“Forget about Facebook — Let’s Make Some REAL Money” (Motley Fool)

by Travis Johnson, Stock Gumshoe | March 6, 2012 2:54 pm

Deciphering the 3D printing picks for the Fool's "next Industrial Revolution"

I don’t necessarily like to gang up on the same publisher two days in a row — but, well, the great legions of Gumshoe readers are asking for it, and we do aim to please.

So just like yesterday, today we’re digging through some Motley Fool foofaraw, an ad they’ve been sending out this week that promises that their next investment idea will be “bigger than the internet” and the “next trillion-dollar industry” and something that will “change everything it touches.”

And you can only waggle words like that in front of your friendly neighborhood Gumshoe for so long before he lunges for the bait. So what are they pitching?

Well, to make a long (really loooong) story short, it’s all about 3D “printing” — you’ve probably seen the plastic prototyping machines and three dimensional laser carving devices (if not, they include a cool video in the ad), and that’s basically the revolutionary idea the Fools are touting. And naturally, they have three companies to tease to us today as they promise great riches from the 3D printing revolution.

The technology has been around for about 30 years, used by industrial designers and generally owned by large companies and universities in the early days, as the cost of the machines and the materials, and the utility of them, made it a questionable endeavor at first. But like all technologies, it has been gradually improved and the costs have come down and the much greater computing power available to all these days has made for whole new worlds of applications for these 3D printing systems, several competing versions of which are available now at prices that most companies would put on their American Express card. In fact, just a few months ago I had a new dental crown made while I watched, with a blank porcelain insert carved in a little computerized shaper that could arguably be called a “printer” to fit the exact dimensions calculated by my dentist’s computer. It was kind of cool, and I didn’t have to wait a week for a centralized lab to mold my new fake tooth.

But I digress — there’s some way for us to get rich here, no? At least, that’s the Fool’s premise. How do they tease out the opportunity? Here’s a taste:

“… just like 2D printing did, 3D printing is exceeding expectations by rapidly becoming both cheaper and better.

“Machines that cost more than $100,000 a decade ago are now selling for $1,299.

“And they can now print with more than 99 different materials. Not just high quality plastics, many of which are completely recyclable (like milk jugs) or biodegradable. But also some of the most durable and useful physical materials we use in the ‘analog’ world, like wood, glass, rubber, steel, and concrete. Some printers can even handle biological materials like human kindney cells. Or composites of more than two materials that create special properties like heat resistance. Some can make three dimensional objects from ordinary printer paper and even chocolate.

“But who would want to print in 3D?

“How about an architect building a model? Or a product designer making a prototype? Or a dentist casting a mold?

“These are some of the professionals who are already gaining a competitive edge by using 3D printing technology….

Sounds pretty impressive, right? But that also sounds like the market where these machines are already being used, maybe revolutionary but not hitting your home just yet. So what’s the vision for the next few years as these machines become popularized and move into the home?

“There is no longer any important difference between a computerized design that exists in “the cloud” and
a real, physical thing.

“If you remember the old Star Trek shows, which take place in the distant future of the 23rd century, a device that could print physical objects from computerized designs was called a “replicator.”

“Incredibly, this science fiction is now fact.

“And here’s how smart 21st century capitalists like you and me can take this real-world replicator straight to the bank….

“If a physical object is a software code, then… there are no longer economies of scale in manufacturing.

“In other words, it won’t make sense any more to pay Chinese factory workers to make 100 million duplicates of the same product. Better to pay American designers to make 10,000 different products specially tailored to individual customers — in the exact size and style they want to buy. Products they can receive in the mail, or print out at Home Depot, FedEx Office, Wal-Mart, or whichever retailers are smart enough to embrace this technology first.

“If a physical object is a software code, then… everyone from an aerospace engineer to an ice sculptor is really a computer programmer creating digital designs.

