When it comes to 3D printing companies, the best stocks to own in my mind are either Stratasys or 3D Systems. However, neither SSYS nor DDD make sense until they’ve taken a 30% haircut from current prices. If the markets keep moving higher, it’s going to be awfully difficult for investors to get their price. But don’t despair — eventually, intrinsic value will meet market value and a buying opportunity will arise.
Until then, you’ve got a couple of options in the ETF realm that give you exposure to 3D printing companies while not fully committing.
The first idea is to buy the PowerShares DWA Technology Momentum Portfolio (PTF), a group of 50 technology stocks exhibiting above-average relative strength. Chosen from 3,000 stocks traded on U.S. exchanges, both DDD and SSYS are in the top 10 holdings with weightings of 3.47% and 3.36%, respectively. If you believe both of these stocks are good long-term prospects but feel there is a possibility 3D printing companies might be in for a bit of a dive over the next few months, the diversification provided by the other 48 stocks should be enough to weather the storm. On the other hand, if they go up rather than down, you get to participate in that appreciation.
A second, less tech-related fund is the Guggenheim S&P MidCap Pure Growth ETF (RFG). It invests in 94 mid-cap growth stocks including DDD, which is the 15th-largest holding at 1.63%. I prefer this option because it virtually eliminates any risk of investing in 3D printing companies but provides a little upside should DDD take off while owning some great midcaps such as Trinity Industries (TRN), SVB Financial (SIVB) and Under Armour (UA).
I don’t think there’s any doubt that 3D printing serves a purpose in our world. I’m just not convinced that it’s going to be the game-changer people think it will be.
The four 3D printing companies I’ve discussed in this article are up an average off 89% over the past 52 weeks — 68 percentage points higher than the S&P 500. Those same four stocks have combined annual revenues of just more than $1 billion with limited earnings. One can’t help but consider them overvalued.
Until profits increase to justify loftier valuations, I’d either wait for a big decline in the stocks of 3D printing companies or buy one of the ETFs to tide you over until they do.
Buying at today’s prices appears fraught with risk.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.