Fiscal Cliff, Sequester, Wolf!
In Italy, Beppe Grillo Leads the Way - But Where?
10 Stocks to Hold Forever - Part Nine
Remember the Fiscal Cliff? For many months, we were warned
that if Congress couldn't find a way to compromise, the economy
would go over the cliff. Somehow, they did, and it didn't.
Then came the Sequester, preceded by more dire warnings that
allowing the automatic (last resort) measures to take effect
would strangle the economy, put thousands of federal employees
and contractors out of work and inconvenience-or endanger-the
rest of us as government productivity slowed.
Well, the Sequester has taken effect, and I can't say I've
But I do wonder who's going to cry wolf next.
And recognizing that our politicians are becoming increasingly
unable to run our country with any degree of cooperation and
efficiency, I present the chart below!
Created by Harris Interactive, after a broad survey (more than
14,000 interviews) of U.S. general public, it illustrates the
Reputation Ratings of 14 industries and the government.
At the top, most respected of all, is the technology industry.
Thank you Apple, Netflix, Google, Facebook, LinkedIn and all the
companies that make our lives more fun and productive.
At the bottom is tobacco. Understandably.
And one step off the bottom, viewed negatively by 67% of
respondents, is the Government. Overall, we don't respect it. We
think it's ineffective, if not just plain wrong. We take for
granted that our politicians protect the interests of themselves
and their lobbyists first and us second. And yet we allow the
government to keep growing!
Meanwhile, over in Italy, something interesting happened in
the general election 10 days ago.
Beppe Grillo upset the apple cart. And he wasn't even running!
But his populist Five Star Movement, which unlike other parties
formed no alliances and vowed to refrain from doing so in the
future, took 25.5% of the vote, electing 163 representatives to
the Parliament of 945.
Which means that no alliance in Italy has a majority. Which
means that no group in Italy controls the government. Which means
that Italy now has no effective government.
Now, some wags will quip, "What else is new?" After all, past
president Silvio Berlusconi, whose coalition received 29.1% of
the vote, has been convicted of perjury, illegal financing of a
political party and tax fraud. He just received a one-year
sentence for abuse of office concerning publication of wiretaps.
And he's still on trial for paying an underage prostitute!
Well, I think the Italian election results are big news. I
think Italians, especially the younger ones who voted heavily for
Five Star candidates, were desperate for something different.
They wanted to "throw the bums out," and in many cases they
did. The challenge now is getting from here (limbo) to a better
place. It will be interesting to watch.
Similarly, it will be interesting to watch what happens in our
own government, where there are many similarities.
Here in the U.S., 38% of voters now identify themselves as
independents, while 32% identify with the Democratic Party and
24% identify with the Republican Party. This is the highest
percentage of independents in 75 years.
As the Democratic and the Republican Parties cooperate less,
an increasingly large group of citizens will be up for grabs by
these three alternatives:
Movements built on principles
or combinations of the above.
In Italy, Beppo represents the first and second. Here in the
U.S., the Occupy movements of the past two years represented the
second and third, while the Tea Party movement represented the
None of these alternatives have gained significant power yet,
but there's no question our own government is becoming
increasingly less effective as the parties become polarized, and
thus the opportunity grows for a person/ideology/movement to
emerge that upsets the apple cart here and puts some power back
in the hands of the people.
Having no idea who or what that will be, I'll close with the
words of an American whose words and deeds on that subject have
stood the test of time.
"The spirit of resistance to government is so valuable on
certain occasions, that I wish it to be always kept alive. It
will often be exercised when wrong, but better so than not to be
exercised at all. I like a little rebellion now and then."-Thomas
In recent weeks, I've been writing a series called "
Ten Stocks to Hold Forever
," featuring 10 stocks, selected by Cabot editors, that you might
choose to, well, "hold forever."
The ninth stock is
Stratasys Corporation (
, and it was selected by me.
The company is one of the two leading players in the 3-D
printing industry. The other is 3-D Systems (
Both are growing by acquisition, effectively locking up all
the expertise in the industry. And I expect both to grow
tremendously in the years ahead. But I'm choosing Stratasys over
3-D Systems for the simple reason that the company has no
Stratasys is based in Eden Prairie, Minnesota. It was founded
in 1989. And it's grown revenues every year of the past decade
but one (2009), when broad economic weakness brought modest
shrinkage. It's been profitable every year of the decade, too,
though its earnings trends are messier, mainly because of
acquisitions. But after-tax profit margins are improving, and in
the last quarter of 2012, they crossed the 20% level, hitting
22.9%. In the same quarter, revenues grew 63% from the year
before to $71.2 million and earnings grew 29% to $0.40 per share.
Those are impressive numbers, and one more sign that the company
is well managed and on the right track.
So what exactly is a 3-D printer?
It's a lot like an inkjet printer. But instead of printing in
two dimensions, on paper, it prints in three dimensions, building
a real physical object. Stratasys uses two different
technologies, FDM and PolyJet. FDM stands for Fused Deposition
Modeling, and in this system, the machine creates parts by
extruding molten thermoplastic in fine layers to build the part
layer by layer. The PolyJet process also builds in layers, but
using photopolymers, which are simultaneously cured by
And who uses 3-D printers?
Industries include aerospace, automotive, medical device,
electronic device, military and educational.
Functions include building concept models, developing
prototypes, producing manufacturing tools (like jigs) and
creating finished parts for low-volume production.
The most important question of all, though, is this: Where is
this industry going and how big will it get?
No one knows. Maybe 3-D printers will be in our houses
someday, just like 2-D printers, which no one imagined 50 years
ago. Maybe not. But there's little question that as costs come
down, the printers will find more uses in a wide variety of
industries. And if Stratasys remains one of the leaders, as I
expect it to, its fortunes will continue to grow.
As to the stock's chart, that's very interesting. When I chose
SSYS for this list late last year, it was trading around 70, in a
confirmed uptrend. In January, it hit 90. But in late January,
both SSYS and DDD sold off on big volume, after a couple of
analysts opined that the industry was in a bit of a bubble. SSYS
bottomed at 60 a month later, and today it's working its way back
up, having released an excellent fourth quarter report early this
In short, while SSYS is no longer a leading stock, the decline
since January has taken a lot of risk out of the stock and this
looks like a decent buying opportunity for investors with longer
time horizons, including "forever."
Yours in pursuit of wisdom and wealth,
Cabot Stock of the Month