“And the market for those designs will be just like today’s market for music, movies, and books. You’ll have the iTunes store, Amazon.com, and other legitimate download vendors on one side of the law, and a thousand fugitive ‘pirate bays’ on the other. Your grandchild’s Happy Meal toy will be scanned onto your smart phone at the cash register and it will be finished printing before you get home from the drive-through.

“Finally, if a physical object is a software code, then… the companies that make the best design software and the companies that can offer a comprehensive package of hardware, input materials, and servicing stand to make HUNDREDS OF BILLIONS OF DOLLARS.”

OK, so all of us amateur futurists can argue about whether any of this makes sense, and whether forging precise 3d objects is the same as assembling complex machines made of hundreds of objects, but it is at least a feasible future … someday.

So who, then, are these companies that are supposed to make us rich as this technology takes over the world?

In typical fashion, the Foolies give us one … and tease us about two others. The one they tell us about up front is one of the leaders in computer design, Dassault Systeme (DSY in Paris, DASTY on the pink sheets), which sells the SolidWorks software system as well as many other 3D and “virtual” design systems.

“Right now, we’re at the very beginning of the transition from the “garage” stage to the “mass market” stage.

“And that’s the moment when you want to be investing.

“Sure, you could make some money later.

“You could wait until the market is more ‘proven.’ But as we’ve seen, this technology is already scientifically sound, and it’s already used by professionals in every imaginable field of human enterprise.

“You’d really be waiting for other investors to catch on. Because when the big money on Wall Street finally embraces 3D printing, the growth in this industry is going to be massive.

“Did you invest in Apple in 1980?
“Did you invest in Microsoft in 1986?”

That’s how they tell us we’ll feel if we buy the pioneers of the 3d printing revolution — and apparently Dassault Systeme is one, with a strong leadership position in computer aided design (CAD) and a laundry list of top global manufacturers who depend on their software. The Fool copywriter pitches the idea of the “razor and blade” model, which we love, and which has already been abundantly profitable in the printing world (HP makes money from selling ink cartridges, they lose money selling printers), but they expand that to say that the CAD software of Dassault Systeme is like the “shaving cream” that makes the razors and blades work smoothly. A stretch, perhaps, but a nice way of explaining things. Apparently David Gardner recommended Dassault Systeme a few years ago, and that’s a $10 billion company that’s profitable and fairly well known, at least in their business … but these other picks are more obscure, and are newer members of the Fool universe.

I also have to share with you this little tidbit from the ad, since it paints a pretty picture of the investment newsletter business that we study each day:

“The reason David’s track record is so reliable is that, unlike all the acrobats, lion-tamers, and clowns who perform in the three-ring circus that is called (with unearned dignity) “the financial news and advisory industry”… David picks great companies.

“Great companies. Not great bubbles.

“Because truly timing the market — picking a stock on exactly the right day, the right week, or even the right month, is impossible.

“Nobody in the “circus” admits this, but it’s true.

“Good investments are made for the long term. I don’t mean 100 years. 5 is plenty. 10 is even better.”

So as usual, David Gardner is likely to hang on to some breakthrough-potential companies for many years, no cautious little 20% stop losses here, not if you’ve an eye on a ten-years-off future that might present thousand-percent-gains — and of course, if you’re planning for those long term winners and giving loose reins to the stocks of small, innovative companies, well, you’ve got to diversify to give yourself a better chance of picking the winners — the Apples instead of the Palms, if you will.

What, then, according to David Gardner are the unnamed companies we should be buying in addition to Dassault? Here’s a touch more:

“When he recommended a company called Intuitive Surgical in 2005, it had already grown 500% in two years. But after he recommended it to his readers again in 2006, and again in 2008, and again in 2012, it gained an incredible 1,046% more.

“And that’s the same opportunity David sees in the 3D printing hardware, materials, and servicing industry. These are the machines that unlock the trillion dollar potential of the revolutionary software programs created by Dassault Systèmes, the company we talked about earlier.

“But unlike Dassault Systèmes, these next two companies aren’t hidden secrets.

