Investment fads come and go, and when they go it doesn’t always mean the earlier excitement was unwarranted. In fact, it can be an ideal time to invest. Once the hype has passed, valuations can actually be more compelling and put the investing odds back in favor of the investor.
That looks to be the case with 3D printing, which really just got going in the 1990s. Back in 2013, the market had grown enamored with 3D printing, but the excitement has slowed considerably since.
One issue is the industry is seeing much more tepid demand lately. This helps explain the decreased demand for the stocks. But long-term growth is expected to be 25%, suggesting the industry has some of the more compelling growth projections out there. One key industry player expects 3D printing to grow to a $21 billion market by 2020.
3D printing isn’t intuitive, but represents a revolutionary manufacturing process by which an object is printed from a digital image or three-dimensional computer model. CAD (computer-aided design) software can design a part or product that a 3D printer is able to create.
The below pure plays in 3D printing offer direct exposure to the best this industry has to offer. Of course, large, diversified and incumbent manufactures including General Electric Company (NYSE:GE) could end up eventually dominating the space. That could easily include buying out any of the players mentioned today, which would offer another chance for investment upside. Given the overall growth expected for the industry, investors should be looking for the safest way to position their own respective portfolios.
Clark Estates Inc. NY held its stake in shares of 3D Systems Corp. (NYSE:DDD) during the third quarter, Holdings Channel reports. The fund owned 1,426,390 shares of the 3D printing company’s stock at the end of the third quarter. 3D Systems Corp. makes up 4.9% of Clark Estates Inc. NY’s holdings, making the stock its 4th largest position. Clark Estates Inc. NY’s holdings in 3D Systems Corp. were worth $25,604,000 as of its most recent filing with the SEC.
Other hedge funds have also modified their holdings of the company. Princeton Alpha Management LP acquired a new stake in shares of 3D Systems Corp. during the second quarter worth $313,000. First Trust Advisors LP acquired a new stake in shares of 3D Systems Corp. during the second quarter worth $5,498,000. Commonwealth Equity Services Inc increased its stake in shares of 3D Systems Corp. by 9.9% in the second quarter. Commonwealth Equity Services Inc now owns 37,251 shares of the 3D printing company’s stock worth $510,000 after buying an additional 3,369 shares during the last quarter. California Public Employees Retirement System increased its stake in shares of 3D Systems Corp. by 2.3% in the second quarter. California Public Employees Retirement System now owns 364,300 shares of the 3D printing company’s stock worth $4,987,000 after buying an additional 8,200 shares during the last quarter. Finally, Emerald Acquisition Ltd. acquired a new stake in shares of 3D Systems Corp. during the second quarter worth $543,000. Hedge funds and other institutional investors own 48.62% of the company’s stock.
Shares of 3D Systems Corp. (NYSE:DDD) traded down 0.316% during midday trading on Tuesday, hitting $14.185. 387,480 shares of the stock traded hands. 3D Systems Corp. has a 52 week low of $6.00 and a 52 week high of $19.76. The company’s 50-day moving average is $14.47 and its 200 day moving average is $14.64. The firm’s market capitalization is $1.59 billion.
3D Systems Corp. (NYSE:DDD) last posted its quarterly earnings data on Thursday, November 3rd. The 3D printing company reported $0.14 EPS for the quarter, topping the consensus estimate of $0.09 by $0.05. 3D Systems Corp. had a negative net margin of 98.40% and a positive return on equity of 4.14%. The business had revenue of $156.36 million for the quarter, compared to analyst estimates of $160.16 million. During the same quarter in the previous year, the firm posted $0.01 earnings per share. 3D Systems Corp.’s quarterly revenue was up 3.2% on a year-over-year basis. Analysts anticipate that 3D Systems Corp. will post $0.43 earnings per share for the current year.
