Fidget spinner toy ()
As any parent will know all too well, fads among kids come and go extremely quickly. Every holiday season seems to bring a “must have” toy that is in short supply and every now and again one comes along at other times of the year. Hands up if you remember silly bands.
The current equivalent of those shaped rubber bands is the fidget spinner, a variation on one of the oldest toys known to man, the spinning top. What is different now to the situation just a few years ago is that crazes such as this, aided by social media, take hold with breathtaking speed. That and the fact that they fade just as fast makes investing in these kinds of things seem impossible, but one aspect of the fidget spinner story sheds light on a way for investors to benefit from this and future meme-driven crazes.
Despite going from unheard of to must have in just a matter of weeks there has been very little problem of short supply in the spinners. There are some “high end” versions that have become scarce but for the less fussy, there are a host of other choices if you simply have to have one.
The reason for that rapid jump in supply is the key to investing in this and future crazes: 3D printing.
Not that long ago, sudden popularity such as this inevitably created supply problems. Whole factories had to be retooled to manufacture whatever was in demand, and that takes time. In the age of 3D printing, however, that is not the case. A program can be written in a matter of hours that enables fast, cheap production of versions of the toy.
That is, I am sure, extremely frustrating for whoever came up with the original idea, especially as the ease of rapid supply makes it possible in many cases to flood the market before any kind of patent protection can be granted, but that is another issue.
Until fairly recently those who saw the opportunity in 3D printing faced a problem when looking to invest; a problem that will be all too familiar to those who were early investors in alternative energy or almost any idea that obviously had a future. Such obvious opportunity attracts a host of companies looking to get in early, many of which never make it to the point when potential begins to translate to actual profit and early investing is usually a crap shoot.
After a while, though, the capitalist system works its magic. The weak go to the wall and consolidation allows those that survive to grow rapidly while still making money. That has definitely been the case in 3D printing, where two companies, 3D systems (DDD) and Stratasys (SSYS) have emerged as the clear market leaders.
In the last few quarters both DDD and SSYS have surprised the street by reporting actual profits rather than the small losses that everyone had come to expect as the industry got going. The problem is that that has come about from cost savings - revenue over the last few years has in both cases been fairly flat. In other words, growth in the industry has stalled, and that always raises a question in investors’ minds as to whether it will ever come to the extent anticipated.
The above example of the fidget spinners suggests to me that it will. Advances in the metals and plastics used in 3D printing combined with reductions in the associated costs for manufacturers are beginning to change the game. Rapid response manufacturing is now possible and in a short attention span, meme-driven world, that ability to change direction quickly has increasing value. Now that they have proved themselves to be the dominant companies in the market both DDD and SSYS look, therefore, to be long term investments that fall in the “must own” category.
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.
