“Unmistakable Signal is Flashing ‘Buy'” (David Gardner’s Motley Fool pick)

De-teasifying the latest pitch from the Motley Fool Stock Advisor

By Travis Johnson, Stock Gumshoe, August 15, 2012

“The ‘unmistakable signal’ that could lead YOU to profits of 246%, 631%, even 1,425%

“Only one in a thousand investors has even heard of it. But it’s delivered them an average return of 140% for more than ten years running.

“And the signal just started flashing AGAIN — pointing them to a surging stock that could be their biggest winner yet.”

That’s how the latest teaser ad for the Motley Fool’s Stock Advisor newsletter gets us started — this time the teaser letter is actually signed by a subscriber to the newsletter, a guy named Danny Vena, but the basic idea of the “unmistakable signal” is one they’ve used in ads several times over the years.

Basically, what they’re saying is that every time David or Tom Gardner re-recommends a stock, it does much better than the market… so that re-recommendation itself is the “signal” that a pick is extraordinary.

And there are plenty of examples they provide to back this up — both the Gardner brothers have re-recommended several stocks over the years, and many of them have been their best picks, stocks like Marvel (now owned by Disney, DIS), Quality Systems (QSII), Priceline.com (PCLN), Intuitive Surgical (ISRG) and Whole Foods Markets (WFMI). Of course, they’ve also occasionally re-pounded the table on stinkers, like Netflix when it was well over $200 a share (they also picked it cheap and got in very early, to be fair — they teased it at $17 a share in 2007, so folks who bought then are probably still happy if they hold the shares at $63 … it’s just that they kept saying it was a good buy at $200+ before the 70% collapse that started about a year ago), so the “signal” may not be entirely infallible.

Here’s how the ad puts it:

“Nearly all of Stock Advisor‘s biggest winners share one defining and extremely telling characteristic…

“They’re all stocks that David Gardner has re-recommended. Allow me to explain…

“Every month David recommends one stock to his Motley Fool Stock Advisor members.

“And, occasionally, when he thinks a stock he’s already recommended once makes for an incredibly compelling investment opportunity — either because of a temporary pullback in share price, or a new growth catalyst, or simply because he thinks it’s the very best company you can possibly buy at that given moment — he will actually double down and re-recommend it…

“That’s why I wasn’t surprised to see that David Gardner’s latest Stock Advisor re-recommendation is already up 20.8%… even though the S&P 500 has delivered just 2.4% in this same short period.

“If you’re worried this means you’ve missed your chance again… you shouldn’t be. Because what really fuels this stock’s growth (other than its 1,000 disruptive technology patents — both current and pending) is its ongoing defiance of Wall Street’s expectations.

“Here’s what I mean by defiance… on July 19, equity analysts at J.P. Morgan downgraded their rating of this company. But from that moment, it’s actually gone up… in just a few weeks, it’s clobbered the return of the S&P by a factor of more than 8 times.”

And he does actually insert a small note of caution, though it ain’t exactly in the bold type — he says that the “unmistakable signal… only generates a positive return about three quarters of the time.” So there’s your note of sobriety. But then he steps it up a notch because this is a rapid re-recommendation:

“Less than two months ago — for only the 6th time ever in his legendary investing career — David Gardner gave one of the picks on his Stock Advisor list an even STRONGER vote of confidence….

“Here’s the key statistic I want you to focus on: 6 months.

“As David will tell you, 6 months is usually too short of a period to evaluate a stock’s performance and potential. For starters, it includes only one quarterly reporting period.

“That’s why (until now) David has recommended a new stock — and then re-recommended it less than six months later — just 5 times in his entire career as an investor. A career that includes literally hundreds of stock picks.

“And those 5 recommendations have generated an average return of 440%.”

