Apparently, 3-D printing stocks have fallen out of favor in 2014. After the industry's two largest players -- Stratasys (SSYS 0.84%) and 3D Systems (DDD 1.90%) -- posted stock gains of 850% and 340%, respectively, between 2012 and 2013, they look to be running out of steam. Not only has each lost considerable value this year, but they were also dumped by one of the country's more successful hedge funds.
Tiger Global management is an $8 billion hedge fund under the direction of Feroz Dewan and billionaire Chase Coleman. Over the years, they've had a number of lucrative investments that have paid off for investors, like Apple, Amazon.com, Google, and Netflix.
So it's at least worth kicking the tires to try to find out why they thought Stratasys and 3D Systems were no longer worth their investment dollars. And as you'll see, there's more to the story than meets the eye.
Big sales, big profits
One important thing to understand about Tiger's investment in these 3-D printing companies is that they were likely hugely profitable. Though we can't know for sure exactly what price the stocks were bought for, according to Tiger's recently filed 13-F, each recent sale was significant.
|
Stratasys |
3D Systems | |
|---|---|---|
|
Shares Sold |
975,000 |
496,956 |
|
Approximate Value |
$130 Million |
$46 Million |
Source: Whale Wisdom.
Because each stock went almost continuously up over the past two years, it's a pretty safe bet that each of these positions garnered huge returns for Tiger. It could simply be that the company wanted to take its profits off the table and invest the money elsewhere.
Given that each company's stock has fallen since then, and that each were (and still are) trading for very expensive multiples, it appears that Tiger made a shrewd move in selling before the end of last year.
But there's more to the story
Interestingly, it seems that back in October, Tiger held about the same amount of shares in both 3D Systems and Stratasys -- about 1.275 million. You might notice that that's more shares than the company sold at the end of last year.
What that means is that, while Tiger apparently was interested in taking some profits and reducing their exposure to these companies, they were not willing to completely part ways with their investments.
Source: Makerbot, a subsidiary of Stratasys.
While Tiger also opened up a position now worth about $30 million in industrial 3-D printer ExOne (XONE +0.00%), it still has roughly $100 million tied up in Stratasys and 3D Systems combined.
Though it's impossible to know exactly what Dewan and Coleman are thinking, it's clear they both still believe in the 3-D printing sector in general, but wanted to reduce exposure, likely because of lofty prices.
ExOne is still a very small company, but because of its focus solely on the industrial sector -- which could be the most lucrative of all -- and the ability of its printers to use sand, glass, and several different metals, it makes sense that they'd want skin in the game.
As far as Stratasys and 3D Systems are concerned, while each company has experienced setbacks of late -- especially 3D Systems in the wake of its weaker-than-expected guidance -- they are both still valued at less than $8 billion.
If either company accomplishes even half of what some proponents think they could over the years, such market caps could one day seem very small indeed.
