Passing on CONSOL Energy, Staar Surgical, and DoorDash

For the most part, I only like to highlight stocks that meet all of the stringent criteria to earn a "green dot" approval and a spot on our Watch List.

However, I think it can also be constructive, from time-to-time, to briefly discuss some Green Screen stocks that were reviewed and did not make the cut.

Today's "rejects" include a commodity player benefiting from unsustainable prices, a medical firm with a lot of competition and one-time revenues, and a well-known delivery service with unattractive financials even at massive scale.

CONSOL Energy (CEIX)

Would you believe that the stocks of coal miners have been one of the best performing sectors of the market in 2022? The Russia-Ukraine war has created a massive energy crunch, particularly for natural gas, causing increased demand for coal. At the same time, a decade of policy has deterred investment in coal supply development. As a result, thermal coal prices have skyrocketed this year:

CONSOL Energy is a thermal coal miner with mines in western Pennsylvania and a shipping terminal in Baltimore. At "normal" coal prices, it is a thoroughly unremarkable business and would never sniff the Green Screens. It is generally a very bad idea to buy commodities companies at peak pricing, and I don't see the current spike on coal as sustainable long-term. That makes CEIX a quick pass.

Staar Surgical (STAA)

Staar Surgical offers vision correction procedures under the Vision ICL brand. ICL stands for "implantable contact lenses". There are some advantages over competing operations like LASIK - no dry eyes, can fix more serious vision issues, better night vision, etc. But there are disadvantages too, mainly cost and the fact that ICL has not been an accepted procedure in the U.S. to this point (less than 1% share of vision correction market).

I see two main issues with this company as an investment. First, there are no recurring revenues - vision correction is "one and done" per customer. Second, there is no moat. Eyeglasses, contact lenses, and LASIK are all cheaper and in most cases, easier. The history of LASIK is a cautionary tale in the lack of competitive advantage. That space became very competitive in the early 2000's, so much so that it became a commodity, with cutthroat pricing and minimal profit margins. Given all this, Staar just doesn't look like a particularly attractive Green Screen option.

DoorDash (DASH)

DoorDash has continued to grow revenue rapidly even after the pandemic subsided, due both to a rapid expansion into new product categories (convenience stores, grocery stores, pharmacies, etc.), and its purchase of European doppelgänger Wolt. DoorDash is founder-run, has no debt, and its stock price has come down dramatically.

And... it STILL isn't a buy! The economics here just don't make a lot of sense. Despite possibly once-in-a-lifetime favorable conditions in 2020 and 2021, DoorDash was still unprofitable and only modestly cash flow positive. It is very hard to determine what a mature operating margin or revenue maturity looks like here. Neither DoorDash or any of its competitors (Uber Eats, Postmates, GrubHub) have been financially successful. For these reasons, I'll pass.