How long have you held Stratasys?
We’ve held Stratasys (NASDAQ:SSYS) since 9 August 2012.
What do you like about it?
Additive manufacturing (colloquially known as 3D printing) has been characterised as the second industrial revolution. The ability to completely reinvent manufacturing, and its associated impacts on supply chains and business processes, attracted AEI to this stock. Through a combination of strong organic growth and strategic acquisitions (most recently MakerBot which now secures Stratasys’ position in both the commercial and retail market), the company has the potential to maintain double-digit growth rates for several years. Ultimately, its growing installed base of printers will create a large pool of recurring revenue, through the sale of consumables when growth inevitability slows.
Stratasys’ impact on how we do everyday things is already evident in Australia. Stratasys distributes its printers in Australia through Tasman Machinery, which counts Royal Perth Hospital (RPH) as a customer. RPH has purchased two additive manufacturing machines, which they use for surgical planning tools used during pelvic reconstruction and scoliotic spine correction. The machines are also used in cranial reconstruction to ensure the implant fits correctly before surgery even begins.
How is it better than its competitors?
Stratasys has the largest installed base amongst commercial users. In the retail/hobbyist segment, with the MakerBot acquisition, Stratasys is in the top three.
What do you like about its management?
The merger with Objet last year saw founder and inventor of Fused Deposition Modelling technology Scott Crump move up from the CEO role to the Chairman position. David Reis, Objet’s then CEO, became the CEO of the combined group. Keeping both within Stratasys ensures continuity in the business and retains significant IP. Reis successfully ran Objet, so there is every indication that this will continue at Stratasys.
At what point would you sell it?
Stratasys remains a concept stock in our mind. The potential for this technology to disrupt the business of manufacturing and its rapidly growing list of new applications, means it remains difficult to forecast when this period of high growth will end. That said, we are closely watching the financial metrics it reports because Stratasys remains just a business and you still have to manage things like working capital and costs efficiently.
How much has it added to your overall portfolio over the last 12 months?
We have held it since 9 August 2012 and it has thus far returned 29%.
Where do you see the value?
We defer to our previous comments on when we will sell it. Stratasys is a high-risk play in our portfolio and is sized accordingly. We are continuously weighting the potential upside against how the business is actually tracking.
By Nathan Lim
Nathan Lim is a portfolio manager at Australian Ethical Investment. He has nearly two decades experience in stockbroking and funds management and joined Australian Ethical in 2010.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
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