The Future (Opportunity) of 3D Printing

What if you could print the broken piece on your coffee maker rather than make a trip to the repair shop? What about skipping Black Friday madness by printing the latest toy for your child? How about printing that new pair of jeans you tried on at the mall but didn’t fit quite right (your body scanned for a perfect fit)?

Would you say that’s “crazy”?

Perhaps but that’s the direction the world is headed.

“Printing goes beyond product that you can see and touch”. Guitars, tables, board games — those objects can be printed today. But food, organs, bones, houses? Those “will take probably 10 years to come,” – says Geomagic’s Ping Fu

General Electric is “So Stoked About 3D Printing, They’re Using It To Make Parts For Jet Engines”

As Business Insider noted: “CONFIRMATION as to how seriously some companies are taking additive manufacturing, popularly known as 3D printing, came on November 20th when GE Aviation, part of the world’s biggest manufacturing group, bought a privately owned company called Morris Technologies.

Many manufacturers already use 3D printing to make prototypes of parts, because it is cheaper and more flexible than tooling up to produce just one or two items. But the technology is now good enough for it to be used to make production items too.

GE sees the purchase as an investment in an important new manufacturing technology. “Our ability to develop state of the art manufacturing processes for emerging materials and complex design geometry is critical to our future,”

Printing parts for jet engines is already here but the jeans, well, that may take some more time before its commonplace but it’s not out of the question.

So how can you invest to capitalize on this new industry?

Two stocks catch my eye in the world of 3D printing and rapid prototyping:

  1. Stratasys, Inc., SSYS
  2. 3D Systems Corporation, DDD

I don’t intend on spending this blog post describing the detail of the technology itself as plenty of that exists through a simple Google search, however, I will include basic company descriptions from Yahoo Finance (see bottom of post).

Several things stand out while researching these two stocks (see charts):

  1. Year-over-year EPS growth
  2. Double digit quarterly growth for sales and earnings (going back 8 quarters)
  3. Increasing Intuitional Sponsorship

In addition to the fundamental items above, the daily and weekly charts for both SSYS and DDD show some solid technical setups for the long term (I am not writing this post from a short term perspective). We’re talking 2-5 years out as this game is only in its infancy with Wall Street.

SSYS has been trending higher for the past year showing a 170% gain since last November. The recent weekly pattern clearly shows a breakout point to new highs above $73.32. Considering the overall environment of the market, I would prefer a better risk-to-reward buying opportunity closer to the 50-day or 200-day moving average. Due to its technical strength, the 50-day moving average looks to be the ideal pullback area for accumulation.

DDD has pulled back more than SSYS and may provide investors with an opportunity sooner as it trades just above the 50-d moving average. Like SSYS, DDD has given early investors a great return on investment with a 193% gain over the past 12 months. I’d be suspect of the large distribution week, two weeks back, but as long as the 200-d moving average is not violated, an initial entry could be warranted.

As of this post, I do not own shares in either company but I plan to accumulate both as we head into 2013. Both the action of the individual stocks and the general market will dictate when I start the accumulation so please perform your own due-diligence. Follow me on twitter for my latest updates.

Lastly, as Stratasys notes on its home page, 3D printing is “ADVANCING INDUSTRIES” to which it highlights the following:

  1. Aerospace 3D Printing
  2. Automotive 3D Printing
  3. Commercial Products 3D Prototyping
  4. Consumer Products 3D Prototyping
  5. Educational 3D Printing
  6. Medical Device Prototyping
  7. Military 3D Printing

Yahoo Finance:

Stratasys, Inc., together with its subsidiaries, engages in the development, manufacture, marketing, and servicing of three-dimensional (3D) printers, rapid prototyping (RP) systems, and related consumable materials for office-based RP and direct digital manufacturing (DDM) markets. The company offers its products as integrated systems consisting of an RP machine and the software to convert the CAD designs into a machine compatible format, and modeling and support materials. Its products enable engineers and designers to create physical models, tooling, jigs, fixtures, prototypes, and end use parts out of production grade thermoplastic directly from a CAD workstation. The company also offers rapid prototyping and production part manufacturing services; and maintenance, leasing/renting, training, and contract engineering services for 3D production systems and 3D printers.

3D Systems Corporation, through its subsidiaries, engages in the design, development, manufacture, marketing, and servicing of 3D printers and related products, print materials, and services. The company’s principle print engines comprise stereolithography, selective laser sintering, multi-jet modeling, film transfer imaging, selective laser melting, and plastic jet printers. Its 3D printers convert data input from computer-aided design software or 3D scanning and sculpting devices to produce physical objects from engineered plastic, metal, and composite print materials. The company also blends, markets, sells, and distributes various consumables, engineered plastics, metal materials, and composites; and offers various software tools, as well as pre-sale and post-sale services, including applications development, installation, warranty, and maintenance. In addition, it provides custom parts services, such as precision plastic and metal parts service and assembly capabilities. The company markets its stereolithography materials under the Accura and RenShape; laser sintering materials under the DuraForm, CastForm, and LaserForm; and materials for professional printers under the VisiJet brands.

