Which is why I no longer give market advice to friends and family.
TomE drilled this in my head in 2005. Since then I have only shared philosophy and a subset of my actual actions. People often write to me - privately and publicly - for stock advice and I never oblige them. I merely share my own actions.
Anurag
This is a classic example of how management’s presentation of non-GAAP earnings can be grossly abused
Awesome post Fletch, thanks for taking the time to write that. This post and the last few big threads on the differences between GAAP and Non GAAP have really helped my overall understanding of things
IMO it’s only a matter of time before you become TMFBlazerMania
Wow!
This thread has turned into a long one, looking at buy/sell, GAAP/non-GAAP. Great.
I look at non-GAAP & GAAP, and 'm okay with non-cash expenses being backed out. Companies do all sorts of things with stock, but the diluted eps does capture most of the effects. I 'm not saying one should let SSYS off the hook for a bad acquisition. The market gave them a 31% haircut for the MakerCut acquisition presumably gone wrong. Anyways, I 'm just going to disagree with the GAAP only proponents and not argue this further.
With respect to SSYS, it’s true that they use acquisitions to fuel growth but the underlying business is growing fine. Actually organic growth was better than the growth provided by MakerBot at 30+%, so it’s the acquisition/merger that’s the problem.
With respect to 3D printing at homes, well that’s not how this area is going to grow. It’s the industrial use cases that’s going to drive adoption. The 3D printing at every home is just magazine talk.
What 'm I doing? Not panicking because my position is small. Remember, I have 50 positions, an average position is only 2.5% and this one was smaller (now even smaller). I have to read the earnings transcript to make a decision on adding, but I 'm not selling based on this report. The stock was overpriced and it got a correction following a bad report is how I look at it currently, and I 'm going to digest the call and decide whether to add, sell, or do nothing. I still think 3D printing is an area that will be much bigger 5 years from now and that SSYS is one of the better ways to play this trend.
Anirban
I used to ride motorcycles and fly small aircraft on instruments in limited visibility and survived both but it’s not something I would suggest others do.
nothing wrong with flying on instruments in weather, now flying in weather Not on instruments that’ll kill you. 
I still have the occasional nightmare about flying emergencies. My husband who was a Naval officer has dreams about ship fires…
The 30% or so decline in SSYS was not the whole 3D field. XONE (which granted has already down 80% from its high) was only down another 3.7%, and Arcam was only down 2 cents!
Arcam:
P/S is a more useful metric for 3D firms, IMO, instead of P/E. Since these firms are acquiring and investing into R&D, sales and not earnings track the firms better.
Anurag
Why do you say that Arcam is not a 3D printing firm?
I misunderstood the description. It is indeed a 3D printing firm. Thanks for correcting.
Anurag
And, one that is actually making a profit and increasing sales nicely, plus having patents such they are the only ones with that technology and clear markets.
3D metal printing has almost nothing to do with the far more mature field of plastics 3DP, especially if it is involved in niches where quality and weight are more important than a few cents cost saved, huge volumes are not needed,and sometimes exotic metals are preferred…
I think XONE is a loser, at least so far they are unable to make money doing what they do, with no convincing argument that larger volume would help.
Arcam is a different matter,.
Fletch your posts are so good I feel like I should be sending you money. Maybe I could direct deposit them into your account at BOFI.
JEB
I worked at Boeing for 30 years. Long ago there was an article in the Boeing News (internal publication about stuff at Boeing) regarding “sintering”, i.e. 3D printing, additive manufacturing, whatever name you want to give it.
Boeing had some technology (I don’t whose) in Mfg R&D which they found useful for prototyping parts - but it was basically an experimental toy with no practical production value. Either the parts were too crude and required too much after-work, or the process too slow, or whatever. The technology was just not competitive with traditional manufacturing processes such as precision casting and various removal machining processes (i.e. routing, lathe operations, etc.).
I retired in 2010, and have no idea if any 3D processes are now in use for Boeing production, either at our primary parts fab plant or major sub-contractors. My guess is, if so, it is very limited.
I was invested on DDD for a while, made some money, then watched it go down, sold before all my gains evaporated. This is fascinating technology. There’s no doubt about it. But I really struggle with trying to envision where the market is.
The notion that everyone will want one in their home just doesn’t make sense to me. There are a few tinkerers and would-be inventors who might buy one, but wide-spread home adoption is unlikely IMO. What are you going to make that you can’t buy more easily and probably for less total cost? And before you “print” your creation, you have to come up the design s/w learning curve - I don’t know, but I suspect that’s a big time investment.
As for manufactured production parts - I’ll concede that additive manufacturing will find a role. I can see it especially appropriate for medical applications where each time a “part” is required it needs to be customized for the specific application - no two whatever it is are identical. Perfect application for this technology. Maybe dental labs are already using 3D printers, I don’t know. But when it comes to production of high volume, replaceable parts, IMO the opportunities for 3D applications diminish pretty quickly. There will be some, maybe some assembly operations can be replaced with higher strength 3D parts. Prototyping will provide a market. Short production runs of unique parts (i.e., spares for out-of-production parts) will be a market . . .