We’re told that this is a big vote of confidence because Dave Gardner re-recommended the stock very quickly, after just four months and 26 days … and that …

“… he isn’t issuing this ‘ultimate vote of confidence’ because the stock has seen a temporary pullback in price that represents a short-term misvaluation. Quite to the contrary, it’s already up 94% on his first recommendation. And now he’s signaling us again… that based on his analysis of the company’s outstanding fundamentals and its unique position in the marketplace, it’s poised to make an even BIGGER move.”

Got it? So we want to know what stock he’s re-recommending, yes? Well then, on to the clues!

“… the companies he favors most are what he calls ‘Rule Breakers’ — businesses that completely reinvent their industry, or overturn it and create entirely new industries….

“… if you’ve been keeping an eye on the science world lately — like the recent “TED 2012” conference — you know that there’s only one technology right now that has this kind of disruptive potential.

“Researchers in Austria just used it to create a fully detailed automobile the size of a grain of sand. It’s convinced NASA (left for dead by decades of budget cuts) to start making new plans for a mission to Mars. And everyone from gun manufacturers, to pharmaceutical developers, to gourmet chefs, is rethinking their long-term strategies because they’re starting to recognize that it could put them out of business altogether….

“As recent articles in Forbes and Bloomberg Businessweek reveal, the world’s two dominant aerospace manufacturers, Airbus and Boeing, have both already created enormous new production facilities to start using this technology to better their bottom line. And as we speak, American athletes like Michael Phelps, Ryan Lochte, and LeBron James are taking full advantage of it at the Olympics in London.”

Sound familiar? Yes, this stock is not just a re-recommendation … it’s also a re-tease, the Stock Advisor folks teased it many months ago, around the time they were first recommending it. But there are actually a few stocks in this category that have been promoted by the Fool, so let’s make sure we ID the right one for you. A few more clues:

“… company is the clear-cut market leader bringing this technology into homes and offices everywhere.

“It just:

  • Reported an impressive 71% increase in its already-healthy profits.
  • Accepted a nomination as a finalist for the coveted American Technology Award.
  • Closed key partnership deals with Volkswagen and Heineken.
  • Acquired six of its competitors over the past year.

And if you think you’ve “already missed the really big gains” because the stock has almost doubled this year, the ad compares getting in early to buying Intel “late,” 15 years after its IPO and after they’d already hit revenues of a billion dollars … folks who bought then and held until now (27 years) apparently would be enjoying almost 100-fold gains. And of course …

“David Gardner recently went on record and stated that he’s ‘convinced the success we’ve already seen is just the beginning.'”

So who is it? Well, the 71% increase in profits was actually for 2011 over 2010 (the last two quarters actually posted year over year declines in per-share profits), but the Thinkolator says this is still … 3D Systems (DDD)

Which we’ve written about quite a few times — to their credit, the Motley Fool was the first one of the big newsletter publishers to get on board this 3D printing trend and push it hard as an investing theme back in March, calling it the “end of ‘Made in China'”, but it’s also been teased by Nicholas Vardy and Michael Robinson in recent months. Heck, I even got on board back in June and profiled DDD and their main competitor, Stratasys (SSYS) for the Irregulars.

And yes, DDD has gone up quite nicely since the Foolies started recommending it early this year. If the teaser ad is accurate on the dates (they aren’t always), then Gardner picked this one four months and 26 days before August 14, so that would mean he recommended it on February 17th (which is indeed the “third Friday” of the month, the day the newsletter typically publishes). From the chart I would have guessed February 22, since that’s the day there was a huge spike in the trading volume (it traded 10X as many shares) and a jump in price by about 10%, but either way it means he picked the stock right around $20. Right now it’s just shy of $40, so a 94% gain sound about right. Stratasys, which was also teased in that same ad back in March, has done almost-but-not-quite as well, and the big software provider they gave away as a “free” pick at the time, Dassault Systems (DASTY), has handily beaten the S&P but has trailed far behind the two 3D “hardware” companies.

