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In early August, while the market was swooning and investors were starting to panic, a calm and collected David Gardner joined The Motley Fool's weekly radio show -- Motley Fool Money -- to give his thoughts on the market
During the discussion, he revealed an industry that he's very excited about: manufacturing. Before clicking off the story because manufacturing sounds as boring as watching paint dry, hear me out.
David wasn't just talking about any old type of manufacturing; he was talking about 3-D printing.
Fast-forward to 2050
It's Dec. 24, and you still haven't done your Christmas shopping. You aren't worried though. You have it all figured out.
- Your son's favorite toy broke a month ago. He thought it was a goner, but you secretly glued it back together and threw it into your 3-D scanner. An hour later, your printer produces an exact replica.
- Your daughter was expecting a new bike, but you couldn't find one she liked. So you went online and designed your own bike, went to the corner 3-D printing shop with your specs (your printer's not that big), and tomorrow you'll have your present ready.
- Finally, your spouse doesn't expect too much, but he/she would like something sentimental. You go on your computer, pick out a photo of the two of you, paste it onto a virtual coffee mug, and print the mug out in your 3-D printer.
Voila! You're done. And if you're willing to believe what David says, you can print off your food early the next morning so you have a fantastic Christmas brunch waiting for you.
Back to reality
If this sounds far-fetched, I don't blame you. But the fact of the matter is, this kind of technology has existed -- in less sophisticated forms -- for more than a decade. The first major mover in the industry was born when 3D Systems (Nasdaq: DDD ) founder and current Chief Technology Officer Chuck Hull patented his stereolithography process. Currently, there is only one major competitor to 3D: Stratasys (Nasdaq: SSYS ) .
I wouldn't blame you if you think this vision is a bunch of baloney. Then again, that's probably the reaction I would have gotten in 1960 if I told people that there would be a computer in every house with printers by the end of the millennium.
At first, this technology mostly caught on with engineers. With the technology, they were able to design prototypes on the computer and get an idea for what the final product would be in a fraction of the time and cost of sending out the design to a third party to produce.
But the market for 3-D printing is quickly expanding from design engineers to a much wider audience. Industry researcher Terry Wohlers recently reported that 20% of the output from 3-D printers was final products, not prototypes. More importantly, that number is expected to jump to 50% by 2020.
While that's certainly a boon to Stratasys and 3D Systems, there's no telling what it could mean for some manufacturing stalwarts. Deere (NYSE: DE ) and Caterpillar (NYSE: CAT ) could see their one-size-fits-all assembly lines disrupted by personalized products offered in agriculture and construction. General Electric (NYSE: GE ) might just team up with a 3-D printer and put an appliances shop in every neighborhood. At this point in the game, the possibilities seem endless.
But first, some caveats
Before you go busting down the doors to load up on shares, it's important to remember that potential doesn't always translate into profit. Stratasys, for instance, has been trying to make inroads into the consumer market by teaming up with Hewlett-Packard (NYSE: HPQ ) to sell low-end 3-D printers. Many are wondering how committed HP is to this partnership given its recent troubles.
The printers aren't exactly cheap either. 3D Systems has a printer available for small business and homes for a reasonable $1,300, but consumables (think ink cartridges) won't come cheap. And Stratasys (not counting what may be offered through its HP partnership) has systems available for a much higher $18,900 but cuts down on costs because its technology only requires inexpensive spools of filament to keep things running.
Would this fit in your portfolio?
While there are a lot of fundamental factors to consider when deciding whether either of these companies should be in your portfolio, I've included a quick valuation breakdown for the two companies.
|Market Cap||$787 million||$434 million|
|Rev. Growth (1 year)||41.70%||19.10%|
Source: Yahoo! Finance, Fool.com.
If you're still not sure whether either 3D Systems or Stratasys is for you, I'm willing to offer you access to a special free report from The Motley Fool: "The Only Stock You Need to Profit From the NEW Technology Revolution." Inside, you'll find out about a data mining company that is changing the face of business. The report is yours today, absolutely free!