Invensense (INVN) Update

I’ve been asked the following question (one way or another) numerous times:

“Why do you like Invensense so much?”

My answer: It’s an investment in the technology and I believe this is the company to take that technology to the next level. I always follow that response by emphasizing this: Do your own due diligence and NEVER make an investment based off of what I do.

I am not a short term trader but I do follow rules while making trades and one of the most important of these rules is: CUT LOSSES!

As several of my twitter followers have pointed out, I have violated that rule with INVN. That’s true, I didn’t cut the loss when is violated my mental stop. In fact, I dollar-cost averaged my original position. The follow-up purchases have taken my original position to a maximum position size. Now, I sit here writing this post stating that I DO NOT violate “position sizing” within my portfolio. That may be difficult to believe if I just violated another rule but as of today, I have not violated that one. My cost basis is higher than Friday’s closing price for INVN and it took a lot of strength not to buy another block of shares when it dropped below $10 (as low as $9.06 to be exact).

Think about it, a purchase below $10 is showing a gain anywhere from 10%-20% in two weeks. I knew it was a fantastic level to enter and my cost basis would have dropped but I am maxed out – I CANNOT increase my risk against my overall portfolio. That’s how you GO BROKE (especially if you turn out to be wrong – and I may be wrong with Invensense).

That’s the beauty of trading and investing. Your ideas prove to be right or wrong based on making money or losing money. As of today, I show a loss in INVN. So why do I still hold on?

Two reasons

  • The technology: INVN is a leading provider of MotionTracking™ devices for consumer electronics products such as smartphones, tablets, game controllers, smart TVs, and wearable sensors. I see a big future here and I’m betting that INVN is the leader or one of the leaders.
  • The fundamentals (specifically: sales and earnings growth)

I am a technically based trader on a longer term time-frame but for now, I am not trading the chart. Although one may argue that the recent price action suggests that support has been established – it’s still debatable based on the number of shares sold short. The IPO lock-up period has passed, the lawsuit is open knowledge, supplier product shortages have been discussed and the market has not performed well so INVN has paid consequences. I’d like to believe that all of that BAD news is priced in.

The pending lawsuit from their main competitor, STMicroelectronics, does keep me a bit worried on the fringes but I have no control there, other than to sell (that can screw up everything, regardless of fundamentals and technicals).

Let’s take a look at the numbers:

Earnings (YoY):
2008: -0.09
2009: 0.01
2010: 0.19
2011: 0.13
2012: 0.47
2013: 0.61 estimated +30%
2014: 0.85 estimated +39%

Earnings (QoQ):
June 30, 2011: 0.11 vs. -0.01
September 30, 2011: 0.15 vs. 0.04 | +275%
December 31, 2011: 0.13 vs. 0.06 | +117%
March 31, 2012: 0.07 vs. 0.03 | +133%

INCOME STATEMENT | FY2012 (April 1, 2012) vs. FY2011 (April 1, 2011)

Current Period Prior Period % Change
  4/1/2012 4/1/2011  
Sales (Income) $152,967,000 $96,547,000 58%
Cost of Sales $67,246,000 $43,386,000 55%
Gross Profit $85,721,000 $53,161,000 61%
Gross Profit Margin 56.04% 55.06% 2%
Net Operating Income $47,014,000 $21,478,000 119%
Net Operating Income Margin 30.73% 22.25% 38%
Income Available to Common $16,329,000 $1,631,000 901%

BALANCE SHEET | FY2012 (April 1, 2012) vs. FY2011 (April 1, 2011)

Current Period Prior Period % Change
  4/1/2012 4/1/2011  
Cash $157,772,000 $38,075,000 314%
Accounts Receivable $11,931,000 $10,678,000 12%
Inventory $12,240,000 $15,208,000 -20%
Total Current Assets $186,131,000 $65,297,000 185%
Total Assets $193,318,000 $70,746,000 173%
Accounts Payable $13,172,000 $10,786,000 22%
Total Current Liabilities $13,200,000 $11,012,000 20%
Total Liabilities (Total Debt) $16,441,000 $11,605,000 42%
Total Equity $176,877,000 $59,141,000 199%

INSTITUTIONAL ACTIVITY (as of May 28, 2012):

Institution Type
  13F (Money Market) Mutual Fund Other
Number of institutions 100 101 7
Number of new positions 47 61 5
Number of positions sold out 11 4 1
Shares held 15,879,598 8,357,405 118,315
Shares held previous period 11,958,005 1,790,387 62,656
Shares bought 9,209,721 6,724,972 84,315
Shares sold 5,288,128 157,954 28,656
Value of shares held $159,431,164 $83,908,346 $1,187,883
Value of shares bought $92,465,599 $67,518,719 $846,523
Value of shares sold $53,092,805 $1,585,858 $287,706

Two things stick out:
1. The increasing number of institutional investors (including large quantities of shares bought)
2. Increasing earnings, year-over-year and quarter-over-quarter.

Time will tell and my account balance will let me know if I am right or wrong. As for now, I am long $INVN – betting on the technology, industry growth, earnings growth and sales growth. In addition, I would like those institutional investors to continue buying!