3D Systems was indeed downgraded by the JP Morgan analyst on July 19, from neutral to underweight (which is pretty much going from “hold” to “sell” if you choose to speak English instead of analystese) — they put their price target at $34.50, which is right around where the stock was trading at the time, so from there to the recent highs (the stock bumped above $41 briefly on Monday of this week, which is the all time high price) it did indeed jump up by about 20%. This has been a wild ride of a momentum stock this year, and as befits a David Gardner pick it’s trading at a steep premium to the market by most conventional metrics — the trailing PE is close to 70, forward PE around 30 (for what’s expected to be long-term growth in the 15% neighborhood, so a fairly pricey price/earnings/growth ratio of a bit over 2), and thanks to the lofty valuation and the double in share price this year there’s a very high short ratio — more than a quarter of the free trading float is sold short, which means some investors are placing a pretty hefty bet that the stock will fall. Though to be fair, short interest has been pretty high in 3D Systems all year, which means either there’s a lot of in-and-out trading going on among those shorts or there are some really long-suffering short holders on these shares, and the potential for a substantial short squeeze if the share price keeps climbing.

(If you don’t know what a “short squeeze” is, it’s when a heavily shorted stock rises enough that the short holders either choose to (sick of losing money) or are forced to (because of margin calls) “throw in the towel” and get out of their short position. A short position means you borrowed the stock in order to sell it, so covering a short means you have to buy the stock to repay that loan of shares … which means they have to buy the underlying stock in the open market to cover their position, and if there’s a heavy short position and a lot of shorts have to cover at once, it can drive up trading volume substantially and cause the share price to spike on what can sometimes be desperate buying).

But this is also very much a “story” stock — it is in an industry that shows a lot of signs of breaking out and reaching much more widespread usage, both by traditional and industrial users and by home users (though I think the potential of the home business, with devices like DDD’s Cube printer, is probably overly hyped by many investors), thanks both to rapidly improving technology that allows these printers to be used for “real” manufacturing as well as for models and prototypes and to dropping prices … but we’re still in the very early days, without a history of earnings growth to look back on for any of these companies. Stratasys and 3D Systems have been around for a while, and there have been several times when the promise of 3D printing seemed eagerly anticipated but it spent a couple decades being a “little deal” … important for prototype designers but not showing any chance of doubling or tripling the market overnight. So a big part of the concern about these stocks is a worry that the bump up they’ve seen in revenues and earnings over the last two years might not be sustainable.

I tend to agree with Gardner that we’re in the early days of much faster adoption of these technologies, and continuing refresh cycles in the hardware as the 3D printers become better and better, with increasing precision and speed and a constantly improving variety of materials and colors … but that doesn’t mean the stocks can’t fall if the horizon starts to look a bit less shiny, expectations are quite high for these stocks, and as we’ve seen from several newsletters pushing them pretty aggressively the level of attention is increasing even if Mom and Pop investors may not have yet heard of these companies, so an earnings “miss” or a downbeat forecast from either Stratasys or 3D Systems would very likely cause a substantial drop in the shares. These are both pretty big companies now, Stratasys acquired the last outstanding major competitor earlier this year, and 3D Systems has grown through many, many smaller acquisitions over the last few years, so DDD is a $2 billion company and SSYS will be comparably sized once their combination with Objet goes through (shareholders will vote on it next month), and they’re no longer “under the radar” and can be expected to move fairly violently if news shakes investor confidence in the growing earnings power of these companies.

