Owning The Future. The Road Ahead, Part V

November 18, 2013

In The Road Ahead, Investment Perspectives Parts I through IV, we explained how the United States, as well as much of the developed economic world, will contend with far-reaching systemic issues in the years ahead.
Economic and financial headwinds in the form of demographic trends and unsustainable policies will force a reckoning throughout the global economic system.
There are, however, areas within the global market place that will provide dynamic opportunities for intelligent, forward-looking investors.
Thus far, we have glimpsed the massive opportunities within the liquid natural gas and shale revolution. Described the huge opportunities present in under-the-radar small-cap equities. Traveled the Silk Road to China. This week, we consider the next iteration of an old technology. One that will literally create the future, and exceptional investment opportunities.
This is the fifth and final installment in a five part series.
. . .
"Time is what clocks measure. Look forward. The future expands endlessly before us. Each day we stand, resolutely or not, upon its vast frontier."
Recall when Rosie, the Jetson family robot, handed George his spontaneously synthesized cup of coffee as he left for work. Rosie pressed a button. Mug and coffee appeared. And George blew a virtual kiss to Jane via the flat panel on the wall as he stepped into his hovercraft.
Call me George Jetson, baby. The future is now.
3D printing represents an evolutionary leap in an existing consumer technology: inkjet printing. Pioneered by Hewlett-Packard, these machines spray layers of toner on paper to produce desired images. 3D printers apply layers of more substantial inputs, like plastic resin, until the layers produce a desired object.
Sounds simple. Yet, enabling a machine to spontaneously create singular objects for personal utility? It's a new era.
Various 3D printing machines accept multiple inputs to create innumerable products. One machine utilizes paper to creates wooden furniture. Another uses metal pellets to produce steel auto parts. Yet another takes in glass resin and produces glassware, windows and table tops.
And somewhere in this brave, new world, a machine is consuming genetic material in order to synthesize human tissue, organs and more. Check it out here and here.
The implications are massive.
As consumer adoptions quickens, goods will increasingly be manufactured at or near their point of purchase or consumption. Possibly, at the household level.
Consumers will buy the intellectual property and the raw materials, and then manufacture the goods in the comfort of their homes. Or, local merchants will be able to manufacture highly personalized products without a thought towards large scale production requirements and economies of scale. No shipping. No inventories. No factories on the other side of the world.
Imagine car dealerships creating replacement parts on site. Assembly plants devoid of supply chain constraints.
Goods will be vastly more customized, as alterations won't require modifications to an industrialized production process. Only software tweaks. This will better meld the manufacturing process with the artistic sensibilities of the creator.
The technologies will likely result in an overhaul of the manufacturing, supply and retailing chains. Companies will rethink their entire strategies and operations. Multiple trends will likely develop.
3D printing technology will move from the "model" to the industrial strength phase. In other words, 3D printers won't just make model airplanes, but create the airliners in which we fly.
3D printing will increasingly play a vital role in healthcare applications like medical implants, prosthetic limbs and orthodontia. Tissues experiments are underway. At some point, hospitals may be able to print a transplantable heart, as opposed to awaiting the donor.
3D printing will lead away from mass production toward must customization. You will buy a product made for your specifications. Or, you will buy the printer and raw materials, and make the products yourself. Toilet paper. Paper towels. Cutlery. Dog food. People food. Cleaning products. Clothing. It's limitless.
3D printing will lead to faster product innovation as companies no longer need to reconfigure their manufacturing bases, but simply retool the printer and its raw materials. New products and technologies will glean quantum leaps forward overnight. Imagine nanotechnology available to consumers within their homes and workplaces. Click here to see ten cool items you can already print at home.
Of course, change comes with challenges.
These developments could adversely impact those foreign manufacturing havens like China and India, among others. As economies of scale and labor costs become less a factor, these emerging market nations will have less leverage to attract these traditional opportunities. The implications of which are complex and far reaching.
While most Americans are yet to see a 3D printing demonstration (click here for demo), the technology is attracting attention. President Obama referenced it in his most recent State of the Union Address, describing 3D printing as having the potential to "revolutionize the way we make almost everything."
Much like other existing technologies, our children may soon know much more about 3D printing than we do.
MakerBot creates individual 3D printers enabling consumer to build polymer based products in their homes and offices. Its CEO, a former teacher, has launched a growing initiative to install a 3D printer in every U.S. school.
Imagine you teenage son with the ability to spontaneously create most anything that grabs his imagination. Talk about the need for a parental control device.
As 3D printing technology is increasingly used to produce everything from toys to medical devices, the investment opportunities have exploded.
Market leader Stratesys (SSYS) has averaged a 65 percent annualized rate of return the last five years.
ExOne (XONE), which makes industrial 3D printers, has seen its shares double since its February IPO.
Shares of Germany's Voxeljet (VJET), which provides on demand 3D printing to industrial and commercial clients, have jumped 140 percent since its IPO last month.
Organovo Holdings is a 3D biology company focused on providing bioprinting technology capable of creating tissue on demand. The company's products could be used for research, medical applications and more. Shares have risen over 500 percent the last year.
Yet, not all of the players are pure 3D companies.
Hewlett-Packard (HPQ) recently announced that it will enter the 3D printing market over the next year. As pioneers of the printing industry, it only makes sense that HP leverages the 3D opportunity. Whether they start from scratch, or acquire an existing competitor, their very presence will help to further expedite the mass adoption of 3D technology.
Likewise, General Electric (GE) has entered the 3D printing realm, though GE's interest appears to be largely focused on enhancing internal efficiencies.
A brave new world is upon us.
Some day, every home, school and office may have a 3D printer. Creating consumer products. Sporting goods. Office supplies. Even foodstuffs. Hospitals may utilize 3D printing to create on-demand body parts. Nothing is beyond the realm of possibility.
Truly, investors can own the future today.

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