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Mega Themes Investing - 3D Printing



January 07, 2014 – Comments (2) | RELATED TICKERS: DDD , SSYS , VJET

Board: New Paradigm Investing

Author: anthonyms

As described in a post towards the end of last year – (, I have started to structure my investing according to some new paradigm investment themes and as a result have sought to identify potential plays that represent high growth opportunities associated with and exposed to clearly identifiable, large and potentially transformational mega themes and offer profitable participation.

One of the responding posts on the original thread suggested dissecting these in a theme by theme, play by play discussion – which I will attempt to kick start now with a follow up post for each of the 10 themes identified. Where I have taken a position in a particular play I will highlight this in the interests of transparency.

Theme 1/10: 3D Printing

The 3DP theme hardly needs any introduction on this board or even within the community, (not that it gets discussed much at all over on interestingly enough). The thesis behind this theme is that 3D printing has the potential to disrupt, dis-intermediate or replace parts of or whole value chains across so many industry sectors in the way that computers and the internet have.

Whether it be IP development, design, prototyping, manufacturing, integration, distribution, supply or retailing of almost any physical entity. It will turn the concept of IP on its head in the way digital rights has done with music. At the very minimum it can create physical structures that could not be created previously and/or in fewer parts or components, democratize access to out of stock/delisted items (as eBook readers have) and change the concept of publishing from virtual or 2D print to 3D material. It will allow personalization like never before. It will challenge the economics of small batch run production and will bypass whole supply chains and allow instant local materialization. It will challenge our notions of freedom, security, ownership, quality control, safety and even location/proximity. The economic success of 3DP and the individual players will depend on speed of manufacturing, quality of production and cost of feedstock as well as the innovation and foresight of how players will operate within the space to maximize revenue/profitability from the value chains and sectors they target. The current industry CAGR lies around 30% which is expected to continue for the next 5-10 years.

Key documents and resources (thanks to others who have helped uncover these previously)
Key boards containing 3DP discussions include: NPI, 3D Printing, 3D Systems SAS: 3D Systems & Stratasys.
An outline of technology and players:
A technical resource area:
A basic PWC investment article:
An investor resource area:
A deloitte article:
A thread covering growth projections and resources:
Economist article on 3D printing:

I see this holding so much potential that ~25% of my worldwide equity investments in current value are allocated to this play which is a pretty substantial exposure proportion to have. (See separate post/thread at

Ok now for the hard part as Warren Buffet identifies: “The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.” (

The plays I have identified so far are as follows. (* denotes I have an investment interest).

3D Printer Manufacturers
The most pure play and by association hyped, are the manufacturers of 3D printing hardware. In general the larger American 3D printer companies have focused on rapid prototyping amongst developers, prosumers and consumers with plastic materials, whilst the more niched European companies have focused on small high cost production via additive manufacturing in the industrial space and with metal materials. Although there has been both share price volatility and variance it is interesting to see how similarly valued the share prices of these companies have converged on in terms of price to sales (around 20), irrespective of their ranking, profitability and growth rates. TMF contributors appear to regularly cover these in written and video format and both Stratasys as well as 3D Systems feature in a TMF report on the new industrial revolution with Stratasys represented within the Stock Advisor selections.

Arcam AB (AMAVF)*
This Swedish company designs, develops and assembles high value Electron Beam Melting (EBM) 3D printers (it outsources manufacturing) and supplies feedstock to its industrial customer base which is predominantly avionics and aerospace, dental, orthopedic and medical and industrial plant equipment manufacturers. They collaborate with EU funding sponsors to research advances in manufacturing speed and production quality. It has a competitive advantage in its EBM IP ownership and the integration of quality control systems (Arcam LayerQam™ integrates a camera-based monitoring system for part quality verification). Arcam has targeted medical implants as an industry sector to drive vertical integration participation within (through their alliance with DiSanto Technology) and has acquired metal powders supplier Raymor industries to better control its feedstock. One apparent weakness in the EBM technology is finishing quality which other 3D printing technologies appear to be stronger in. Whilst delivering extremely high organic growth, Arcam faces potential saturation points in demand for its industrial niche as well as supply bottlenecks.

Arcam’s share price enters 2014 20% off its peak following some recent equity dilution. It is has a comparatively low market cap of ~$600m and an above industry average growth rate leaving it with a p/e of ~170 and a p/s of ~20.