You can easily see the possibility that we’re on the cusp of great things — 2010 and 2011 brought breakthroughs in terms of operating income for DDD (it rose to 15% of sales in 2011, up from 3% in 2009 and 12% in 2010) without huge new spending on R&D or rising general or administrative costs, and the temptation is strong to look at this as similar to the 1990s performance of the desktop printer companies — eventually they were able to drive down equipment costs so much that every office and home had a printer, which drove usage much higher, and their profit margins increased dramatically when the sale of supplies became the main part of their income statement. Like inkjet printers in the early days, 3D printers are largely hostage to the refillable “cartridges” (printing materials) sold by the manufacturer, so increasing printer use leads to higher sales of disposable materials, which leads to higher profit margins. Right now the revenue growth from printer sales is higher, but the actual revenue from printer sales is about the same as from print materials (both are smaller than the revenue from their largest division, services, which includes “printing as a service”), but the lion’s share of their actual profits (42% for the first half of this year) already comes from print materials. That’s promising, though it’s been and may continue to be a gradual process. You can get a good idea of how they see themselves and the promise of their business from their latest investor presentation, released about a week ago. (Their next quarterly report won’t be until October 23, by the way.)

The most likely “big picture” risks seem to be either that this technology reaches saturation much earlier than folks like David Gardner expect, which would mean too much expected growth is factored into the shares, or that price competition erodes profits. I don’t have any way of predicting the former, though since it’s still pretty early in what looks an awful lot like a transformative technology that’s getting a new head of steam, I’m not terribly worried … and I think the latter is not terribly likely given the fact that for commercial-scale products there is an emerging duopoly, which tends to keep price competition in check to at least some degree. There are a lot of other companies who make printers, which can also be made using a kit at home, and some of these other firms might come up with a “better mousetrap” … but none are nearly as big as DDD or SSYS, and the two companies have consistently bought out all their emerging competitors, so that seems likely to continue.

With the volatility in these stocks, it’s very hard to open a position at or near all-time highs — since we can feel in our bones that there’s bound to be a quarter when they do very badly and the stock gets crunched by 20%. Of course, if the shares have already climbed another 30% before that happens, we’re still better off buying today, so you can never tell. If you’re interested in these kinds of high-momentum, high-expectation growth stocks (I’m interested in both SSYS and DDD, but have not bought them personally yet), I find that it’s generally easiest on the nerves to buy them in small nibbles over time, keeping an eye open for dips in the price as long as you’re still confident about the long-term future growth.

So what do you think? We’ve been writing about 3D printing for quite a while now, and DDD seems to be narrowly edging out SSYS as the growth darling consensus pick among investing pundits so far … do you agree? Or would you rather jump aboard Stratasys, or move to a stabler part of the food chain and buy one of the software companies like Dassault? Let us know what you think with a comment below.

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Share Your Thoughts

ShowHide Comments (46)
      • Rebekkah
        Aug 17 2012, 11:32:23 am

        I bought ADSK, DDD and SSYS early last fall after my son had me watch the infamous wrench video on youtube and, after a discussion with a co-worker in which we tossed around all of the possibilities…one of which was a 3D printed fetal ultrasound – and guess what? A company in Japan is now doing this! So I am convinced I have placed my bet on the right technology…I recently purchased additional shares in ONVO…I am in this for the long-term and cannot afford much but I encourage anyone with spare money to invest to buy whatever they can – my recommendation is SSYS – I feel they are the “top dog” with potential to buy out other smaller companies. get a scottrade or other account and buy what you can now.

        • SpenceB
          Aug 21 2012, 03:45:24 pm

          haha – you’ll be rich if you watch those guys, esp. Stratasys. I missed the boat on them about $40 dollars ago and am still kicking myself. I got 3D, though. Good luck.

    1. Thomas Yudeik
      Aug 15 2012, 01:08:41 pm

      I don’t know yet…I hedged a bet on 3D Feb13 45 Call options just based on the technology was used in the movie “ParaNorman”! Might be dumb but I figure if the movie takes off, 3D might follow…release is this Friday, 17th. The technicals were decent but it was a bit hot on the overbought side.