A number of analysts have weighed in on the company. Vetr upgraded 3D Systems Corp. from a “buy” rating to a “strong-buy” rating and set a $20.54 price target for the company in a report on Thursday, October 6th. FBR & Co assumed coverage on 3D Systems Corp. in a report on Monday, October 3rd. They set a “market perform” rating and a $18.00 price target for the company. Zacks Investment Research downgraded 3D Systems Corp. from a “strong-buy” rating to a “hold” rating in a report on Tuesday, October 4th. Bank of America Corp. set a $25.00 price objective on shares of 3D Systems Corp. and gave the stock a “buy” rating in a research report on Tuesday, September 13th. Finally, Canaccord Genuity reissued a “hold” rating and set a $14.00 price objective on shares of 3D Systems Corp. in a research report on Tuesday, September 13th. Four equities research analysts have rated the stock with a sell rating, nine have given a hold rating, three have assigned a buy rating and one has assigned a strong buy rating to the company. The company currently has an average rating of “Hold” and a consensus target price of $16.04.
About 3D Systems Corp.
3D Systems Corporation is a holding company. The Company provides three-dimensional (3D) products and services, including 3D printers, print materials, parts services and digital design and manufacturing tools. Its ecosystem supports applications from the product design shop to the factory floor to the operating room.
Want to see what other hedge funds are holding DDD? Visit HoldingsChannel.com to get the latest 13F filings and insider trades for 3D Systems Corp. (NYSE:DDD).
Short interest during the two-week period ending September 30 fell on half of the four 3D printing stocks we follow. Buying interest in the 3D printing stocks lifted share prices for all of the players during the short interest period. But short sellers don’t see that situation as sustainable for two of the companies.
Short interest in 3D Systems Corp. (NYSE: DDD) rose by 5.4% to 27.75 million shares. Some 26.2% of the company’s float was short. Days to cover rose from nine to 10. In the short interest period, the share price rose nearly 15.5%. The stock’s 52-week range is $6.00 to $19.76, and shares closed at $16.69 on Tuesday, down about 5.8% on the day.
Stratasys Ltd. (NASDAQ: SSYS) saw short interest drop by 14.4% in the last two weeks of September to about 5.96 million shares, or 12.3% of the company’s float. Days to cover fell from seven to six. The share price rose nearly 12% in the period, and the stock closed at $22.76 on Tuesday, down more than 4% on the day. The 52-week range is $14.48 to $31.60.
Short interest in The ExOne Co. (NASDAQ: XONE) rose by 6.8% to 1.87 million shares. About 19.9% of the company’s shares were short. ExOne’s share price rose by about 13% in the two-week period. Its 52-week range is $6.50 to $16.15, and shares closed at $14.30 on Tuesday, down nearly 4% for the day. Days to cover slipped from 14 to 13.
Short interest in Voxeljet A.G. (NYSE: VJET) decreased by 4.3% to 578,954, with days to cover dipping from eight to six. The share price rose by about 9.6% in the two weeks to September 30. The American depositary shares closed at $4.32 on Tuesday, down about 3.6% for the day, in a 52-week range of $3.50 to $6.99.
At The Motley Fool, we’re big fans of buying high-quality companies and sticking with them for the long term. However, you sometimes need to be willing to sell a position when the investment thesis is not playing out as expected, or if the business fundamentals are simply deteriorating.
In that spirit, we asked our contributors to share with our readers which stocks they might consider selling in the middle term, and names such as 3D Systems(NYSE:DDD), Pfizer(NYSE:PFE), and Brookfield Infrastructure Partners L.P. (NYSE:BIP) popped up during the conversation.
Andres Cardenal: 3D Systems stock is up by 165% from its low point in January, but even after this massive gain, the stock is still down by more than 40% over the last 12 months. This shows that 3D Systems is a tremendously volatile stock, and that’s not even the worst part. Volatility would not be much of a problem if the business fundamentals were moving in the right direction, but 3D Systems is a fairly uncertain investment at this stage.
The company is one of the leading players in 3D printing, an exciting industry offering potential for innovative disruption. Nevertheless, just because the industry looks promising doesn’t guarantee that different companies in the business will be solid propositions for investors, and 3D Systems is just not delivering in accordance to expectations.
