3D Gets Physical

We’ve been following 3D for a few years although most of our early work was on visual 3D and motion processing. It fits into our RealVR ├╝ber theme. On the motion processing side we own a position in InvenSense (INVN) which makes the motion processing chips that are now commonly embedded on mobile phones and game controllers.

But physical 3D has also been getting more adoption and attention in the last year. The details might be a bit hard to see from this Google Trends graph but when in terms of “3D printing” it is definitely up and to the right.

This trend has been brewing for several years now in both consumer products and industrial manufacturing. The consumer movement with the success of O’Reilly’s “Make” magazine. It has inspired millions of people to “hack stuff” and think about things differently. The company that best captures this spirit is MakerBot Industries. MakerBot is about building open source robots. Their early efforts didn’t seem serious but after raising $10M in private capital from many of the smartest early stage investors the company started to gather momentum and have the resources to really develop their product.

For an even longer time there have been industrial applications using so-called “3D printers” from public companies like Three-D Systems (NYSE: DDD – $24.98) and Stratasys (Nasdaq: SSYS – $38.97). A few years ago these printed received some fame when Jay Leno talked about using one for custom motorcycle parts. These two companies have been around for a long time and have grown in fits and starts. Over the past decade it’s been easy to get frustrated owning these stocks depending on when you bought them.

There’s been some new blood flowing in the industrial segment with new startup companies getting funding and a spread of innovation in not only devices but materials, applications and use cases. There’s been a significant recent IPO as well: Proto Labs (NASDAQ: PRLB – $28) came public at $16 and quickly traded up to settle in just a few dollars below our IV estimate. The $650M market capitalization will certainly fuel more investment in 3D technologies.

Dassault Systems (PINK: DASTY (ADR) – $83.72) is the dominant software company in the 3D and RealVR market. Dassault is closing in on $3B in annual revenues with a 28% operating margin. We are working on finding some smaller companies to add to the portfolio but with an IV of $107 we believe DASTY is a core position.


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