Whether we are in a correction or not in the general market there are always sectors within the market to invest in to make money. Much attention is being placed on the fact that the Federal Reserve might have their hand forced with all the good economic data in recent weeks and start their tapering program early. Although we highly doubt this, it stands to reason that the banks would make excellent buys right now based off of this fear. The steepening yield curve is very beneficial to their business and although they might experience some near-term pain, longer-term that will help their earnings dramatically.
Although the banks are a way to play the fear that is in the market, the 3D printing names remain an excellent way to play the euphoria that still exists. We were early to this rally and have since written that investors would be wise to be wary of the smaller names in the industry and book profits when possible, but that cautionary tone should not be a deterrent for anyone wanting exposure to the sector.
Chart of the Day:
The rate on the 10-year U.S. Treasury is jumping again this morning after strong economic data. We are inching closer to the 3% level which is worrying some market participants but overall that is good news. It means that the economy is picking up steam and that investors are venturing out into riskier assets. The Fed will not, and cannot, lose control of rates so we think that in the near-term that 3% will be the resistance on the 10-year.
Source: Yahoo Finance
We have economic news today and it is as follows:
- MBA Mortgage Index (7:00 a.m. EST): Est: N/A Actual: -12.8%
- ADP Employment Change (8:15 a.m. EST): Est: 160k Actual: 215k
- Trade Balance (8:30 a.m. EST): Est: -$40.5 B Actual: -$40.6 B
- New Home Sales (10:00 a.m. EST): Est: 420k Actual: 444k
- ISM Services (10:00 a.m. EST): Est: 55.0 Actual: 53.9
- Crude Inventories (10:30 a.m. EST): Est: N/A Actual: -5.585 M
- Fed's Beige Book (2:00 p.m. EST): Est: N/A
Asian markets finished mixed today:
- All Ordinaries -- up 0.34%
- Shanghai Composite -- up 1.31%
- Nikkei 225 -- down 2.17%
- NZSE 50 -- UNCH
- Seoul Composite -- down 1.12%
In Europe, markets are trading lower this morning:
- CAC 40 -- down 0.90%
- DAX -- down 1.12%
- FTSE 100 -- down 0.53%
- OSE -- down 0.83%
3D Printing ...
On Tuesday both 3D Systems (DDD) and Stratasys (SSYS) were initiated with 'Outperform' ratings at FBR Capital. The firm put an $85/share price target on 3D Systems' shares and a $155/share price target on shares of Stratasys. Based on FBR's research note it is apparent that the firm is bullish of the entire 3D printing industry as a whole and believes that we will see growth rates outpace expectations as well as last longer than many currently anticipate. One of the key drivers for both names, according to FBR, is continued consolidation within the industry with the belief that both 3D Systems and Stratasys will adhere to acquisition strategies which focus on bolt-on acquisitions that help bolster their offerings.
This morning we saw two more upgrades for 3D Systems coming from Maxim and Credit Suisse, with Maxim increasing their price target from $68/share to $90/share while Credit Suisse moved their price target from $68/share to $76/share which is still below the current stock price.
With all of the rumors and speculation once again swirling we want to reiterate to readers that we think the best way to play this trade is through the big names such as 3D Systems and Stratasys while at times speculating in the smaller names like ExOne (XONE), Voxeljet (VJET) and Organovo (ONVO). The entire industry is highly volatile but the smaller names especially so, which is why readers should be active in profit taking and trimming positions into rallies.
Looking Ahead ...
We should see many new product offerings announced over the next month from different names in the industry and based on what we have already seen it appears that the industry is giving customers reason to spend on new equipment as the new technology is creating the most efficient printers yet that can do far more than their predecessors. Right now many are interested in the metal printers and the growth that this holds for the industry. The rumor is that Stratasys wants to do an acquisition to help it catch up in this segment as 3D Systems' recent metal acquisition has been receiving high praise from customers, analysts and industry insiders.