If you’re seeking stocks that offer more risk and possible reward than a typical blue-chip, consider 3-D printing pioneer 3D Systems (NYSE: DDD).
It’s a market leader in an emerging technology, with only one serious competitor at the moment, Stratasys (Nasdaq: SSYS), which recently merged with Objet, 3-D printing’s third major player. 3D’s revenue, net income and free cash flow have all been trending solidly upward.
3D Systems is making a major push for the home user. Its plug-and-play printer and community model is the first of its kind. The Cube (and its Cubify.com community) is similar to Hewlett-Packard’s successful razor-and-blade-style printers-and-ink model. Scale matters with such a model, though, so 3D Systems will need to appeal to more than the hobbyists.
The company’s other products and services encompass medical uses, aerospace applications and more, and its service revenues are increasing at a rapid clip.
With big potential comes big risks, and 3D Systems is not risk-free. Profit margin has been shrinking recently, and the company remains largely dependent on corporate clients such as automakers or defense contractors, which are facing tough times of their own.
3D Systems isn’t cheap, but it might reward long-term investors. (The Fool owns shares of 3D Systems, and its newsletters have recommended it and Stratasys.)
Ask the Fool
Q: How do you know when it’s time to sell a stock? – E.M., Syracuse, N.Y.
A: Your ultimate results depend on the price at which you bought and sold a stock, so selling at a sensible time is critical. Consider selling if you’ve found a significantly more promising place to put your money. (If you find only a slightly more attractive place, the tax hit on any capital gains might wipe out the value of moving your money, unless the stock is in an IRA.)
You might also sell if the stock is now significantly overpriced or if the reason you bought the stock is no longer valid. (Perhaps the company has made some boneheaded moves, and you no longer have confidence in management, for example. Or maybe competitors are eating the company’s lunch.)
Selling is also smart if you’ll need the money within three to five years. Such short-term money shouldn’t be in stocks in the first place.
My dumbest investment
My dumbest investments have been buying General Electric at $32.50 and watching it plunge to $6.50, and setting sell limits too high in 2000 and watching some stocks go to zero. – B.A., Hilton Head Island, S.C.
The Fool responds: Those who bought GE in the $30s have indeed been burned, but if they’ve hung on, their losses (which are not yet realized, since they haven’t sold) have shrunk. The stock was recently trading around $20. The company’s future is promising, too, as it invests in alternative energies and its core businesses. Its GE Capital unit, which got whacked in the recent credit crisis, has turned itself around and will resume paying dividends to the parent company. GE’s stock has sported a dividend yield above 3 percent lately, too.
With GE and also with your setting sell limits too high, your errors might have been avoided if you’d tried to determine what your various stocks were really worth. With overvalued ones, consider selling or not buying, or be prepared for a dip in the price. If you’re planning to hold great companies for decades, simply expect temporary downturns.