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The One 3-D Printing Company This $8 Billion Hedge Fund Believes In

By Brian Stoffel - Mar 1, 2014 at 6:00AM

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It's not the big boys we're talking about. This firm is betting on the underdog.

Tiger Global Management is an enormous, $8 billion hedge fund run by billionaire Chase Coleman, and Feroz Dewan. As Forbes wrote last February, "Tiger has scored some of Wall Street's most impressive returns, mainly from investing in growth stocks like Apple, Amazon.com, Google, and Netflix." 

Though it's never a good idea to blindly follow any investment guru, it's always worth kicking the tires to see what the really successful ones are up to. After a recent filing with the SEC, we now know that there's one 3-D printing stock that stands out above the rest in Tiger's eyes.

Betting on the underdog
The two largest companies within the 3-D printing industry are Stratasys ( SSYS -6.56% ) and 3D Systems ( DDD -3.85% ). Tiger actually used to hold positions in each of these companies but sold them during the fourth quarter of last year -- likely for a nice profit as well.

It's interesting, then, to see that Tiger instead chose to focus on a much smaller -- and much more expensive -- player within the field: ExOne Company ( XONE ). Whereas Stratasys focuses on consumer and commercial printers, and 3D Systems is trying to succeed in just about every industry 3-D printing can disrupt, ExOne is solely focused on the industrial sector.

And on the face of it, ExOne is also far more expensive than these counterparts:

Company

Market Cap (Millions)

Price-to-Sales

Price-to-Earnings

Stratasys

$6,200

15

74

3D Systems

$7,700

15

88

ExOne

$672

16

N/A

Source: E*Trade. N/A=not applicable because of negative earnings.

ExOne is slightly more expensive based on sales and has yet to turn a profit. In fact, in its one year as a public company, it has brought in just a bit more than $40 million -- not much for a quickly growing industry.

So why is Tiger so bullish on ExOne?
Though it's impossible to know with 100% certainty, the likely reason that Tiger is so bullish on ExOne has to do with the potential of industrial 3-D printers to become the next staple in manufacturing.

Indeed, the company's printers are either currently -- or will soon be -- able to print objects like those pictured here in steel, bronze, sand, glass, bonded tungsten, iron, titanium, aluminum, tungsten carbide, and magnesium.

Source: ExOne. 

Printing with these types of materials gives ExOne a much more practical customer base than the larger players cater to. Management sees its printers being integral in the aerospace, automotive, oil and gas, and heavy equipment industries.

What you need to know before investing with ExOne
Investors need to understand that in their current format, these printers alone can't mass-manufacture parts for use in these industries. Instead, they can offer up prototypes in a much quicker and more cost-effective manner than is currently available.

Though the company's stock took a pretty significant hit early in the year when it announced that some key sales were pushed into the next quarter, investors should be excited by the fact that ExOne is currently spending its cash to build out capacity. Management wouldn't make that decision unless it was confident that customers will be lining up to buy the printers.

And investors should also keep an eye on Voxeljet ( VJET -4.43% ), the other main player in industrial 3-D printing space. Between ExOne and Voxeljet, ExOne looks to be the smarter buy right now: Voxeljet has a much higher price-to-sales ratio, and made a seriously questionable move last year by using 20% of its proceeds to buy real-estate that it had been renting for a fraction of the cost.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

3D Systems Corporation Stock Quote
3D Systems Corporation
DDD
$21.23 (-3.85%) $0.85
Stratasys Ltd. Stock Quote
Stratasys Ltd.
SSYS
$24.22 (-6.56%) $-1.70
The ExOne Company Stock Quote
The ExOne Company
XONE
voxeljet AG Stock Quote
voxeljet AG
VJET
$6.90 (-4.43%) $0.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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