    2. Fullyinformed
      Aug 15 2012, 01:58:15 pm

      I think it really doesn’t matter what they think. What matters generally is the overall market trend. If the market trend continues higher they will be right. If the market trend should put in a double top, then their choices may end badly.
      I do little but options as I can benefit from either direction in the market or a stock. instead what I do it look at the Motley Fool Re-recommendations and would consider option strategies to profit from in either direction. That way it doesn’t matter if they are right or wrong, I would still profit.
      Teddi Knight

    3. Boa1952
      Aug 15 2012, 02:00:38 pm

      Don’t forget a lesser known 3D printer for medical applications called ONVO Holdings. This stock is only in the low $2.00’s with hugh upside. Do your due diligence.

      Long DDD, SSYS & ONVO! Also long RBY! Mr. Gumshoe, you are good, very good! And, the Gardner brothers are Super Good!!!!

      • 3984 |
        Travis Johnson, Stock Gumshoe
        Aug 15 2012, 02:26:53 pm

        I do hear a lot about ONVO, they’ve come back in price after their wacky high earlier this year — do note that ONVO is a much longer-term play, they happen to use 3D printing technology but my (limited) understanding is that they’re very much in the research phase, their “printed organs” won’t be in clinical trials for at least several years.

        • Boa1952
          Aug 15 2012, 09:45:00 pm

          Let’s start with software that takes part stem cell, part DNA and and prints your artery, which then surgically replaces a bad artery in your body. Stem cell and DNA match, so “no rejection”. Now, use your imagination, and watch a perfectly matched heart being printed to replace your old heart. I am 60 years old and believe I will see this in my lifetime. Star Trekian replication is here.

          Long DDD, SSYS & ONVO

    4. Richard Stern
      Aug 15 2012, 02:22:30 pm

      Mr. Gumshoe, do you think the profits of these firms are vulnerable to erosion from independents’ selling supplies compatible with their printers, as occurred with HP and other sellers of regular printers? If that occurred, what would that do to their business models and stock prices?

      • 3984 |
        Travis Johnson, Stock Gumshoe
        Aug 15 2012, 02:32:05 pm

        I suspect that there are third party suppliers now, but the industry is still changing so fast that there’s little standardization and I suspect the manufacturers (DDD and SSYS and the others) will probably have pretty tight control over the supplies markets for their printers for at least several years, partly because the market isn’t large enough yet to entice competitors. I don’t know if they’re protected by patents or trade secrets in any way on that front. It took decades for firms like HP to lose their monopoly control over their ink cartridges, and even now, with lots of competition, HP still makes a lot of their money from cartridges.

    5. Duane Hussey
      Aug 15 2012, 02:39:42 pm

      Sometime in 2006 a friend in the aviation business shared with me they had been experimenting in the use of the 3D printer in making molds and an associate who had a business working with entrepreneurial types was creating 3D prototypes saving them boat loads of cash getting products to investors. I began investigating these companies, researching this new process to me. I live near HP and got one of the engineers there who’s wife works with mine to share some of their work and all this lead me to believe there was momentum building for this technology. (Timing is everything as we have all learned.) So when Travis’s research revealed DDD, SSYS, and DASTY (and I add ADSK) it confirmed my watch list stock picks. As a long time user of Autodesk 3D and Google’s Sketchup I know of the potential (story). Point, I chose DDD and have been wishing I had made a wiser choice and bought more DDD and less ONVO. Now I am holding ONVO for the long haul and paying for it from the DDD rise in value. I want to add more shares and feel I will stay with DDD and help see about adding ADSK.

      • Duane Hussey
        Aug 21 2012, 02:44:24 pm

        Just a couple additional thoughts about ONVO and 3D printing. The current technology has to make the transfer into the applications that grow income. With the tissue printing applications perhaps more drug manufactures will catch on and can run isolation test to remove tertiary results. I also see this technology making it into burn centers and field hospital’s with our troops. First printing the skin for graphing and later directly printing to the sight of the injury.
        The 3D printing as a whole is just a limit of the imagination. Such as the day when manufactures send a print code to the purchaser and they recipient customizes the product say color, size, etc and then presses the print button on their 3D printer, The number of ways this reduces cost of delivering products is staggering; inventory controls, logistics, dealer cost …. What about City planners who create a model of their persective communities and can display for public review the impacts of proposals by developers in this type of visual representation… How many ways can the investor support this game changer?

