How many times have you studied the stock charts of Google Inc. (Nasdaq: GOOG), Apple Inc. (Nasdaq: AAPL) or Amazon.com (Nasdaq: AMZN) – and wished you could travel back in time to become an early stage investor in just those sorts of king-making companies?
We can’t, of course, but I can offer the next best thing: I can tell you about the brand-new industry where the next stock like this will likely come from.
I’m talking about 3D printing.
Folks who’ve been following my work know that I’ve been predicting this sector’s emergence for some time. Back in March, I told readers of our sister newsletter Money Morning that 3D printing was a $1 trillion industry in the making. In October, in a note to all of you, I followed up with a roundup report on the newest breakthroughs.
In every piece I’ve written, my key message was always the same: 3D printing will give tech investors the next real shot at windfall profits.
In 2012, U.S. stocks (as measured by the Standard & Poor’s 500 Index) gave investors a 14.5% gain – a pretty nice return in the face of the Eurozone Crisis and the Fiscal Cliff debacle.
But mid-cap leader 3D Systems Inc. (NYSE: DDD) smoked the broad market – gaining 270% to earn honors as one of the hottest stocks of 2012.
A few great picks like that would make any of our retirement years a lot more rewarding.
Now you can see, once again, why I say that it pays (literally) to follow the big tech trends that are helping reshape the world around us. By the end of the year, it seemed that every major financial publication had jumped on the 3D bandwagon.
Not only that, but a number of advances in the field drew a lot of attention from the general public. Ditto for both savvy individual investors and market pros.
Online video helped spread the word as several clips went viral. On YouTube alone, the Top 10 videos on this subject were viewed nearly seven million times. That’s a whole lot of street-level promotion.
Maybe it’s because of the Graying of America, but the public and investors alike found themselves thrilled by how 3D printing is having a major effect on medicine.
Take the case of how an 83-year-old woman in Europe had received a new jaw doctors printed with titanium powder. News junkies found the story riveting.
And investors quickly grasped the implications of this advance. Soon, if you need a new hip or shoulder, your doctor can just “print” one up in no time – and to your exact specifications down to a “T.”
Add all this up and you have the key ingredients for some real stock-market magic …
Strictly speaking, you don’t really “print” a new product. But it is a similar process. Rather than putting ink on paper, the system creates the product by adding thin layers of special polymers and some powdered metals.
I’ve focused on 3D Systems because it is my favorite “pure play” in this field. Of course, its stock did well partly because there really are only two publicly traded firms focused on the broad market for these cutting-edge printers.
The other is Stratasys Ltd (NasdaqGS: SSYS).
And the performance of that company’s stock bolstered my argument that 3D printing has arrived.
I say that because SSYS returned a whopping 160% over the past year, more than 10 times the S&P’s return. As strong as that performance was, it was still about 100 percentage points less than 3D Systems.
Don’t get me wrong, Stratasys is a great company. But its approach differs from that of 3D Systems. In simple terms, Stratasys is focused on the upper end of the market – more on the Fortune 500 than small firms.
But 3D Systems wants those entry-level buyers. And the way I see it, this strategy makes a heck of a lot of sense. After all, the market for small companies and solo inventors is much larger than it is for major corporate buyers.
So, the company’s decision to release its hallmark product – the Cube, with a price of $1,299 – enticed a lot of new buyers into the field. Of course, 3D Systems has plenty of other products to sell them, either supplies or more pro-level printers.
3D Systems also was smart to take a lot of competition out of the market. The firm has gone on a merger tear over the last two years and has done a good job of translating that into new profits.
Let me close by noting that it’s difficult to predict how long the good times will last for this stock. At some point, every great equity loses its steam.
And yet … as of right now, the chart just looks great. It shows a lot of solid buying and the balance of power is clearly in favor of the bulls on rising volume.
So, while I doubt it will return another 270% this year, the fundamentals are still very much in this stock’s favor.
And just think … once you’re in on the ground floor of a $1 trillion industry, you’ll never have to stare wistfully at Google’s stock chart ever again. After all, we’re in the earliest stages of the 3D printing revolution – here in the Era of Radical Change.