Profiting from game-changing trends is often like surfing a wave. If you've ever watched someone surf, you know that most of the time in the water is spent waiting, watching, alert, being "one with nature." Good surfers wait to spot the perfect wave. When it finally comes, they're able to catch it for a great ride.
Creating wealth is similar. It's all about spotting opportunity, being aware of what's happening in the world around you, and being vigilant to make sure the wave develops. At just the right time, a perceptive investor jumps on a developing trend like a great wave and surfs it all the way to the bank.
But, just because a swell looks to be building doesn't mean that you should jump on board. It could fizzle out altogether, or it could break the wrong way and become a safety hazard. Timing is critical, and if you don't pick the right moment, you could end up wiping out completely.
Such is the case with 3D Printing, which you've probably been hearing about. It's an incredibly hot topic right now. It's showing up everywhere; newspaper articles, videos, even some of my GameChanger subscribers have asked about it.
It is definitely one of those things that make you go, "Wow." If you're not familiar with it, 3D printers make a three-dimensional solid object from a digital model by laying successive materials in different shapes. In other words, it's like your own personal manufacturing plant.
You need new shoes? Print them! Want chocolate? Go ahead and print it out! It's a very interesting technology, and one that could prove to be a huge game changer someday. This type of printing would allow for the simplification of assembly lines. It would also allow more products to be manufactured at the same factory in less time, rather than being outsourced.
And believe it or not, scientists are trying to "print" living organisms as well. There was a story just recently about printing stem cells, which could one day end animal testing of potential new drugs and possibly even lead to printing organs on demand. As I said, wow, right?
It also sounds like a fortune waiting to be made for investors. That may well be true one day, but for now, I am not comfortable putting my money into 3D printing quite yet.
There are two main players right now: 3D System Corporations (DDD) and Stratasys, Ltd. (SSYS). After doing well last year, both stocks have come under considerable pressure recently, despite the strong overall market, and the companies have been targets of short-sellers. I believe investors are concerned that selling prices for the companies' hardware will continue to fall, which would cause growth to slow from its rapid pace. For example, DDD's sales grew 52% last year, but they are expected to slow to 31% growth this year and even further to 21% growth next year.
But you can be sure I'm watching this industry very closely. There is still a chance for expansion for both DDD and SSYS, and they also have stable material and services businesses to go along with the hardware business. I'm also looking for indirect winners, which could be some of the biggest. By that I mean companies that learn to utilize 3D printing most effectively, perhaps changing the game in their own businesses or industries and laying the foundation for explosive growth in the coming years.
These are exciting times, and companies that change the way we live and thrive will continue to do well. Sometimes, we as investors have to be patient to make sure we catch the right wave and ride it to big profits.