3D Systems (DDD)*
3D Systems Corporation, through its subsidiaries, develops, manufactures and markets 3D printers, print materials, on-demand custom parts services, and 3D authoring solutions for professionals and consumers. The company’s primary print engines comprise: stereolithography, selective laser sintering, multi-jet modeling, film transfer imaging, selective laser melting, and plastic jet printers, as well as ZPrinters. Its 3D printers convert data input from computer aided design (CAD) software or 3D scanning and sculpting devices to produce physical objects from engineered plastic, metal, and composite print materials. 3D Systems is one of the originators of 3D printing and is the most established and broadest based player. It is aggressively acquisitive and is building horizontal and vertical integration across more sectors than any other player in the consumer, prosumer and industrial spaces. One concern for 3D Systems is the expiry of certain patents this year although it retains substantial IP.

3D Systems begins 2014 at an all time high share price and is the largest pure play 3DP company with a market capitalization of ~$10bn and whilst already profitable has an extremely high valuation of ~200 p/e and a p/s ratio of ~21.

Stratasys (SSYS)*
Stratasys Ltd. provides additive manufacturing (AM) solutions for the creation of parts used in the processes of designing and manufacturing products and for the direct manufacture of end parts. Its AM systems utilize its patented fused deposition modeling (FDM) and inkjet-based PolyJet technologies to enable the production of prototypes, tools used for production and manufactured goods directly from three-dimensional (3D) CAD files or other 3D content. The company offers desktop 3D printers for idea and design development, a range of systems for rapid prototyping, and production systems for direct digital manufacturing under the uPrint, Mojo, Objet, Dimension, Fortus, and Solidscape brands. It also provides a range of approximately 130 3D printing materials, including approximately 120 proprietary inkjet-based PolyJet photopolymer materials and 10 proprietary FDM-based thermoplastic materials. It targets the aerospace, apparel, architecture, automotive, business machines products, consumer, defense, dental, electronics, educational institutions, heavy equipment, jewelry, medical, and toys industries. Stratasys was transformed by the merger with Objet of Israel and has been applauded for its post merger integration excellence enabling it together with the current merger action with Makerbot in the consumer space allowing it to vie head to head with 3D Sytems for broadbased industry leadership. It’s latest capability to print Nylon is expected to substantially increase its addressable market given that Nylon is the most manufactured production material in the world.

Stratasys also enters 2014 at an all time high share price and market capitalization of ~$6.5bn and whilst currently loss making has a forward p/e ratio of 58 and a relatively lower than sector average p/s ratio of 16.

Voxeljet (VJET)
Voxeljet AG provides three-dimensional (3D) printers and on-demand parts services. Its 3D printers employ a powder binding additive manufacturing technology to produce parts using various material sets. The company operates in two segments, Systems and Services. The Systems segment focuses on the production, development, and sale of 3D printers. It also offers consumables, such as particulate materials and proprietary chemical binding agents, maintenance contracts, and spare parts. The Services segment prints on-demand parts at its service center through its 3D printers, material sets, and in-house finishing capabilities. The company provides its 3D printers and on-demand parts services to industrial and commercial customers in automotive, aerospace, film and entertainment, art and architecture, engineering, and consumer product end markets. Voxeljet is both a relatively young company and only recently listed with its US IPO late in 2013. It has a similar profile to ExOne though with a shorter track record and at a lower baseline of unit sales. It is considered a acquisition target for larger 3D printing companies for its metal printing capabilities and European footprint.

Voxeljet has seen volatile share price action since its IPO and enters 2014 30% off its peak. It has a market capitalization similar to Arcam at just under $500m and is expected to just about move into profit in 2014 with a forward p/e of 450. It has one of the highest p/s ratios of 33.

ExOne (XONE)*
The ExOne Company engages in the development, manufacture, and sale of three dimensional printing machines and printing products. The company provides Max, Print, Flex, and Lab machines that enable designers and engineers to design and produce industrial prototypes and production parts; and ExMicro Orion machine, a laser micromachining product for conventional and exotic materials. It also offers associated products comprising consumables and replacement parts; and other services, such as training and technical support services. The company markets its products to industrial customers in the aerospace, automotive, heavy equipment, energy/oil/gas, and other industries. ExOne is focused around materialization whether it be for prototyping or production. It also serves the molding industry through its capabilities to 3D print in sand. It has one of the broadest ranges of material materialization capabilities including glass, sand, metal and plastics and is looking to constantly broaden its range. ExOne is also focused on building out 3D printing foundry like service centers as part of its business model. ExOne is relatively young, appears well managed and focused on its industrial niche but with a broad range of printing materials.

ExOne starts the year 20% off its all time high but in strong momentum. It has a market capitalization at just under $1bn and whilst unprofitable currently, is expected to break even in 2014 with a forward p/e of 155 and has a P/S of 21

Groupe Gorge SA (GGRGF)*
Groupe Gorge SA is a French company that operates in the industrial services and nuclear sectors offering smart safety robotics, monitoring and protection equipment. The company is profitable, growing and dividend paying and in 2013 purchased the prodways 3D printing company (set up by ex 3D Systems staff). At the recent trade-fair it exhibited record setting 3D printers which were well received and secured initial orders in the dental equipment sector. Whilst not a pure play the market capitalization values the existing business at a p/s of 1 which means that the 3DP section is thrown in for free at a zero valuation effectively.

