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Ready For 3D Printing? (AAPL)

seymour_greenz • July 13th 2015 12:00:27 AM

I got my first 3D printer in December 2013. The whole thing seemed to me like something straight out of Star Trek. Super exciting.

I have expert 3D experience and the idea of having physical models of my designs is a long time dream come true for me and many other designers.

I certainly had high hopes for this 3D printer as I fired it up for the first time. It made sounds reminiscent of R2D2 as I printed my first object. The machine was both quirky and wonderful at the same time. If things weren't just right the printer would make something that looked more like a bird's nest or "transporter accident" than a functional part.

Although it accepts multiple plastics including ABS, the "Lego plastic", this machine prints particularly well in a corn-based plastic called PLA. PLA has a lower melting point than ABS and has a slightly sweet popcorn smell when printing.

I downloaded some interesting designs, created my own 3D objects and generally became a mad-scientist with it for around 2 months straight. It was really fun to see the objects in the real world, then make adjustments to the design and print again. Especially knowing things like this would have taken years to accomplish in the past. My evaluation: Absolutely wonderful as a prototyping tool, but far from useful at making anything but the simplest functional real world parts.

To be fair, I have used the 3D printer to repair things around my house and fix a broken battery-powered change sorter but it became increasingly clear that every man, woman and child would not be needing to churn out shapely plastic trinkets with the sweet smell of corn. This whole deal was not going to be hitting mainstream until a killer app came along. Where have we heard that before?

And the stocks, well, while in favor at the time, I realized that 3D printing companies could be in real trouble soon. How many people are buying these things? Tons of competition popping up from overseas manufactures. With no killer app in sight this whole sector could be a good short.

Two thoughts immediately struck me. The entrepreneur in me: what kind of killer app would it take to get this incredibly cool technology to the tipping point? And the trader in me: the enthusiasm in 3D printing companies has to deflate, they are excellent shorts.

I think a killer app for 3D printing could be metal printing, since metal parts are durable, useful and valuable. Even better would be "mixed media printing". This would be a machine that could print a combination of plastic, metal and perhaps even some kind of semiconductor. The potential for a machine like this is astonishing. Imagine being able to print a lightbulb, radio, calculator or eventually even a cell phone.

3D metal printers are starting to surface in prototype form. Alas, there are many technical hurdles to overcome with molten metal and mixed media is that much harder as the temperature of melting metal is vastly different than plastic. I think the way I would initially attempt to approach this would be to develop some sort of conductive plastic and semi-conductive plastic.

There are a handful of 3D printing companies. Notable are Stratasys (SSYS), 3D Systems (DDD) and Voxeljet (VJET). The clear leader of the pack is SSYS. They acquired Brooklyn-based MakerBot Industries and if any 3D printing company has a shot to break into mainstream, it's them.

Since I tend I to avoid shorting "market leaders" unless I see a clear bubble (a topic I will cover more in the future) I chose to short DDD. I patiently waited for a good entry later in 2014 and got in on the spike above 70. Today, some of those shares have been covered and some as recently as last week. If you pull up charts on DDD and SSYS, you'll see SSYS has held up better over the same timeframe. DDD is down over 80% while SSYS is down 10% less. DDD closed at 16.82 on Friday 7/10.

I follow the 3D industry closely. Any sign of innovation, partnership, acquisition, a new product, or "life" in general from 3D Systems and I'm ready to cover completely, or perhaps even reverse my bet (though far more likely I would long market leader SSYS). Things in 3D land are low right now, however, I could still potentially see some more downside in the sector with softening in the tech market and the looming interest rate hike jitters.

That is, until the holy grail killer app for 3D printing arrives.

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