3D Systems: Taking Profits In Another Cyclical Winner

Aug. 09, 2018 11:39 AM ET3D Systems Corporation (DDD)RES17 Comments

Summary

  • In January of this year I wrote an article explaining why 3D Systems was a buy from a cyclical value perspective.
  • I recently took profits in that investment after nearly a 100% gain.
  • I review the strategy I used to make this investment and highlight another stock that has a similar dynamic that 3D did in January, and why I expect similar returns.

Introduction

On January 8th of 2018, I publish an article titled "3D Has Entered Cyclical Value Territory" which was featured as an editor's pick here on Seeking Alpha. In the article, I outlined my cyclical investing strategy, why I thought 3D Systems (NYSE:DDD) was a buy at the time, and I explained how I go about investing in stocks that have recently come off super-cyclical highs. At the time I wrote the article 3D Systems was down 90% off its 2014 highs:

Chart
DDD data by YCharts

Investing in highly cyclical stocks requires a unique investing approach, and I've spent the last three years focusing almost exclusively on researching cyclical value stocks. The best time to buy cyclicals is when everything looks absolutely dreadful for them. While not every cyclical stock needs to be down 90% off its highs like DDD was, it's not uncommon for me to invest when stocks are down 50%-80% with few signs of life. The reason for that is because the rewards are highest if one can find the courage to invest when things look the bleakest. Here is how DDD has performed relative to the S&P 500 (SPY) since my article was published 8 months ago:

Chart
DDD Total Return Price data by YCharts

As you can see, there was quite a lot of volatility during this period, but I have now taken profits with almost a 100% gain, which was my stated goal in the original article. ($18.42 is the price I ended up selling my position, which is the price this chart shows.)

Was this just luck?

Inevitably, when things go well, there are those who attribute the success to luck. And the fact of the matter is, investing, like poker, involves a reasonable degree of luck (both good and bad). But the investments I've written about as "cyclical values" on SA over the

This article was written by

Cory Cramer profile picture
20.21K Followers
One-of-kind research using historical cycles to identify tops and bottoms

My analysis focuses on the cyclical nature of individual companies and of markets in general. I've developed a unique approach to estimating the fair value of cyclical stocks, and that approach allows me to more accurately buy near the bottom of the cycle.

My academic background is in political science and I hold a Bachelor's Degree and a Master's Degree in political theory from Iowa State University. I was awarded a Graduate Research Excellence Award in 2015 for my research on conservatism.

Disclosure: I am/we are long myl, POWl, SIG, MDR, RES. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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