Who wouldn't want to own a stock that's shot up more than 2,000% over the past five years?
Despite losing nearly half of its value so far this year, 3D Systems (NYSE:DDD) is a stock that has made investors a tremendous amount of money in recent years.
But not everybody is celebrating the stock's success. Whitney Tilson, the managing partner of New York hedge fund Kase Capital, thinks that 3D Systems and the rest of the 3D printing sector is simply over-hyped.
Most investors will, by far, be better off sticking to things like Berkshire Hathaway or AIG (NYSE: AIG) or Citigroup (NYSE: C); solid businesses, trading at low multiples of earnings or book value. You won't have a lot to talk about at cocktail parties, but you're not going to lose your shirt either...
To see what else he had to say about the 3D printing industry, check out the video clip below. A transcript follows the video.
Koppenheffer: Kase Capital now also has some short positions. Last year, tough year to be on the short side of the market.
Tilson: I'll say. It was a once every 10 years kind of year, where it was just carnage for short sellers, and a lot of people gave it up entirely. I'm too stubborn to do that, though.
Koppenheffer: This year, we've seen maybe a little bit more turnaround in the opposite direction.
Tilson: Sure. My short book's really been working this year.
Koppenheffer: For investors on the long side of the market, what parts of the market should they be looking out for? What are the danger zones?
Tilson: Just generally, anything with a lot of hype and momentum. It's almost staggering to me that six years after one of the worst downturns and financial crises in history ... I thought it would take another generation -- it would be 20 years -- before unbelievable stupidity and speculation and so forth, returned to the markets, and where we are back at full force.
When I saw "The Wolf of Wall Street" movie, about the bucket shops promoting these fraudulent companies 20 years ago or something -- as I watched that movie I'm like, "Nothing's changed."
I'm short a bunch of companies that I know are being promoted by fraudsters and bucket shops and so forth -- guys just like the Wolf of Wall Street. These tend to be a little bit smaller companies, probably off the radar screen of most investors, but just be careful.
Classic example is the 3D printing sector. Every good fraud or promotion has some legitimacy, some veneer of legitimacy. 3D printing has been around for 20 years. There are companies that have real revenues -- it's not a fraud -- but it just got promoted to the Moon.
A lot of stuff in the biotech space ... the areas where the frauds and promotions tend to occur are medical devices, exciting new technologies, that kind of thing.
Most investors will, by far, be better off sticking to things like Berkshire Hathaway or AIG or Citigroup; solid businesses, trading at low multiples of earnings or book value. You won't have a lot to talk about at cocktail parties, but you're not going to lose your shirt either, and right now we're in an environment where investors should be thinking first and foremost about not losing their shirt.
A lot of these momentum names, they've been cut in half, and they're still wildly overvalued by any ... there are no value guys that are going to step in and support that stock. I think 3D Systems has got another 50% drop in it.
Matt Koppenheffer owns shares of American International Group, Berkshire Hathaway, and Citigroup. The Motley Fool recommends 3D Systems, American International Group, and Berkshire Hathaway. The Motley Fool owns shares of 3D Systems, American International Group, Berkshire Hathaway, and Citigroup and has the following options: long January 2016 $30 calls on American International Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.