Markets

A Brand-New 3D Printing ETF with Big Investment Potential

Today, ETF expert Grant Wasylik brings us details about a new ETF issue that offers investors diversified access to a very fast-growing industry: 3d printing.

General Electric (GE) just spent $1.4 billion on two acquisitions.

Why is this big news?

First, GE has been more of a seller than a buyer in recent years. Since 2010, the conglomerate has sold both halves of NBC Universal, Vital Signs and its appliance business. On the buy side, its only purchase in the last six years — prior to its announcement on Sept. 6 — was ShipExpress in 2016.

And second, its most-recent acquisition targets both come from a game-changing area of the market …

3D printing.

Arcam (ARCM, on the Stockholm exchange) and SLM Solutions (AM3D, on the Xetra platform in Europe) are European companies that produce machines used for 3D metal printing.

GE says it plans to bring 1,000 3D printing machines online over the next decade. In doing so, it aims to cut costs by $3 billion to $5 billion across the company. Arcam and SLM Solutions will help GE accomplish these goals.

Courtesy of GE, here’s an example of how 3D printing technology can dramatically reduce the complexity of the manufacturing process …

Source: GE webcast presentation, Arcam and SLM Solutions acquisitions, 9/6/16

Source: GE webcast presentation, Arcam and SLM Solutions acquisitions, 9/6/16

“Additive manufacturing” is technology that builds 3D objects by adding layer-upon-layer of material. (Plastic, metal, concrete, human tissue, etc.)

And by shifting turbine frame assembly from traditional to additive manufacturing, GE reduces the number of requirements involved in design, manufacturing and services anywhere from 80% to near 100%.

The end result is revolutionary in terms of productivity.

Now, in all fairness, investing in 3D printing has been a roller coaster ride in recent years.

Two Tales of 3D Printing Stocks

A five-year chart tells both sides of the story …

Source: YCHARTS

Source: YCHARTS

The returns feature the two most-recognizable names in the 3D printing industry: 3D Systems (DDD) and Stratasys (SSYS).

Notice their meteoric rise in the left side of the chart. DDD skyrocketed 790% and SSYS shot up 480% from early September 2011 to early January 2014. And on the right side of the chart, 3D printing came crashing back down to earth. Both stocks plunged 84% since their January 2014 highs.

Much of the huge price appreciation came from the anticipation that 3D printers would make it into the homes of individual consumers. Well, the once-hopeful days of printing an online outfit — with your personal 3D printer — in your closet within minutes of order placement turned out to be far-fetched. (At least for now.)

Basically, 3D printing for personal use was overhyped. It never materialized.

But, that doesn’t mean left-for-dead 3D printing stocks are, in fact, dead …

The Investment Case for 3D Printing

3D printing is gaining a lot of ground in industrialization as of late.

Just like with GE’s rationale, 3D printing provides considerable cost savings in the manufacturing process. Plus, it also allows for other efficiencies: reduced time, better accuracy, less waste, more design capabilities and additional customization options.

Some of the world’s largest companies are using 3D printing to improve their manufacturing processes …

  • GE Aviation estimates it will 3D print 100,000 parts by 2020.

  • Airbus expects 3D printing to bring 50% weight savings and 60%-70% cost savings for aircraft parts.

  • Lockheed Martin reports it can 3D print its preform spacecraft fuel tank in 2 weeks, as opposed to previous times of 18 to 20 months.

  • Ford has 3D printed over 500,000 parts over the last decade — saving billions of dollars and millions of labor hours.

  • The U.S. hearing aid industry converted to 100% additive 3D printing in less than 500 days. Not one company that stuck to traditional manufacturing methods survived.

  • Nike uses additive manufacturing, which encompasses 3D printing, to produce its Flyknit shoes. This technique reduces labor costs by 50% and cuts material usage by 20%. It’s saved over 2 million pounds of material waste since 2012.

And according to leading experts, 3D printing has big-time growth potential ahead.

Source: ARK Investment Management LLC, Wohlers Associates, Gartner

Source: ARK Investment Management LLC, Wohlers Associates, Gartner

Wohlers Associates doubled its estimates for the 3D printing market twice from 2012 to 2014. And Gartner Research forecasts 3D printer shipments to more than double annually between 2016 and 2019.

I consulted ARK Investment Management’s Thematic Analyst Tasha Keeney, who told me:

“As 3D printing technology continues to penetrate the $500B end-use part market, we see the market size approaching $40B by 2020, which is roughly a 50% CAGR from today.“

ARK’s research indicates 3D printing has penetrated less than 1% of the $500 billion total addressable market!

Now, with the potential for heightened volatility in 3D printing stocks, it’s understandable investors don’t want to buy — or gamble on — just one stock.

But, a new ETF launch alleviates those concerns.

Instant, One-Click 3D Printing Exposure

The 3D Printing ETF (PRNT) is the first and only ETF dedicated to 3D printing.

The innovation authorities at ARK Invest just brought this creation to market on July 18.

ARK specializes in disruptive innovation and thematic investing. As the company likes to say:

“We discover stocks of tomorrow, today.”

The ARK team focuses on investment opportunities in robotics, big data, autonomous vehicles, cloud computing, bioinformatics, DNA sequencing … and yes, 3D printing.

PRNT tracks the performance of the Total 3D-Printing Index. This index contains exchange-listed global companies that are engaged in 3D printing-related business lines. The index rebalances quarterly using the following multi-factor weighting methodology (names are equally-weighted within each factor):

As of Sept. 13, PRNT owned 40 companies involved in the 3D printing industry.

With a launch less than two months ago, this ETF has only $9 million in assets. So, it’s not real big yet, but it’s garnered interest in the early-going.

PRNT caught the attention of astute investors last week. And more attention — and more assets — could be coming soon …

Remember the M&A activity mentioned earlier? Well, it had big implications for this ETF, specifically.

PRNT owns both Arcam and SLM Solutions. (The two companies that received buyout offers from GE.)

Before the takeover announcement, Arcam was PRNT’s ninth-largest holding at 4.4% and SLM Solutions was its second-largest holding at 5.4%.

After GE offered a 53% premium for Arcam and a 37% premium for SLM Solutions, these two positions vaulted to the top of PRNT. Arcam is now its second-largest holding at 6.6% and SLM Solutions holds the top spot with a weight of 7.5%.

Due to the news, PRNT jumped 7% over Labor Day weekend (one trading day) … it hit a new intraday high of $22.87 (Sept. 7) … and the ETF also saw a sizable uptick in volume — up almost 3X since the takeover announcement.

Interested in the Potential Upside of 3D Printing?

Consider an investment in PRNT. Its diversified approach should be able to offer a smoother ride than any lone 3D printing stock.

I also reached out to ARK’s Director of Product Development Tom Staudt. He mentioned to me how ARK filled a void in this niche space:

“Because the 3D printing industry is a combination of the technology and industrial sectors and many of the stocks have smaller market caps, it was very difficult for investors to access through a fund.“The 3D Printing ETF (PRNT) is truly the only ETF that provides investors with pure exposure to 3D printing ecosystem stocks.”

PRNT’s 40-stock portfolio gives its shareholders a better chance of profiting from the next takeover in the world of 3D printing as opposed to employing a single-stock-selection strategy.

Takeovers or not, 3D printing is poised to become a more critical part of the manufacturing process across various industries. And that means PRNT could have a bright future ahead.

To learn more about The 3D Printing ETF (PRNT), click here.

This article originally appeared on Uncommon Wisdom Daily.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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