3D printing vertical players
With the exception of the very successful and established Align Technologies, each of the vertical plays are at very early stages of development with very high risk/reward profiles.

Align Technologies (ALGN)*
Whilst not a strictly pure play, Align has developed a business model around being able to tailor its dental solutions enabled by 3D scanning and printing. It is a large and growing worldwide niche segment (although most of the 7bn humans around the world probably have teeth or the need for teeth). Align Technology, Inc. operates as a medical device company primarily in the United States and internationally. It designs, manufactures, and markets a system of clear aligner therapy, intra-oral scanners, and computer-aided design and computer-aided manufacturing (CAD/CAM) digital services that are used in dentistry, orthodontics, and dental records storage. The company operates through two segments: Clear Aligner, and Scanners and CAD/CAM Services which it distributes to the orthodontic channels and trade. The revenues of its current business niche are comparable with the total sales of 3D Systems and Align has added $90m in sales over each of the last 3 years.

Align enters 2014 with a share price close to its high, has a market capitalization of ~$4.5bn, a p/e of 150, a forward p/e of 33 and a p/s of 7.

Camtek (CAMT)
Camtek is not a pure play and has a pre-existing business of questionable potential. Its 3D credentials lie in the aspirations to move into the vertical of 3D printing PCBs which could offer substantial value to the electronics industry. Alongside the core business the company also offers digital material deposition systems and inks, including GreenJet, an SM digital printing system to replace the conventional SM application lines for prototypes and high mix low volume production; and LGP, which offers digital legend printing technology solution.

Camtek enters the year 20% off its high valued at $130m market capitalization and whilst not achieving profits in 2013 is priced at a forward p/e of 17 and p/s of 2.

InVivo Technologies (NVIV)*
Invivo Therapeutics Holdings Corp., a development stage company, focuses on developing and commercializing biopolymer scaffolding devices for the treatment of spinal cord injuries, peripheral nerve injuries, and other neurotrauma conditions. It intends to develop and commercialize biocompatible polymer scaffolding devices to treat acute spinal cord injuries; biocompatible hydrogel for use as dural sealants, dural replacements, and nerve conduits, as well as for local controlled release of methylprednisolone to treat spinal cord injuries and peripheral nerve injuries; and biocompatible polymer scaffolding devices seeded with autologous human neural stem cells to treat acute and chronic spinal cord injuries. Invivo suffered some reputational setbacks in 2013 with regulatory filings and boardroom re-shuffles. The replacement management team are all now installed and it seems the regulatory process is getting back on track. This is very early days in a sector fraught with risk however it represents the deployment of cutting edge 3D science in an area of significant unmet need.

The market capitalization of InVivo sits at ~$180m with no sales or profits in sight on the near term horizon and the share price is significantly down from its 2013 high.

Organovo (ONVO)*
Possibly the most weird science of all the 3D printing applications to date concerns Organovo 3D printing human tissue including livers, heart and in the future plans – skin. Organovo Holdings, Inc. develops three-dimensional (3D) bioprinting technology for creating functional human tissues on demand for research and medical applications. The company’s 3D NovoGen bioprinting technology works across various tissue and cell types, and allows for the placement of cells in desired pattern. It offers NovoGen MMX Bioprinter, a commercial hardware and software bioprinter platform to create tissues for bioprinting research and development. The first product areas of focus are 3D liver assays and cancer tumors for the pharmaceutical R&D industry. It hopes to have these in market by 2014/2015.

Organovo begins 2014 within 10% of its all time high and a market capitalization of just under ~$1bn. It has no sales or profits.

3D printing design and deployment software and solutions support
3D printing is beginning to involve an ecosystem of related software and service solutions from 3D CAD to back end verification processes and systems. These will undoubtedly be consolidated into a combined software hardware scan, design, print, verification platform but for now individual specialists have emerged to co-exist and compliment each other.

Cimatron (CIMT)
Cimatron Ltd., together with its subsidiaries, designs, develops, manufactures, markets, and supports computer-aided design/computer aided manufacturing (CAD/CAM) software products. The company offers CimatronE, a CAD/CAM solution, which provides tools, applications, and process-automation solutions for the tooling and manufacturing industries. It serves automotive, aerospace, medical, consumer plastics, electronics, and other industries. This is not a pure play and the underlying core growth rates are single digits however it has a complimentary association with 3D scanning/designing and printing.

