Like fiction but not in the mood for a novel or movie? You can always search using “Cathie Wood” and the name of a specific stock that you’re curious about and in some cases, you’ll be transported to fantasyland.
To be clear, highlighting that popular stock picker Wood, the CEO of ARK Investment Management, has bought a stock for one or more of her ARK Invest exchange-traded funds (ETFs) can be useful information for investors. Along with many of my colleagues, I’ve done so — recently with TuSimple, a maker of self-driving technology for long-haul trucks that went public in April.
The issue is that there is no shortage of misleading online information about Wood’s stock buys. This issue extends across stock categories, but seems particularly prevalent in the 3D printing space.
Here’s what investors should know.
Why is the 3D printing space rife with misleading Cathie Wood information?
The short answer is that it seems largely due to ARK’s The 3D Printing ETF (NYSEMKT:PRNT) being an index fund, not an actively managed one.
ARK Invest has eight ETFs; six are actively managed and two are index funds. For the actively managed ones, Wood and team choose the stocks, buying and selling as they see fit. Of course, each fund has specific goals and certain parameters within which the team operates. The aim of the index funds is to track their respective underlying index.
ARK’s The 3D Printing ETF “seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Total 3D-Printing Index,” according to the firm’s website. This index belongs to German company Solactive, and is composed of stocks of companies from the U.S., non-U.S. developed markets, and Taiwan that are engaged in 3D printing-related businesses.
The fact that Wood buys a 3D printing stock for this index fund does not equate to her “liking” or “loving” or “being bullish on” that stock. She and her team will buy and sell stocks in this fund to track moves in the underlying index, which they do not control.
On the other hand, it’s pretty safe to assume that Wood and team probably like a particular 3D printing stock if they buy it for one of ARK’s actively managed funds. Likewise, sales in these funds can be meaningful, but don’t read too much into sales unless they’re large relative to a fund’s total holding of that stock. If a stock runs up quickly, the ARK team might trim its ownership simply to keep the stock from accounting for too large a percentage of a fund’s total value.
What pure-play 3D printing stocks are in ARK’s actively managed funds?
3D Systems (NYSE:DDD) stock is the 11th-largest holding (of 45 total holdings) in the ARK Autonomous Technology & Robotics ETF (NYSEMKT:ARKQ). Shares of the U.S.-based diversified 3D printing company, which has a market cap of $3.5 billion, account for 2.73% of the fund’s total value as of June 18.
The stock of the 3D printing industry’s other early mover, Stratasys (NASDAQ:SSYS), isn’t as heavily weighted in any ARK actively managed fund. However, it’s a holding in two of these ETFs. The diversified 3D printing company, dually headquartered in Israel and the U.S., is the 39th-largest holding in the ARK Autonomous Technology & Robotics ETF, accounting for 0.87% of the fund’s value. And its holding is No. 45 (of 50) in the ARK Innovation ETF, accounting for 0.46% of the fund’s value.
I’ll let you be the judge of which of these two stocks the ARK team probably likes better based on the above numbers. For some time, I preferred Stratasys, as it seemed better managed and had fewer quality issues with its products. But I’d give 3D Systems the edge now, as CEO Jeffrey Graves has been doing a commendable job so far in turning the company around and positioning it for growth. That said, 3D Systems should still be considered in turnaround mode for at least another few quarters.
In the first quarter of 2021, 3D Systems grew revenue 7.7% year over year (and 17% excluding the impact of divestitures), while Stratasys’ revenue edged up 1%. 3D Systems was profitable from an adjusted basis and according to generally accepted accounting principles (GAAP), while Stratasys was unprofitable. However, Stratasys has a big cash advantage: $530 million versus $133 million at the end of Q1.
One thing I particularly like about 3D Systems is its increasing push into 3D bioprinting. It’s had research collaborations in this realm dating back a few years, but it only entered the bioprinting commercial market in May via its acquisition of Allevi.
Materialise (NASDAQ:MTLS) stock is also a holding in two ARK actively managed funds. Unlike 3D Systems and Stratasys, this Belgium-based company doesn’t manufacture 3D printers. It offers 3D printing software and 3D printing manufacturing services for a range of industries and has a medical segment that 3D-prints medical devices and provides 3D printing services and 3D printing software for medical applications.
Materialise is holding No. 27 in the ARK Autonomous Technology & Robotics ETF, accounting for 1.26% of the fund’s value. And it’s No. 46 in ARK Innovation, accounting for 0.43% of the fund’s value.
The following smaller pure-play 3D printing stocks are also in ARK’s actively managed funds and should be considered speculative:
- Nano Dimensions, which makes 3D printers that print electronics, has strong growth potential. But the Israel-based company generates relatively little revenue and has large losses. The $1.9 billion market cap stock is the 18th-largest holding in the ARK Autonomous Technology & Robotics ETF, accounting for 2.14% of the fund’s value. It’s also holding No. 30 (of 47) in the ARK Next Generation Internet ETF, accounting for 1.07% of the fund’s value.
- ExOne makes industrial-grade 3D printers that use binder-jetting technology. The U.S.-based company has been publicly traded since 2013 and has never been profitable on a trailing-12-month basis. It’s holding No. 42 in the ARK Autonomous Technology & Robotics ETF, accounting for 0.58% of the fund’s value.
The ARK Space Exploration & Innovation ETF has an interesting holding: ARK’s The 3D Printing ETF. Yes, an index fund within an actively managed fund. The 3D Printing ETF is the second largest holding (of 38 holdings) in the ARK Space Exploration & Innovation ETF, accounting for 6.69% of the fund’s value.
Lastly, ARK’s actively managed funds hold a total of three special purpose acquisition companies (SPACs) that each plan this year to bring public a 3D printing company. I’ll be covering this topic soon.
Is that all of the pure-play 3D printing stocks in ARK’s actively managed funds? I think I got them all (though no guarantees, as this exercise was labor-intensive), with one caveat: There might be some stocks that are too small per The Motley Fool guidelines for me to discuss.
Stock trades in the two ARK Invest index funds — including The 3D Printing ETF — should not be viewed as reflecting Cathie Wood and team’s opinion of these stocks. However, stock trades (buys and significant sales) in the six ARK actively managed funds can generally be viewed as a reflection of the ARK team’s opinions of them.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
View more information: https://www.fool.com/investing/2021/06/21/3d-printing-stocks-that-cathie-wood-likes-setting/