Scanning The New 3D Printing ETF


Last month, New York-based ARK Investment Management launched The 3D Printing ETF (BATS: PRNT), the first exchange traded fund dedicated to once-hot 3D printing equities.

PRNT follows the 3D-Printing Index. That index is composed of equity securities and depositary receipts of exchange listed companies from the U.S., non-U.S. developed markets and Taiwan that are engaged in 3D printing related businesses within the following business lines:(i) 3D printing hardware, (ii) computer aided design (CAD) and 3D printing simulation software, (iii) 3D printing centers, (iv) scanning and measurement, and (v) 3D printing materials, according to ARK.

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Arguably, there has already been one boom/bust cycle in 3D printing stocks, but the transformative industry is still in its nascent stages. Overall, that's a positive, but there are some difficulties in valuing some of the stocks that dwell in this space.

And like the early Internet, 3D printing comes with a lot of hype. Giddy investors who thought home 3D printers would be as widespread as dial-up modems in 1999 have been disappointed, and stocks of companies like 3D Systems Corp. (NYSE:DDD), a maker of 3D printers for personal and commercial use, look like those of a poster child for dot-com hubris, said AltaVista Research in a recent note.

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As of July 18, PRNT's underlying index allocated nearly 53 percent of its weight to technology stocks and 32 percent to industrials, according to ARK data. Healthcare, consumer discretionary and materials are the new ETF's other sector weights.

AltaVista initiated coverage of PRNT with an avoid rating, but that doesn't mean the research firm is bearish on the new ETF. Quite the contrary.

Estimates weve seen of the potential size and growth of the 3D printing market are all over the map, and frankly impossible to evaluate. But it will be huge, not just because it dramatically lowers barriers to entry into manufacturing, but also because of the new capabilities it brings to existing manufacturers, including rapid prototyping, mass customization, and novel structures (i.e., things that could not be fabricated with traditional manufacturing techniques), said AltaVista.

In fact, AltaVista encourages investors not to read too much into its avoid rating on PRNT. As the research firm notes, the stocks in PRTN compare favorably on valuation to S&P SmallCap 600 Growth Index and look inexpensive compared to biotechnology names.

Current revenue for the 3D printing industry stands at $4 billion, but that number could swell to a range of $180 billion to $490 billion by 2025, according to McKinsey data.

PRNT charges 0.66 percent per year, or $66 for a $10,000 investment.

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