“In fact, a lot of the so-called experts think they’re overvalued.”

And “overvalued” is one of Gardner’s criteria — he won’t call something a “rule breaker” unless they’re a top dog and first mover in their industry, and unless Wall Street already thinks they’re “overvalued.”

So with that long lead-in (hey, if I had to read the whole ad, you can suffer through just a piece of it), what are the clues we’re given for those other two companies?

“… a lot of investors who were initially excited about 3D printing started to cool off their enthusiasm over the past fall.

“But now that these companies have released new earnings information that leapfrogged over the analysts’ expectations, we’re seeing them rise in value once again….

“Together, these two American companies control more than 80% of the total market for 3D printing.

“How do you decide between two good choices?

“Choose Both.”

And the specifics for the first company?

“One company is focusing on the upper end of the market, where they sell printers with the latest technology to business customers like Hyundai, Black & Decker, Medtronic, BMW, Oreck, Chipotle, Ducati, and Toro for an average of $51,000 per unit (some units cost more than $1 million).

“They just shocked Wall Street by reporting a year-end income figure that more than doubles last year’s record earnings. They’ve locked in a sweetheart distribution agreement with old pro Hewlett Packard to sell their products and services in Europe. And unlike most fast-moving technology companies, they don’t have a penny of debt, just tens of millions of dollars to pour back into R&D.”

That one is Stratasys (SSYS)

Stratasys is one of the founding companies of this business, and they do indeed look a bit expensive — they make the “printers” and rapid prototyping systems and the supplies for them, and they are profitable and fairly small (market cap around $700 million), but they area also trading at a substantial premium to the market, with a forward estimated PE of about 23 and an expected growth rate of about 15% … though it’s worth noting that analysts have raised their estimates for this year and next, and that the company has beaten estimates handily for the last four quarters.

How about the second one?

“The other company is taking the “razors and blades” strategy to the consumer and education markets, offering an app store full of online tools that make it easy for everyone to use their 3D printers, and selling the basic units themselves for just $1,299. (Believe it or not, this is roughly what the first desktop 2D printers cost in 1984 when we adjust for inflation… today many of them cost less than a box of paper.)

“They’re also reporting revenues 47% higher than last year, nearly doubling the free cash on their balance sheet. They have “almost as many patents as employees” (and they have 1000 employees). They just bought out their biggest direct competitor. And their founder and chief technology officer is the scientist who first invented 3D printing at that tiny laboratory I told you about — beating technology giants like 3M and Fujitsu to the punch.”

This one would be the faster-growing competitor in this micro-sector, 3D Systems (DDD). Interestingly enough, DDD is a bit cheaper than SSYS and is growing faster and is far less predictable in its earnings trajectory … but it’s also a bit larger, with a market cap just over a billion dollars. DDD is gambling on the home market, creating an “app store” for hobbyists to develop their own applications for their small Cube 3D printer, the first one designed for home users — it’s decidedly “high end” but they’re providing an online community for people to share 3D designs that can be produced using this $1,300 home printer.

Both companies are certainly active and growing, with lots of products ranging from the little home and “do it yourself” printers to the large high-spec prototyping machines for design offices and actual production printers that are building products or pieces of products. And both are certainly relying on the “razor and blades” model to create their own ecosystems of installed machines that will allow them to eventually ramp up into high-margin sales of disposables and “print cartridges”.

If you’d like to look into these, they are exactly the kinds of stocks that individual investors and investing pundits love to cover (lots of whiz-bang technology and high growth potential), so you’ll certainly find plenty of articles to get a good background — you can get a quick start with this piece from Forbes[1] and this story from the Economist last year[2]. There are also a few other companies active in the business, and new innovations and kits for building your own 3D printers, not unlike the early “make it yourself” personal computers, but it would stand to reason that the first few companies to develop a large user base would have a strong advantage if the industry really explodes outside of the current established professional prototyping market. I have no idea whether these will be millionaire-maker companies in the decade to come, but, well, there’s no reason why you’d trust my opinion on the future anyway — it’s your money, after all, so let us know what you think with a comment below.