Market Pullback and Energy Opportunities in COP and BP?

Set stops and look to take some profits at sign of weakness – a couple of signals are popping up for a slight brake right now $$ – 11:25 AM – 9 Feb 12 via web

That was my tweet from Thursday, February 9, 2012.

The signs that I was referring to are located in the following two charts. The divergence over the past month is very clear on the charts below as the transports are showing weakness in comparison to the industrials. I am not calling a market reversal or downtrend but I am seeing some exhaustion among the leaders and major market averages. Recent gains need to be digested before moving higher (if that’s where 2012 is headed).

Oil has become a topic of interest with gasoline prices across America making headline news on a daily basis. With crude oil pushing higher, above $100, I have become interested in two dividend plays that also present solid technical charts.

ConocoPhillips ($COP – $73.36) operates as an integrated energy company worldwide. The company’s Exploration and Production (E&P) segment explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids.

The company has a market cap just shy of $100B, an annual dividend of $2.64/3.60%, 65% held by institutional investors and a P/E of 8.17x. A move to new highs could catapult the stock well into the $80 range (along with that dividend). The company has been experiencing an increase in net income, year over year revenue growth and a solid record of earnings growth. One could argue that the ideal entry is closer to the 50-d moving average.

BP p.l.c. ($BP – $47.62) provides fuel for transportation, energy for heat and light, retail services, and petrochemicals products. Its Exploration and Production segment engages in the oil and natural gas exploration, field development, and production; midstream transportation, and storage and processing; and marketing and trading of natural gas, including liquefied natural gas (LNG), and power and natural gas liquids (NGL).

The company has a market cap of $150B, an annual dividend of $1.92/4.03%, 10.68% held by institutional investors and a P/E of 5.90x. A move to new highs could push the stock back towards pre- “Gulf of Mexico” disaster levels (along with that dividend). The company has been experiencing increasing net income, growing revenues, reasonable debt and future potential with new contracts and repaired brand image.

As with $COP, an ideal entry for $BP is closer to the 50-d moving average but we are targeting these stocks as value plays considering their dividends and low PE’s.

InvenSense Inc – INVN

InvenSense, Inc.

INVN is up 20% since my first tweet on January 5, 2012 which followed a 9% gain that day from $10.90. The stock is up 33.43% since January 1, 2012 and 77.20% since the IPO on November 16, 2011. It’s a young IPO moving on strong volume with a small float and a very interesting (in-demand) technology.

The ideal buy point for this young chart pattern is $11.95, $0.10 above the high of the left side of the base, see chart below. The stock is currently extended from the buy point so please be patient and wait for a new setup or a pullback on lighter than average volume.

I do not own shares as of this post but I am looking to get in based on the analysis above. The stock shot up too quickly before I was taking it serious. It now has my attention. Note that the stock closed down 1.85% on Friday and after-hours trading had it down another $1.13 or 8.50%.

INVN Tweets in 2012:

  • January 5, 2012 | $11.11: $INVN Young IPO up 9% on vol 277% larger than ave. Interesting technology
  • January 9, 2012 | $12.19: $INVN crushing it lately, targeted last week. Up 10% on vol 78% larger than ave to new all time high. Great technology.
  • January 9, 2012 | $12.19: $INVN Making a move on volume
  • January 10, 2012 | $12.99: $INVN Tack on another 6.5% with volume 156% larger than ave
  • January 12, 2012 | $13.54: $INVN A 22% move this week, as of noon Thursday. Small float, great technology.

Per Yahoo Finance:

InvenSense, Inc. designs, develops, markets, and sells micro-electro-mechanical systems (MEMS) gyroscopes for motion processing solutions in consumer electronics. The company delivers next-generation motion processing based on its advanced multi-axis gyroscope technology by targeting applications in video game devices, handsets and tablet devices, digital still and video cameras, digital television and set-top box remote controls, 3D mice, portable navigation devices, and household consumer and industrial devices.

It sells its products to manufacturers of consumer electronics devices, original design manufacturers, and contract manufacturers through direct sales organization and non-stocking distributors worldwide. The company was founded in 2003 and is headquartered in Sunnyvale, California.

Key Financials 2011:
Current Period (Quarterly) 10/2/2011 vs. Prior Period 7/2/2011
Cash (Bank Funds): $57,740,000 vs. $44,877,000
Total Assets: $102,312,000 vs. $84,150,000
Total Equity: $82,431,000 vs. $69,320,000
Sales (Income): $43,034,000 vs. $35,627,000
Gross Profit: $23,662,000 vs. $20,618,000
Net Operating Income: $14,799,000 vs. $11,731,000

Period (Yearly) 4/3/2011 vs. Prior Period 4/3/2010
Cash (Bank Funds): $38,075,000 vs. $35,269,000
Total Assets: $70,746,000 vs. $54,450,000
Total Equity: $59,141,000 vs. $35,000,000
Sales (Income): $96,547,000 vs. $79,556,000
Gross Profit: $52,900,000 VS. $43,483,000
Net Operating Income: $21,478,000 vs. $21,971,000