It begins 2014 30% off its high and has a small cap of $90m, a p/e ratio of 22 and is valued at a p/s of ~2.

Dassault (DASTY)
Dassault is the gorilla in the room of CAD and is aggressively promoting its own repositioning as a 3D company – perhaps a little desperately even to the point of its URL, in the way traditional companies tried during the dotcom boom to position themselves as eBusinesses, (remember IBM anyone?). Dassault Systemes SA provides three dimensions (3D) design software, and product lifecycle management solutions worldwide. The company offers SolidWorks, a software solution for design, simulation, technical documentation, and data management; CATIA, an engineering and design software for product 3D computer-aided designing; SIMULIA, which provides simulation applications for finite element analysis, multiphysics solutions, optimization analysis, and simulation lifecycle management; DELMIA, a digital manufacturing and production software that allows manufacturers to define, plan, create, monitor, and control production processes; ENOVIA, which delivers 3D digital collaboration solutions; 3DSwYm, an online solution to create on-the-cloud social communities; Exalead for search and search-based applications; and NETVIBES to create personalized dashboards. It serves aerospace and defense; transportation and mobility; marine and offshore; industrial equipment; high-tech; architecture, engineering, and construction; consumer goods; consumer packaged goods and retail; life sciences; energy, process, and utilities; natural resources; and financial and business services sectors through direct sales, value-added resellers, and distributors.

Dassault Systems is a $15bn company and begins 2014 only 10% off its all time high with a strong multi year share price trajectory. It trades at a p/e of 33 and a p/s of 5.5 which might sound cheap for a 3D company until you consider it is growing at an 8% CAGR. It is referenced inthe fool article new industrial revolution companies.

Sigma Labs (SGLB)
Sigma is the result of Los Alamos National Lab investments taken private and listed and majors around process monitoring and consultancy. Sigma Labs, Inc. engages in the development and commercialization of manufacturing and materials technologies, and R&D solutions. It also focuses on commercializing technologies and products in various industry sectors, such as in process quality assurance for manufacturing; aerospace and defense manufacturing; additive manufacturing; active protection systems for defending light armored vehicles; advanced materials for munitions; advanced materials for sporting goods; advanced manufacturing technologies; and dental implant and biomedical prosthetics technologies. Its main claim to 3D printing involvement surrounds the provision of quality control/assurance processes and solutions that it aims to integrate into client systems, its own 3D printing capabilities and 3rd party solutions. Little is known at this stage as this is all aspirational and due for release later in 2014.

Sigma Labs which peaked in late 2013 is falling back entering 2014 with a market capitalization of under $100m, no profits and a p/s of 90.

Now let’s see what kind of theme and play discussion this stimulates and if I can get anywhere near this level of dissection in the other 9 themes.
Some possible questions to kick around could include:

Are there any omissions, corrections or clarifications?
Which plays have the greatest potential?
Which have significant and sustainable competitive advantages and moats to their businesses?
Which will likely reward shareholders the most?
How does our investment thinking align with the conclusions of this thesis?

Happy new year.

2 Comments – Post Your Own

#1) On January 07, 2014 at 1:22 PM, Haggy (< 20) wrote:

3D printing might be the future in the same sense that air travel could have been seen as the future many years ago. But investing in individual airlines could have proven to be disasterous.

Given that a group of three college students recently came up with a damn good 3D printer in the $500 range, I don't see it as very long before these become commodities with little profit margin. One could have predicted that 2D printers would have taken off decades ago, and sales did take off. But they are being sold with thin margins. Likewise the future of PCs was not hard to predict, but everything from the Osborne to Gateway 2000 didn't pan out as expected.

Big printer companies make money based on the razor blade model. It's ink and photo paper that drive profits. Bill Gates saw that it was software and not hardware where the future would be. It wasn't the underlying companies that put forth air travel or sold computers or printers that were the guaranteed winners. It might turn out that making the raw materials for printing in 3D will be a much bigger money maker. But that's not my area of expertise so I'll ride this one out. 

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#2) On January 12, 2014 at 4:59 AM, goffperu (86.11) wrote:

I agree that it is very difficult to pick winners amongst manufacturers of finished machines. My focus is trying to identify the components that all of these machines will need. Though these high-end industrial machine manufacturers are certainly growing explosively, I see the desktop market as a more interesting approach. Who makes the filament extruders for MakerBotsPrintrbotUltimaker, etc.? RepRap and others have plans for machining them yourself, but they must be manufactured at scale eventually. How about Step motors, thermistors, etc.? Don't forget software. 

Who manufactures the PLA and ABS granules that are used to make the filaments (ultimately at home potentially)?

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