        • SCOTT MURRAY
          Sep 12 2013, 10:26:12 am

          I see a time when architects design a building, foundations are dug by laser beam, and the a big 3D printer is wheeled out to spew the thing into existence overnight.

    6. Bill Andrew
      Aug 15 2012, 02:57:00 pm

      For my Roth IRA, bought DDD at 21.94 March 13, 12; and on your recommendation SSYS at 36.25 the same time. Sold my 100 shares of SSYS for a gain of $670, seemed to climb even higher afterward. Bought an additional 75 shares of DDD at 33.21 6/18/12 for my traditional IRA and have added 25 shares 8/14/12. So far, these have been very profitable except for yeasterdays purchase, but I intend to stay long with DDD. Thanks for the reccomendation and the advice to buy SSYS also.

    7. rick386
      Aug 15 2012, 09:55:11 pm

      I have seem pumps on 3d printing for couple of years now. I’ve seen a demostration on some science show. And the colbert report. My question is, how would you print a part that needs to be composed of a material other than whatever plastic the machine uses?
      Like metal or rubber, ect. It see ed to me to be in relatively infant stages at the time being used only for art. But I guess that’s the time to buy. Do yo u try to pick which one or do like junior gold miners and get a little of each?

    8. Maxx
      Aug 16 2012, 12:18:05 am

      Got a crown done in an hour at the dentist’s office. The only way they can do this is with a 3D printer. As the cost of the printers goes down the probability that every dentist office will have one increases. Bought DDD in the mid 20’s because I found the tech amazing. Didn’t buy much since it was a pure gamble without much due diligence. This article has me thinking I need to take a serious look at these companies.

    9. GL
      Aug 16 2012, 02:49:21 am

      As for these stock picks, I had bought both based on a non Fool article from the web. Nice that they are flogging them but I have to say as a former Fool subscriber that there are many other stocks recommended that don’t pan out and I was lucky to get out of them before larger losses happened. The Gardner’s are good, but like so many others are compelled to continually recommend buys regardless of timing or technicals. Their strength is in fundamentals but their timing can be way off (Netflix, etc).

        Sep 12 2013, 10:29:21 am

        NFLX is at $300 today 🙂 As you point out, all a matter of timing. The Gardners are buy-and-hold investors. Any buy recommendation they made on NFLX–at whatever price–has been vindicated.

    10. Rebekkah
      Aug 17 2012, 11:39:35 am

      Some things I envision with this technology:
      Recreational – automobile or other antique restoration using original schematics converted to CAD -.the cottage industry will surge again when folks can design and print from home – jewelry, sex toys, kid’s toys, home decor, etc etc ( the sex toy market will EXPLODE, I predict..)
      Medical – ultrasound of tumors or other operations – blockages, clots, etc, in difficult areas, printed to give the doctor a heads-up on how to access it without doing damage BEFORE making an incision – of course, bioprinted body parts and medical research
      Anything else you can imagine…the possibilities are endless…so excited about this technology!

      • james gregory
        Aug 21 2012, 12:09:25 pm

        Thank you Rebekkah. I believe you’ve nailed many of the possibilities of this tech.
        I have been exploring 3D printing from a hobbyist and small business perspective. The idea of being able to design a new product and not have to hire a firm in Hong Kong to make produce small runs is huge to me. While much of the focus has been on prototypes, there is a lot of potential for short run manufacturing with 3D printing. The setup time and costs to do custom or short run manufacturing has been a limiting factor for many small businesses.
        As the owner of an aging vehicle with a shortage of parts I believe one of the largest areas of growth in the short term will be auto parts for collectable or other older cars. I’ve had to make my own parts for home and auto before. (I hate it when I imagine a product and no one is selling it yet). I’ve often thought there should be a way to sell my DIY parts. I think there will be soon and it will open markets for many inventors and designers. It’s a fascinating time to be alive!

