Deep Dive: The Market Is Confusing “Commodity” With “Uninvestable”

Why the best operators quietly win when everyone else obsesses over moats

A few years ago, I bought DAQO Energy [DQ]. Polysilicon, DQ’s output, as every commodity lives in the land of supply and demand. Even though the company was not a tech company and it simply relied on mining a commodity, it turned out to be my best investment, multiplying my capital by 17x in a couple of years.

One of my best picks on Seeking Alpha was Daqo Energy (DQ), a Chinese manufacturer of polysilicon photovoltaic products. I first published my thesis and buy recommendation in September 2017 @ $5.23 per share, re-iterated the buy in November 2018 @ $4.71 per share, one more buy in February 2020 @ $15.18 per share and finally closed my position in February 2021 @ $95.25.

That investment taught me a simple rule that still guides me: when the product starts to look like a commodity, the best operator wins.

In commodity-like industries, the edge rarely comes from a secret product. It comes from boring things done at a high level: buying well, building well, shipping on time, managing inventory like it is cash, and squeezing waste out of a messy system.

That operator lens shapes how I look at companies with no apparent “moat”. The February Stock Pick falls into this category. It is in a part of the supply chain that has no bargaining power. However, this company has been able to have +20% ROIC lately.

The company is already +20% since I sent the trade alert on February 23rd.

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