But, add all these markets together, I don’t see a lot of printers being sold. I’ll look elsewhere for investments. I’m not enticed by any of the companies in this whole segment.
sintering
verb [ with obj. ]
make (a powdered material) coalesce into a solid or porous mass by heating it (and usually also compressing it) without liquefaction.
The quality of the resulting part depends on the alloy used and the temperature of the melting beam. Laser produces a lower temperature than Electron Beam Melting (EBM). GE is making turbine blades for jet engines.
This Electron Gun Builds Jet Engines
Avio developed the technology, called electron beam melting or EBM, together with Sweden’s Arcam. The idea was to improve the manufacturing of parts made from an advanced aerospace material called titanium aluminide (TiAl). The material is 50 percent lighter than the nickel-based alloys typically used for low pressure turbine blades.
http://www.gereports.com/post/94658699280/this-electron-gun-…
Denny Schlesinger
I think you are missing a lot of market, especially since the technology is developing at a rapid rate, increasing speeds and precision and lowering costs. First, there is a segment of manufacturing with special requirements such as working with titanium, which is very difficult and expensive to do by subtractive processes. There are also parts which can be built additively that would have to be several parts if done subtractively. And designs which can be done additively that can’t be done additively. These are all important issues in aerospace, particularly since they are the clue to weight savings. And, that is a domain which is not characterized by high volumes.
In addition to the custom parts you mention, there is a much larger domain of short run manufacturing where setup and tooling costs can make parts insanely expensive compared to a similar part in long run manufacturing. 3DP is a way to address those domains much more economically. Think parts for the military, for example.
And, while it may take a while, I wouldn’t dismiss the consumer sector. Sure, it may be a long time before they are as prevalent as paper printers, if ever, but I think there are a lot of specialized possibilities that can get some share. Remember that, for a long time, laser printers were way to expensive for home use, but eventually that changed. My personal favorite idea … might have something to do with having grandkids … would be for Lego to come out with a small printer for maybe $100 capable of printing anything in the Lego lexicon, perhaps for small fees or just for the material. I think there are a number of parents who would see that as a cost saver!
I don’t see home printers being prevalent soon, but I can see having a printer where if you need a part for something, you look it up on amazon and download whatever specs you need to print it out with your printer. You don’t have to design anything. That’s the key.
Which reminds me that another big market is spare parts … not necessarily in the home because the diversity of size and materials may be an issue, but for various types of stores like auto parts. Presto, a huge virtual inventory with no carrying costs.
Brittle,
I am not completely sure of this but didn’t Boeing use 3d to make their tools? I think I remember that they needed unusual tools at times and used the printers to make them. I could be wrong about that though.
Andy
First, there is a segment of manufacturing with special requirements such as working with titanium
Agreed, Boeing does a lot of work with titanium. It’s a specialized requirement. It’s expensive no matter how you cut it (pun intended). It’s exclusive. Just how big is the general market? I don’t know, but I don’t think it amounts to that much. Some relatively small segment of the aerospace industry. How many 3D printers are they gonna buy? There is never gonna be a chicken in every pot demand for this. And the fact that printers are getting faster may actually lower demand, not increase it.
And, that is a domain which is not characterized by high volumes.
My point exactly, low volumes equates to low market demand. Why buy 100 printers when a couple is all you need to meet the demand?
there is a much larger domain of short run manufacturing where setup and tooling costs can make parts insanely expensive compared to a similar part in long run manufacturing.
This exactly the market I was addressing with out-of-production spare parts which is something Boeing is faced with frequently. Airplanes have incredibly long life cycles. There’s no way that Boeing keeps all the production tooling around for the life of the product, and even if they did they wouldn’t necessarily use the production process to make a few spare parts.
So I agree, there is a market here. It just isn’t huge. If Boeing put 10 printers at every spares depot in the world it wouldn’t come to 100 printers.
Sure Boeing isn’t the only game in town, but it’s exemplary. So go ahead and think parts for the military instead of commercial (though I’d argue that the commercial market is bigger). Add it all together what have got? Being generous maybe 10,000 printers. The End.
And, while it may take a while, I wouldn’t dismiss the consumer sector. Sure, it may be a long time …
Yeah - maybe, after a very long while. You gonna sit on the egg for how long waiting to see if it will hatch?
I think there are more lucrative investments. I’m not buying technology, I’m trying to make my investments pay off.
Andy,
I don’t know, could be that used some 3D printers to make some tools or more likely some parts that were employed in tool fab.
So what? How many printers are they going to buy for tooling? Boeing’s got one tool fab plant in Puget Sound that services both commercial and defense. Every plant has a tooling department, but they typically manage tools and make minor mods, they don’t fab tools.
So maybe they have another fab shop in Wichita, St. Louis, Charleston and Long Beach. Say they need 10 printers at each location. That’s 50 printers. Let’s be generous and toss in another 50 or so for Airbus, Lockheed, Grumman, General Dynamics, etc. Add it all up.
Does that sound like a great investment opportunity to you?
3DP doesn’t need to become a major percentage of all manufacturing … it merely needs to grow substantially from where it is now. It could grow 100 fold and still not be a major percentage of all manufacturing.