        • Boa1952
          Aug 21 2012, 08:12:30 pm

          SSYS is way up! DDD is way up! Both companies pps have increased nicely since Mr. Gumshoe figured that tha Mötley Fool boys may have recommended DDD. Although the Fool has not recommended ONVO to my knowledge, please read the following article from Seeking Alpha. ONVO is steadily basing in the low $2’s. Read the article and the others I have directed you to.
          I am long SSYS, DDD, ONVO and another Gumshoe guess, RBY. My paper returns so far range from 10% to 55%. I am still adding DDD, ONVO and RBY. You might want to throw in S, CLWR, BRD, ES and FTR to do some due diligence on also. Cramer upgraded S yesterday. It has run from $2.50 to $5 and is finding a new base in the low $5’s.

          Good luck and Happy Investing!

          • Rebekkah
            Aug 21 2012, 09:48:42 pm

            I’ve read that article and many others — and I also post whenever I get the chance, to let people know that now is the time to get in on this – it IS an exciting time to be alive – best of luck to both you, let’s hope that stock keeps gaining as steadily as it has in the last 12 months…if it does, we are all in for some excitement! I am already an electronic prepress tech in the offset printing industry – now I am ready to learn CAD and save up for my first 3D printer… 🙂

    11. Arlyn Lichthardt
      Aug 25 2012, 12:38:04 pm

      ONVO — I’m curious. Organovo Inc./Oganovo Holdings — what is a reverse merger? Why did the stock price spike in June, then fall out of bed? From “shell corp.” to a company that does R&D/manufacturing appears suspicious. Help me.

    12. Marianne Baker
      Sep 10 2012, 03:26:19 pm

      Going nuts looking at DDD today! Today it was announced that they made the Fortune 500 list of companies with the most increased profit percentage — i think they were #6 — and the stock price fell 4%. I bought some more. Does anyone have a clue as to what’s going on other than the big players manipulating the market again??

      • 3984 |
        Travis Johnson, Stock Gumshoe
        Sep 10 2012, 03:41:57 pm

        That isn’t really “news” that should make a difference to the stock — after all, those growth numbers were known, they weren’t just released this week — but with a lofty valuation like this (trailing PE of almost 60, forward PE of 30 — and that’s after the stock dropped 10% or so from the highs), the stock is likely to react violently to anything as folks who rode it up by 100% or more this year panic and lock in profits. Dont’ be surprised to see lots of 4-6% moves, both up and down.

        This is still a story stock — it’s hard to justify the valuation based on the projected earnings of analysts, and the shares will be bouncy. In order to justify this valuation, you have to predict that the 3D printing business is going to be bigger than folks imagine over the next ten years to consider this a “buy and forget” stock — and though I think there’s something to that story, I am quite sure that they will have lousy quarters along the way that clobber the share price. Everyone and his brother has been promoting and teasing 3D printing stocks over the last few months, which is part of the reason I featured them in this space, so there is a lot more individual investor attention being paid to these names than in the past, which always brings a bumpy ride. DDD and SSYS are a bet that the industry is transforming dramatically over the next few years, but transformation is rarely smooth and sometimes (often, even) the folks who predict that transformation turn out to be wrong. Betting on DDD or SSYS right now, with Price/Earnings/Growth ratios right around 3 (which typically is a red flag for “too expensive”) means that you think the analysts haven’t had a big sip of the Kool-Ade yet and are betting way too low with their growth numbers and earnings estimates going out into future years.