  1. this piece from Forbes: http://www.forbes.com/sites/gcaptain/2012/03/06/will-3d-printing-change-the-world/?partner=yahootix
  2. story from the Economist last year: http://www.economist.com/node/18114221

Source URL: https://www.stockgumshoe.com/reviews/motley-fool-stock-advisor/forget-about-facebook-lets-make-some-real-money-motley-fool/

  1. Avatar
    Mar 6 2012, 03:23:49 pm

    I saw a 3d ‘printer’ several years ago at the Benetton (now Lotus) Formula One centre in Oxfordshire – it was extraordinary – this bit of kit must have cost a fortune and was used to create parts for the wind tunnel model of the racing cars. It looked (to the eye of an ignoramus anyway) like a pool of amber liquid across which lasers flashed and then out of which gradually appeared the rear part of an F1 gearbox. We were watching for a couple of minutes before their engineers whisked us out… The technology is amazing and I can see its benefits for designers and manufacturers.

  2. Avatar
    Dennis Todic
    Mar 6 2012, 03:56:52 pm

    DDD is a winner. I purchsed on 9/19 after the recommendation in Whitecap (now wall street insider) and after it was recommended somewhere else I jumped in and I am up about 40% right now after a gradual climb. This is a longterm hold for me.

  3. Avatar
    Charles Stadelman
    Mar 6 2012, 07:38:33 pm

    I believe this company, 3D Systems Corporation, with symbol TDSC, was featured in the original RedChip Review (Portland, OR) on July 26, 2002 as a “hold” with Current Price $10.45 and speculative target of $14.00. Red Chip expressed “we are hesitant to issue a Buy recommendation due to the relatively high degree of unsystematic risk involved with an investment in TDSC shares.” I felt there were better companies so passed. Times are changing.

  4. Avatar
    Slick Rick
    Mar 6 2012, 07:51:37 pm

    Of all the 3D Printing stocks mentioned in the article IMHO …..DDD will pull ahead of the pack and become a HUGE winner!

  5. Avatar
    bruce s
    Mar 6 2012, 10:24:59 pm

    I’d like to know the name of that company who would make 3d printers for human body parts. I’m sure that their requirements are little bit different from industrial & commerical 3d printers.
    that would be big in medical industry.

      • Avatar
        James Bennett
        Mar 14 2012, 09:12:40 pm

        Organovo just came public 21 days ago now. I find the business model interesting and they jusy may have the niche that Tengion missed. Tengion is down to about 60 cents per share right now and face de-listing from nasdaq. What I like about Organovo is that they have a well rounded team assembled to move the company forward and they are targeting the right application going forward. If they pick up big Pharma as customers then this technology may be the real thing. They only thing I don’t like is the reverse merger used to go public. They would do better with an initial IPO, but I like the cost savings of the reverse merger. I am Long on ONVO. Tengion is down but not out yet, they need an infusion of capitol it seems and at 60 cents per share just how they can get it is to be seen.

  6. Avatar
    Mar 7 2012, 12:06:20 pm

    I have been long in both these companies for a couple of years now. The technology is expanding continually, making the printers cheaper and faster. The main holdback is the ability to manufacture in different materials which may call for special environments during printing (heat, atmosphere, vacuum). This problem is slowly being conquered, but for now most of the uses are in modeling prior to real manufacture, as opposed to actually printing the finished part as a manufactured item.

  7. Avatar
    Shirley E. Williams
    Mar 9 2012, 07:17:07 pm

    I haven’t posted a comment before and now I’m Off Topic. Sorry. But I’m really wondering about Eagle Diesel. If you’ve talked about it and I have missed it, I apologize. I am in the middle of having surgery for a broken back, so I’m not too reliable for touching base every day (but almost!).

