Diversification and position sizing

Hi all,

Since I started the SSYS thread, I think it’s interesting to note that diversification and position sizing matter when one’s investing in many RB/HG style growth, theme oriented positions.

My SSYS position was never big. I have so far made only two small purchases, and my allocation was 1.5% prior to today’s haircut. Today, my allocation is sitting at 1.2%. And, the beauty of the matter is that although one stock is down today by a big number, I 'm up by a fair amount today compared to yesterday.



Today, my allocation is sitting at 1.2%. And, the beauty of the matter is that although one stock is down today by a big number, I 'm up by a fair amount today compared to yesterday.


There are two prongs to diversification:

a) Risk adjusted diversification - relatively higher number of stocks in relatively higher risk basket. There is also an added dimension of time. Positions in the same stocks widely separated apart in time are sometimes more potent than multiple positions in different stocks at the same time.
b) Risk adjusted capital allocation - higher the risk, lower the capital allocation since if higher reward exist for that higher risk, only small capital is good enough.

I added another small position to SSYS. My overall position is still > 140% higher than my 2 stock purchased earlier over the last 7 years. I also have a $90 leap put for Jan 17 ($25 credit I think) when I had the desire to buy more when stocks was > $100. Selling the put helped here a lot. By Jan 17, i will be time diversified over 9 years with 4 positions. And yet, the overall position in SSYS is still < 2% including smaller positions in DDD and XONE. If this 3D basket has in it to become a multibagger over time, my basket should become > 5%. We will see. If it fails (3D stocks will still not go to zero), I would probably lose 0.5% of my invested capital after tax losses. So 5% profitable basket vs 0.5% net loss - not a bad deal.




While I often quibble with you on various details, I agree with your basic philosophy of risk adjusted portfolio building. In the 3D basket, I never invested in XONE because it looked too risky to me. I never bought DDD but I did write some puts (bad idea now that I think about it). My investment is spread between SSYS & PRLB, and I consider these two to be the best of the lot at least from the Fool recommendations. Given the higher risk here, I have been cautious with capital addition.

I 'm yet to read the CC but my initial read is that the industrial segment is fine but the consumer segment is slow. That appeared obvious to me for a long time. I always looked at the MakerBot acquisition as a way for SSYS to diversify but I nver expected it to be a big contributor in the near future. It looks like management thinks they overpaid for the acquisition. This doesn’t look like a big deal provided they are not becoming serial offenders.

Might be a good opportunity add more but have to read CC/RB analysis first.


1 Like

PRLB is in a different league. They have an amazing interface to submit jobs for small scale rapid manufacturing in addition to prototyping. 3D printers are not at the point of manufacturing in volume.

In my current line of work, I actually use actively SSYS, DDD and PRLB products and services. These firms have literally reduced my implementation time from 4x to 8x, at cost < 5% with way less hassle. There is a substantial value that is being created by these firms.



I like PRLB a lot. I think they have carved a nice niche and they are making the best out of the fragmented prototyping market. It’s good to know you use all three. I also know of colleagues using 3D technology, and agree these technologies will have a big impact on the industrial side. I am not yet sold on 3D printing at home.


3D printing at home would require a little more. Here is my speculation on what needs to happen and may happen:

a) Small form factor of size no more than a desktop printer. cost < $1K.
b) Just like we can download paid video games, there needs to be an interface for secure downloading of prepaid designs to make a variety of useful objects at home - toys, education, small utility items.

With addition of colors, metals and other materials, this gets interesting every passing day.