following up with further analysis of the vision-correction industry, the players competing with Visx and a look at some of the technological advances driving developments in this field. And the timing couldn't be better, now that Visx has launched an industry price war and a new competitor has joined the fray.

First, a little background on how I think about investing. I'm a proud member of a fast-dying breed: the long-term, buy-and-hold investor. Consequently, the primary factor I look for when evaluating a company is sustainable competitive advantage. Powerful competitive advantages create a moat around a company that can keep competitors at bay and allow the business to reap extraordinary growth and profit. Like Warren Buffett, I seek companies with wide, deep moats that will expand over time.

This is a rare phenomenon, as big moats seldom endure for many reasons: High profit can lead to complacency and are almost certain to attract competitors, while new technologies, customer preferences and ways of doing business emerge, etc. Yet when a company is able to achieve a significant moat -- and, most importantly, maintain and even expand it -- the company and its shareholders can be rewarded for decades. The big pharmaceutical companies are great examples of this.

Industry Overview

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