Image source: 3D Systems.
Total revenue during 2015 came in at $666 million, a sluggish increase of 2% year over year. Most of the weakness was concentrated in products and materials, with revenues in these segments declining 9% and 5%, respectively. The services division, on the other hand, is doing much better; revenue in this segment grew 22%. Adding to the concerns, 3D Systems is being hurt by declining profitability; gross profit margin fell from 48.6% of revenue in 2014 to 43.8% of sales in 2015.
I still believe 3D Systems offers upside potential over the long term. However, unless the company proves it can capitalize on its growth opportunities in a profitable way, I may need to sell 3D Systems and invest the proceeds in a sounder and more reliable stock.
George Budwell: After its second high-profile M&A flame out, I’m seriously considering kickingPfizer out of my portfolio. While the market cheered the U.S. Treasury’s actions to break up the planned merger between Allergan and Pfizer, I think this whole episode reveals a deeply disturbing aspect about Pfizer’s approach toward creating value for shareholders: In short, Pfizer’s management seems to be focused far too much on accounting issues — such as its effective tax rate and outstanding share count — rather than on growing its top line.
While it’s true that some of Pfizer’s newer products such as Eliquis, Ibrance, and Prevnar 13 are expected to grow the drugmaker’s top line by 4.4% this year, the fact remains that the company hasn’t effectively dealt with its headlong dive over the so-called patent cliff. After all, its Global Established Products business reported a 14% decline in total sales in 2015, offsetting a healthy 11% annual sales increase within its Innovative Products segment last year. The net result is that Pfizer’s shares have steadily marched lower over the last 12 months:
The bottom line is that Pfizer’s cohort of newly approved products are being diluted — from a value creation standpoint — by the drugmaker’s older products that have lost patent protection. The merger with Allergan would have positioned Pfizer for a possible split in, perhaps, 2018 to solve this problem, but management’s decision to shutter the merger after the tax benefits evaporated leaves the company in a precarious position going forward.
Basically, Pfizer is wasting, in my opinion, some of the best years of its Innovative Products business because of its burning desire to lower its effective tax rate. In the process, Pfizer is getting left behind by many of its big pharma peers that are already starting to push past the patent cliff. Worse still, management doesn’t appear to have a solid plan in place to finally resolve these lingering patent problems, and that’s the main reason I may part with my shares in the not-so-distant future.
JasonHall: This is a tough one for me, but I think in the long run, it’s going to be the right decision to sell Brookfield Infrastructure Partners L.P. Why is it tough? Because I love the business, and I think it’s likely to beat the market’s total returns on average over the long term.
So, why sell a business I love? Because I hold shares in an IRA, and Brookfield Infrastructure Partners is a master limited partnership, or MLP.
Why does that matter? It matters because MLPs don’t pay corporate taxes, passing the tax liability down to investors. And unfortunately, that can lead to owing taxes on distributions, even if the shares are held in a retirement account. It’s a terribly inefficient investment in a tax-advantaged retirement account.
Today, it’s not a problem, since the income I derive from my Brookfield Infrastructure Partners investment is still below the threshold that would cause me to owe tax on it. But it’s in my best interest to not build up enough assets like Brookfield in my retirement accounts over time, since they could turn into a problem down the road. In other words, this is purely a tax-planning move.
For that reason, I’m probably going to sell the units I hold in my IRA, though I’m certainly not selling the ones I own in my taxable investing account. To the contrary, this would be one of the first income investments I’d buy in a taxable brokerage account.
A secret billion-dollar stock opportunity The world’s biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn’t miss a beat: There’s a small company that’s powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early, in-the-know investors! To be one of them, just click here.
Andres Cardenal owns shares of 3D Systems. George Budwell owns shares of Allergan PLC and Pfizer. Jason Hall owns shares of 3D Systems and Brookfield Infrastructure Partners. The Motley Fool recommends 3D Systems and Brookfield Infrastructure Partners. 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.