Gary Anderson, Owner of 3DPrintingStocks.com (USA)

The stock market is very much a fool’s game, you can lose a fortune and unless you own the listing exchange, are involved with the initial IPO or have some solid advice – you know what you are getting yourself into with a sound mind and plenty of knowledge about the industry you are investing in. I thought it would be great to have somebody who’s heavily involved specifically in the 3D printing stock industry to gain a glimpse about this market.

Key takeaways are:

• Investing is a competition – it’s you vs. other investors, and if you have a better grasp of industry-specific trends and players, you’re more likely to win the competition.
• I think for the short term, most of the well-known players are still a little overvalued.
• I’m a 3D printing investor only. As long as the industry is projected to show compound growth of 25-30% annually I can’t think of an area I’d rather be investing my money in.

You can get a hold of Gary by visiting his website at 3DPrintingStocks.com.

Where did your interest in 3D printing come from and more specifically, that of 3D printing stocks? Why did you end-up building a blog focused on this area of expertise with 3dprintingstocks.com?

Well, before I start I need to provide a disclaimer that I am not a registered investment professional and that all comments below are my own opinion. Investors should seek the advice of their investment advisor prior to making any investment. Any investment I may mention in this article can result in losses and investing in the stock market, particularly in high-tech stocks, carries risk.

I’ve always been fascinated by high-tech. stocks and for the last decade or so I’ve been a “niche market” investor. I believe by focusing on a single industry (like medical devices, pharmaceutical, 3D printing), you get to know the industry, the trends, the players, etc. This gives you an investing advantage because that industry-specific knowledge allows you to compete better. Investing is a competition – it’s you vs. other investors, and if you have a better grasp of industry-specific trends and players, you’re more likely to win the competition.

I started investing in 3D printing stocks in 2010 with shares of Stratasys (SSYS) and 3D Systems (DDD) which I still own. I was fascinated by the idea of “making something out of nothing”, with no mold, no waste, just pure creation of a new object. As the technology made tremendous leaps in just the last two years, we’re now on the verge of moving from prototyping to actual production in some cases. It’s a game-changer because of that, and it’s why the 3D printing industry is projected to grow at a CAGR (Compound Annual Growth Rate) of 25-30% over the coming years.

While the industry is comparatively small, the growth is high, and I can’t think of another industry I’d rather be investing in right now than 3D printing.
I launched my web site (and added a subscription-based site this year) because I love researching and writing about stocks in the 3D printing space – so the site was just a natural progression I think.

3D printing stocks have seen some wild ups and downs, just last week DDD dropped significantly before gaining new ground. Other than the top 2 in the 3D printing industry SSYS and DDD – what are some up and comers coming up that people interested in entering the market should watch?

There are several that I like at current prices. One is based in France, MGI Digital Graphic Technology. They recently bought another European company, a commercial grade 3D printer manufacturer called Ceradrop. Ceradrop 3D printers are early movers in 3D printing of electronic components, an area where extremely rapid forward growth is projected.

It’s not a “pure play” 3D printing stock, but it certainly represents a great value at current price. MGI Digital trades in Europe on the Euronext exchange with the ticker ALMDG, and just started trading in the US with the ticker FRIIF. The PE ratio is about 40, and some highlights from 2013 earnings are:

• 22% increase in sales
• 29.8% increase in EBITDA
• 28% increase in net income
• GAAP EPS of $1.50 USD (based on 4.95 million shares outstanding)
• Ceradrop 3D printer division slightly earnings positive for 2013

Here’s a quick video on the MGI Digital acquisition of Ceradrop 3D printers:

I believe MGI Digital with their Ceradrop 3D printer division will outperform the better known 3D printing pure plays like 3D Systems, Stratasys, etc. because of their stronger fundamentals and entry into 3D printing of electronic components. Konica Minolta is buying a 10% ownership stake in MGI Digital, and the potential for future development and deployment of Ceradrop 3D printers will likely get a boost from that partnership as well.

I should say here that I’m not “against” the well-known players and I still own shares of 3D Systems and Stratasys for example. They have their strong points – early mover advantage, great products in the pipeline, good management, etc., but I just think they still priced a little high here.

After your research, do you think the stock market relative to 3D printing specifically is over valued or under valued? How did you come to this conclusion? Is now the time to buy or sell?

