The best advances in technology are the ones that disrupt societies and change industries. Ideas like cloud computing, the Internet and even tablet PCs have changed the modern tech landscape. Early investors in these “game-changing” ideas can profit handsomely as this technology becomes more commonplace. And with the advent of ETFs like First Trust NASDAQ CEA Smartphone (NASDAQ:FONE) betting on future winners is easy.
One revolutionary idea that is still in early stages of growth is 3-D printing.
The technology promises to break ground across a variety of sectors and is quickly advancing. For investors, betting on the 3-D printing firms could be a huge long term portfolio winner.
While it may seem like something out of a Star Trek or Jetsons’ episode, the concept of pressing a button and getting an object out a machine is quickly becoming science fact. 3-D printing is here and it’s getting quite popular with manufacturing firms and soon it will be in our homes.
Essentially, these machines use a process where they "print" a three-dimensional object by depositing layers of material- usually ABS plastic- on top of each other. While the basic technology has been around for roughly 25 years, costs for the machines have dwindled. That’s resulted in torrid sales growth has manufacturers have begun using the machines.
According to tech researcher Gartner, worldwide shipments of 3-D printers priced under $100,000 will grow by 49% in 2013- with consumer spending on 3-D printing hitting $87 million this year. Meanwhile, enterprise and industrial users will spend $325 million on 3-D printers. However, as costs continue to plunge on the devices, Gartner expects that amount to double by 2015.
Already, both GE (NYSE:GE) and Rolls-Royce have begun using 3-D printing applications for their jet engines. While, retailers such as Best Buy (NYSE: BBY) and Staples (Nasdaq:SPLS) now carry home versions of popular 3-D printing models. Overall, the projected average annual growth rate for 3-D printing devices through 2017 will be an impressive 14%.
Yet, investors may finally have a good chance to participate in that growth. A recent negative analyst report on 3-D printer Voxeljet AG (NASDAQ:VJET) threw cold water on the entire sector. That caused share prices for all 3-D printing stocks- including those who are profitable and realizing sales growth- to plunge. Now could be the time to add the sector to a long term portfolio.
Printing Big Gains
Given that the growth in 3-D printing is just beginning, investors may want to give the sector a go. The brand new Robo-Stox Global Robotics & Automation ETF (NASDAQ:ROBO) does include some exposure to 3-D printing stocks like ExOne (NASDAQ:XONE). However, it’s a small percentage. That means betting on 3-D printing will require more individual stock selection.
And really the only two major players are 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS). Both represent the leaders in terms of sales and product development. DDD has the largest patent portfolio as well as the largest operating margins in the sector. Not to mention, the widest selection of 3-D printer models.
On the flip side, SSYS has the largest market share in 3-D- controlling about 57% of the market. Stratasys also is the leading seller of smaller desktop 3-D printers that run for $500 to $4,000 each. That fact could make it the go to play as 3-D printing enters our homes. Either way, both stocks have surged 116% and 49% year to date, respectively. But more giants could in store as analysts price targets are still well ahead of current selling share prices.
The biggest wild-card in the 3-D printing industry could be Hewlett-Packard (NYSE:HPQ). According to CEO Meg Whitman, the traditional document printing firm is working on its own series of 3-D printers for both home and industrial use. That printer should cost less than $500 when launched. More importantly, HP’s huge distribution network and name recognition could give it leg up on the completion over the longer term. It will be interesting to see if Lexmark (NYSE: LXK) and Canon (NYSE:CAJ) follow suit.
The Bottom Line
3-D printing could be one of the most game changing technological advanced in a long time. For early investors, that could mean big profits in their portfolios. Both Stratasys and 3D Systems along with smaller rival Proto Labs (NYSE:PRLB) make ideal picks to play the growth.
Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.