    13. Marianne Baker
      Sep 10 2012, 05:08:56 pm

      Thanks, Travis. I do appreciate your speedy reply and thoughtful opinion. I guess I was thinking the Fortune 500 listing info would bring in new individual investors, but I don’t know if the magazine is even out yet. I’m just always suspicious of market manipulation because so much of it goes on. I am long on DDD — the technology is just too compelling. When it dips, I’ll buy when I can.

    14. Edward Mulwa
      Sep 14 2012, 05:07:39 pm

      Mr Gumshoe. What do you think about VRNG? The company is suing GOOG for parent infringement that Google Adsense and Adwords use. VRNG also recently purchased 500 patents from Nokia. VRNG is currently trading at $3.40 ish but the word on the street is that it could go to between $30 – $70 if they win. Trial begins in October 16, 2012.

      • 3984 |
        Travis Johnson, Stock Gumshoe
        Sep 14 2012, 05:13:57 pm

        I try to avoid buying lawsuit-based investments, for me that would be a bit too much like a blind man betting on a horse race. I might end up being right, but I know there are a lot of people betting who have more information than I do.

      • 3984 |
        Travis Johnson, Stock Gumshoe
        Sep 27 2012, 01:10:04 pm

        I suppose they could always be knocked aside by a new technology, but these are the two founding companies of the industry and have done most of the innovation to this point — they haven’t necessarily innovated as much as they could when it comes to bringing costs down as quality improves, but I suspect that competition is going to continue to push them toward that point. There are and will be many alternatives, from build-your-own kits to small companies like this Kickstarter project, and a few larger companies, but if you think the industry itself will grow dramatically then there’s usually something to be said for going with the industry leaders who have the installed base and experience.

    15. Werner
      Nov 3 2012, 12:51:15 pm

      Left out of the equasion to a large extent so far (surprising to me) are the non listed players in 3D printing, and those outside of USA. Contrary to Motley and most US commentators views they are around, e.g. http://www.eos.info/.
      And while you cannot buy their stock, that does not mean they do not impact the listed players.
      The second factor left out of consideration IMHO: the consumption materials. At the moment 3D printing plays are touted largely as the old razor and blade play, and the distribution channel as it exists today is set up that way. In other words, the likes of DDD sell printer (machine), software, servicing and (consumable) material. However, the core skills of these folk is not materials (where the repeat business will ultimately come from), that is being supplied by others and the machine manufacturers act merely as a channel sales partner/wholesaler/distributor. As volumes grow, that will change, since the basic raw material suppliers include some industrial heavyweights in chemicals, metals etc.

    16. Ron Sickler
      Feb 25 2013, 12:32:47 pm

      I will invest in these stocks, slowly, at first for my familys sake. I am troubled by the potential loss of jobs this technology could do away with. The medical possiblities however, would be its highest and best use. Having read all you have written this is a “long term” no brainer!

      Sep 12 2013, 10:37:20 am

      At this point all of you who invested a year ago are up by about 100%. What are your thoughts now? Anyone worried about a near-term pullback? I love the technology, just wonder how long the market will support these valuations. Maybe 3 years from now it will be obvious in retrospect, but it’s not obvious now. Looking to enter.

    18. John Loren
      Nov 20 2014, 09:59:04 pm

      The Future is Made in America
      See the jaw-dropping new technology that’s putting the U.S.A.
      back on top — and the 3 companies that control it. Two of them
      have doubled since we first recommended it… and the other
      has more than TRIPLED.
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    19. 217 |
      Andrew Bell
      Dec 24 2014, 12:50:54 am

      So John Loren, or anybody. Are the three stocks the Measly Fop are talking up
      SSYS, DDD, and ONVO? Did they come up with a name for the “cartridge sup-
      plier” company, or are they not ready to disclose this name yet? I got bored
      listening to the long-winded { they call the wind Mariah ) spiel for the Mostly
      Fib Stock Advisers, and came to the Gumshoe to get the goods on this one.
      Boy, those recycled teasers are boring!

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