    • Avatar
      Mar 31 2012, 05:25:38 pm

      Westport Innovation (WPRT), a Canadian company that is joint venturing with Cummins Engine to build natural gas driven engines for cars and trucks as an alternative to diesel.
      Also see Clean Energy Fuels, currently doing a build out of natural gas service stations. Both companies I think are still in loss. Major stockholder in both in Boone Pickens,.

  8. Avatar
    Thomas Toedtman
    Mar 10 2012, 11:58:05 pm

    i was a consumer of 3D models years ago. Yes they are valuable for making a physical model so management, marketing and others could see and hold a prototype design. Service companies appeared in silicon valley, and other design intensive locales to provide them to the product designers working in those areas. They also provided contract design services using one or another 3D design software since prototypes would not keep them afloat. Back then it was a laser curing process.
    The technologies generally did not replicate the material properties of injection molded plastics, fiber re-enforced plastics, or many other criteria found in manufactured parts,
    but as mentioned above, a few prototype models are very useful in the early stages of
    design. Generally more valuable to the folks unfamiliar with viewing the design
    in 3D on a computer screen. I would not be thinking they would be used to make functional products, except for things like master patterns for subsequent castings, sculpture, and maybe organ growing.
    Now with more proposed material types mentioned in the article, it’s clear a different
    process is being used, probably along the lines that inkjets use, so possibly a few
    kinds of things could be made that would be “in service”, but time is money and cost is
    determined in parts per hour, so I think every team that needs one will be buying one
    and that’s what were seeing now. The consumables are probably where they make the
    most money.
    Perhaps they will make a model that does birthday cakes complete with Disney characters!

  9. Avatar
    S Metzing
    Mar 14 2012, 01:29:23 am

    I think advances in 3D modeling, both in materials and layering techniques, will be the beginning steps of mass production’s next evolution. Own ONVO, DDD, SSYS, and a newer IPO: PRLB…claims to have the fastest 3D modeling service turn-around time for both machined and injected molded parts (within days…nice selling pt). Taking HAYWOOD’s suggestion a step further beyond just prototyping: 3D printers doing harden structures (like steel components) might be years away but doing ‘soft’, complex replications that include moving parts (like plastic toys) could possibly replace production lines within a few years. It may not compete with well updated production lines (yet) but for smaller companies starting out, it could be a viable option vs. leasing a building, hiring people, production equipment, insurance…etc. Also, while web surfing, came across a 3D food printer, to be available in the next 4-5yrs. I didn’t catch the name of the (private?) company.

  10. Avatar
    May 8 2012, 02:19:06 pm

    i had hoped i get some more insight for ” investment insurance ” options from this link … if anyone has some good suggestions, i’m all ears 🙂

    • Avatar
      Nov 23 2012, 05:28:59 pm

      The Cerec machine by Sirona is not a 3D printer. It is an old fashioned multi-axis CNC machine that mills a solid block of porcelain into a crown (cap) for your tooth. It is a destructive process, wasting most of the block of ceramic.
      Now a real dental 3D printer that could make a crown by printing it in an additive fashion would be quicker and far less expensive. I’d love to see one of those.
      BTW the Cerec machine does not mill titanium alloy for implants. Those are still made by large factories like IMTEC (3M).
      If we could print custom sized implants out of titanium alloy in the office that would be another huge leap forward.

  11. Avatar
    Venture Shadow
    May 14 2012, 01:45:39 pm

    3D printing and stem cell replacement of body organs are the sexiest investments since Credit Default Swaps. Suckered me in too! No wonder my DDD is up, all you other guys bought in too. With the symbol DDD they should specialize in custom fit bras.

  12. Avatar
    May 18 2012, 01:19:06 pm

    So, can you make a 3D printer from another one? If so, then after you buy one, you make a backup so that when the first breaks, repeat and then you never have to buy another.
    Find a way to make money from the intellectual property wars that are sure to follow. Copying physical items will be as easy as copying a CD/DVD. Every item manufactured will have to have some kind of protection to prevent copying.