Good question. I think for the short term, most of the well-known players are still a little overvalued. Longer term (2 years +), I think they’re undervalued – so it depends on your time horizon. Stocks like 3D Systems, Stratasys, Xone, voxeljet have been priced to perfection by investors. Yes, their growth is strong, but they’re not the only players in the industry. Companies like Groupe Gorge (GGRGY) with their cutting edge Prodways line of 3D printers, and MGI Digital (FRIIF) with their Ceradrop division are better short term (6 month) buys here in my opinion, based on their comparative fundamentals.

What are some of the challenges you see 3D printing companies in general having in the coming year? Do you mind making any predictions as to how you see certain stocks going and give reasons why you believe that to be the case?

On an industry-wide basis I think the somewhat limited range of applicable printing materials is an industry issue that will continue to be a challenge. There’s a lot of work being done on materials development in both private and public sectors (with groups like America Makes for example) that will help…but adding a wide array of printable materials is one of the biggest hurdles for the industry to overcome.

On an individual stock basis, the challenge for the well-known and well-followed companies is to continue to grow revenue and earnings fast enough to justify their current prices. I think for at least the first half of the year, most of the well-known 3D stocks will trade sideways overall in a period of consolidation, and I expect they’ll perform better by the end of the year.

2014 isn’t going to be a repeat of 2013 where every 3D printing stock went up automatically. This year will be a “3Dprinting stock pickers market”, and the companies that will outperform will be those that have the fundamentals to support their valuations.

In most cases, I believe those will be companies most investors haven’t heard of yet – companies like Groupe Gorge and MGI Digital for example, that are adding 3D printing to their business model. The big advantage these two companies have is the built-in sales channels for their 3D printers that they have from their already existing operations and partnerships. It’s a huge distinction from the pure plays that have to go out and expand their sales channels (at great cost) to grow revenue and earnings.

Do you invest purely in 3D printing stocks or do you have a diversified portfolio in other industries that aren’t as volatile? What stocks outside of 3D printing are your favorite at the moment and why?

I’m a 3D printing investor only. As long as the industry is projected to show compound growth of 25-30% annually I can’t think of an area I’d rather be investing my money in. The whole concept of 3D printing, as we begin to move from prototyping to production is mind boggling, awe-inspiring, whatever you want to call it. Although the industry is decades old, the technological advances within it are going to change the world in ways we haven’t even realized yet.

Knowing what you do about the stock market – how do you know when it’s time to buy, time to sell and time to “day trade” vs. keeping things for the long haul?

I’m mostly a buy and hold investor, but I do some short term day trades on occasion. I don’t think I can explain when I believe it’s time to buy, sell, or hold here because it would take a page or two (at least) to accurately explain my investing model. That said, one quick rule I do use for selling is to “Never fall in love with a stock”.

Once I enter the stock, I set a 10% stop loss order in immediately. In doing this I limit my potential losses and can either get back in at a lower level or use the funds to buy something else. It’s a very basic and simple way to limit potential losses in the market. These are volatile stocks- if you’re stuck in a downtrend it can take months to recover.

What were some of the wildest stock movements you saw in 2013 and what was their cause?

The wildest and best performing 3D printing-related stock of 2013 by far was Sigma Labs Inc. (SGLB), which rose over 1,000% last year. It’s a penny stock… something I rarely invest in due to added risks, but I did take a decent position in early on. I invested in Sigma Labs because they have big partners in developing their product, “PrintRite3D”, a software/hardware suite that addresses the industry need for live, real time part qualification during the 3D printing process.

This industry need is particularly acute in critical part components like the fuel nozzles in GE’s next generation “LEAP Engines”. Sigma Labs is partnered with GE in this project, and has also received a grant from the U.S. Dept. of Commerce to develop their technology in partnership with other, much larger players in the industry. For me the company (even though it trades as a penny stock) was completely legitimized by their partnerships and government funding.

Anything else you’d like to add?

Thank you Jon for the opportunity to write about 3D printing stocks here on CNCKingdom.com. I’ll be participating on a roundtable discussion on investments in 3D printing stocks at the “Inside 3D Printing Conference and Expo” in New York April 2-4. If any of your readers are attending, I’d love to chat with them about 3D printing stocks – just catch me and start talking. But fair warning…sometimes I can’t stop myself when I get going about 3D printing stocks!