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Copying somebody’s funding methodology verbatim doesn’t train you how you can change into a greater investor. Arriving at your personal set of investing guidelines does. Our personal tech investing methodology is a residing doc that evolves slowly over time in response to the rapidly-changing know-how area. In that doc, you’ll discover quite a few “showstoppers,” onerous guidelines which maintain us from investing in sure firms. One such rule is heavy buyer focus threat.
Expertise shares are a number of the most risky belongings on the market, so it is smart to scale back threat. When you’ve got an organization with only one buyer, that buyer has all the facility on the negotiating desk. If that sole buyer occurs to be one of many world’s largest firms, then your place of weak spot is much more pronounced. Ditto for the U.S. authorities. That’s why once we discovered Symbotic inventory (SYM) had practically totally dedicated to Walmart, it was a showstopper we couldn’t look previous.
Symbotic Inventory and Walmart
There’s one other prepare of thought that claims, “having one of many world’s largest firms as your sole buyer is an effective factor” as a result of it validates your providing. Buyers in that camp will likely be stoked to listen to that Walmart, Symbotic’s largest buyer, accounted for about 88% of their complete income in fiscal 2023, and for a good portion of their $23.3 billion backlog. That’s down from 94% in 2022, so the Walmart dependency is on a decline. This begs the query. At what degree would the Walmart dependency should be for us to look previous this showstopper?
A small crimson flag begins when a buyer accounts for 10% or extra of complete revenues. That’s why
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