    • 11441 |
      Travis Johnson, Stock Gumshoe
      Travis Johnson, Stock Gumshoe
      May 18 2012, 01:43:10 pm

      Well, you can’t copy a machine — at least, not easily. You have no choice of materials to speak of (just colors of resin/plastic for most of these systems), and that’s not going to change anytime soon. You can copy a cog wheel from your cheap plastic toy if one breaks, for example, and their is a growing “content” business for 3D designs that the consumer-focused DDD is particularly paying attention to, but it’s still mostly a toy at the consumer level.

  13. Avatar
    Joe Balke
    May 18 2012, 06:56:33 pm

    I would expect the Air Force to eventually build a complete flying machine using a 3d printing. No welds. No connectors. No fasteners. A machine that is completely seamless.

    Basically, if you think about it, semiconductor devices are 3d machines. Wires. Resistors, Capacitors, Transistors. All neatly composed on a piece of glass.

    Considering the Air Force is spending $250M an airplane, building a flight machine the same way is not really that much of a stretch given a few billion dollars.

  14. Avatar
    Shalom Ormsby
    Jun 2 2012, 01:26:49 pm

    Thanks for this helpful info. I’ve been thinking about using 3D printing for some of my own designs. I think this technology will be a hit in the near future. Researching the best investment in this arena now, and this article was a real help.

  15. Avatar
    Jun 3 2012, 05:22:38 am

    Air Force building a jet could be a ways away but, perhaps, NASA making use of a 3d printer seems viable. Replacement parts on a Mars mission might be hard to come by but having a 3d printer on-board with a supply of resins, oxidized compounds or whatever advance materials they can come up with …. add a little anodized coating to it and ..wah-la…you got yourself some spare parts or a tool. Or anything exotic, once they get to Mars.

  16. Avatar
    Mitchell Hiller
    Jun 20 2012, 02:52:16 pm

    As mentioned below, the 3D printing company that is making human organs is ticker: ONVO. I’ve been reaping handsome profits as it is being invested in in an orderly but very aggressive manner. Hopefully it’s price explosion will not turn out to be a trap move. PS, the laser technology referred to in the above article is not 3D printing. That is an older subtractive technology. 3D printing is an additive technology.

    • Avatar
      Mitchell Hiller
      Jun 20 2012, 02:57:28 pm

      I should have written “as mentioned above”. Also it might be noted that Motley Fool did not imply ONVO as a target investment as far as I can gather, but just stimulated interest to do more searching on the subject.

  17. Avatar
    Roy (Bud) Taylor
    Jan 12 2013, 03:05:40 pm

    In the summer of 2011 my wife and I visited her uncle in Emporium, PA who has been a successful factory rep for many years. He gave me a brouchure about Z-Corporation that he suggested I could use to make engineering prototypes parts. Several companies he repped had bought them and were making parts for engineers. He also suggested I invest in Z-Corp as a wave of the future. I promptly filled that broucure away in my desk drawer and forgot about it until I got a bunch of meetings from MF and others claiming this would be the death of Chinese manufacturing. When I went to the Z-Corp site, I found they were acquired by 3D-Systems (DDD). The price of DDD has been appreciating rapidly and could be the company hinted at by MF. I am now looking seriously at investing in DDD.

    • Avatar
      Johnny Colorado
      Mar 20 2013, 06:02:47 pm

      I went to a 3d public viewing in Denver. They had a few printers making little plastic toys. It was fun. Then I saw the mint of Poland issued a 3d coin. Very cool.
      This printer was used. It may be worth jumping in now the stock has dropped a lot.

  18. Avatar
    Nov 23 2014, 01:44:30 pm

    What company in Santa Clarita were the Fools speaking of for the best 3-D printer manufacturer. Also some input what company might be best choice for the “razerblade” for these 3-D printers.

  19. Avatar
    Jan 9 2015, 09:07:04 am

    Auto cooking; you just pour all the raw vegetables in one end, hot meals on plates come out the other.

    Get crackin’ please; there’s been something overlooked.

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