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Considering Investing in 3-D Printing Stocks in 2014? Then Don't Miss These 6 Key Areas

This article was updated on April 7, 2015. 

You've probably heard of 3D printing because this hot topic has made its way from the techie and financial news to the more mainstream press. You might know that two U.S. companies, 3D Systems  (NYSE: DDD  ) and Stratasys (NYSE: DDD  ) are the two biggest players in this industry; perhaps you've even heard of ExOne (NYSE: DDD  ) Arcam, and voxeljet (NYSE: DDD  )

If that's about where your knowledge of 3D printing as a possible investment ends, this article is for you.

3D printing in a nutshell
Briefly, 3D printing is an additive-manufacturing technology. It builds up a three-dimensional component layer by layer under the control of a computer. By contrast, traditional manufacturing is subtractive by nature, as it involves whittling away at a chunk of material to fabricate the desired component.

The first 3D printing technologies were stereolithography, in which layers of photopolymers are cured by UV light lasers, and fused deposition modeling, in which heated thermoplastic is extruded from a nozzle. However, there are many different 3D printing processes today. 

What are some key reasons why investors might consider investing in 3D printing stocks?
In one word: growth. This is a disruptive technology, with the industry expected to balloon from $3.1 billion in 2103 to more than $21 billion in 2020 -- about a 31% average annual growth rate.

Many top industrial bigwigs -- such as General Electric and Boeing -- are either currently using or planning to soon start using 3D printing for actual production of critical components, rather than for just production of non-critical components and prototyping. This should drive demand for higher-end 3D printers, as well as 3D printing materials.  

There are two key reasons for 3D printings' turbocharged current and projected future growth rates: cost savings derived from greater efficiency and increased innovative possibilities. The cost savings are primarily driven from using less material. These savings can be considerable when we're talking about pricey exotic metals, such as titanium, which is widely used in the aerospace industry. A boon in innovation is occurring -- and should continue to occur -- because 3D printing allows for the design and production of some products that can't be made using traditional manufacturing processes.

Naturally, the projected high-growth rates make this an attractive space, which means competition will further heat up. Deep-pocketed Hewlett-Packard, for instance, has already announced its plans to offer an enterprise-focused 3D printer based on its new Multi Jet Fusion technology in 2016. 

What are some key reasons why investors might not want to invest in 3D printing stocks?
In one word: risk. This risk stems mainly from these stocks' high valuations as well as the onslaught of competition this fast-growing space is attracting.

If losing 10% or more of your investment in one day or the possibility of losing a fair chunk of your entire investment's value in a short time would cause you stress, you should not invest in this space. These former high-flying stocks began big nosedives in early 2014 and are still struggling.

How many pure-play 3D printing stocks are there?
There were five pure-play 3D printing stocks trading on U.S. stock exchanges at the end of 2013: 3D Systems, Stratasys, ExOne, Arcam, and voxeljet. (I'm excluding more speculative tiny companies, as well as Organovo Holdings, which "bioprints" human cells to produce tissues, because it's a biotech play.) A new pure play joined the ranks of the publicly traded in mid-2014: Materialise (NASDAQ: MTLS  ) . 

All but Arcam are listed on major exchanges. Arcam trades on the Nasdaq OMX Stockholm, though it can also be bought over the counter in the U.S. It's thinly traded, which means that it can be extra volatile.

Are there any key things I should know about these pure plays?
There are a few, but we'll keep it to the biggies. First, 3D Systems and Stratasys are the first movers in the group. In general, companies that are first movers -- meaning first to enter a new market, which often involves creating the market, too -- maintain a long-term competitive advantage. Of course, this is a generalization, and first movers can fall by the wayside, too, especially in tech-heavy niches. 

Second, these companies target different markets. 3D Systems, which sports the broadest product lineup since it has seven distinct technologies, targets the consumer, commercial, and industrial markets. Stratasys also focuses on these three markets, but has a strong educational bent as well. Voxeljet makes printers for commercial and industrial users, while ExOne and Arcam focus solely on industrial entities.

Do the pure plays have major operations other than making 3D printers?
First off, only five of the six pure plays produce 3D printers, as Materialise does not. Materialise makes 3D printing software and provides on-demand 3D printing services.  

All these companies except Arcam have general on-demand service operations where customers' components are 3D printed to their specifications. In 2014, however, Arcam acquired DiSanto Technologies, a contract manufacturer of medical implants. It also bought a supplier of metal powder in 2014. 

Are there other ways to invest in the 3D printing industry?
Yes, there are several, but we'll stick to the more direct ones. You could invest in companies that make 3D printing software. Other than Materialise, there are two big players on this front: France-based Dassault Systemes and U.S.-based Autodesk. But it's important to note that neither are pure plays, as both make software for other applications, too. 

Another non-pure play you might want to explore is quick-turn, on-demand manufacturer Proto Labs (NYSE: PRLB  ) . This fast-growing company traditionally used just conventional manufacturing -- CNC machining and injection molding -- but expanded into 3D printing when it bought Fineline Prototyping in April 2014.

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Read/Post Comments (7) | Recommend This Article (29)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 29, 2013, at 1:17 AM, mmmed wrote:

    The french company Group George has been trading as US OTC: GGRGF. Read about their 3d printing acquisition at http://3dprintingstocks.com/groupe-gorge/

    This is not a 3d print pure play but merits watching since they claim:

    10x improvement over industry print rates

    use of LED instead of more expensive lasers used by others

  • Report this Comment On December 31, 2013, at 8:29 AM, temenem wrote:
  • Report this Comment On January 09, 2014, at 12:31 PM, gr8twhtebuffalo wrote:

    So we have a new type of tech (not really new but starting to heat up) in 3D. I can see that large companies like GE and BA are using the technology. 3D Systems is now starting to make these printers available to the average consumer. The technology will help companies cut costs. The downside is the violatility of the stocks; they are all over the place.

    If I'm buying and holding for more than a year I see very little downside.

  • Report this Comment On January 10, 2014, at 12:02 AM, TMFMcKenna wrote:

    @greenbear28,

    Yes, big cos. are starting to use (or increasing their use) of 3d printers. The industry as a whole looks good over the long-term.

    That said, I can't agree with your last sentence. I don't think any investor (esp. any investor new to these stocks) should believe that buying any 3d printer stock and holding for at least one year has very little downside. Not too many things are a sure!

    Thanks for your comment.

    Beth McKenna

  • Report this Comment On January 10, 2014, at 12:04 AM, TMFMcKenna wrote:

    Last line above should read: Not too many things are a sure thing!

  • Report this Comment On January 16, 2014, at 2:51 AM, ????11 wrote:

    No mention of CIMT???

  • Report this Comment On June 17, 2014, at 5:37 AM, dufik wrote:

    The two biggest players in the 3DP market are Stratasys and 3DSystems. And the online space is a great 'barometer' for investors, check out the traffic each of the competing websites is receiving in this insightful and simple analysis by Inside3DP.com -

    INSIDE3DP EXCLUSIVE: STRATASYS VS. 3D SYSTEMS – A PEEK AT WEB TRAFFIC DATA

    http://www.inside3dp.com/inside3dp-exclusive-look-web-stats-...

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