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Author: QuarkHadron Two stars, 250 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 482  
Subject: Re: Citron Research Calls DDD Bubble Date: 2/15/2013 10:09 AM
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What I've noticed in these short-seller articles is the misuse of buzz words as the basis for the articles. As I've said before the 'assumptions' that are used as the foundation for an analysis affect the validity of the supporting statements that then follow. If one accepts the invalid assumption, then one must accept the supporting statements. So, the analysis may 'seem' valid, but since the foundation isn't solid, the rest can't be solid.

For example, in earlier articles the foundational premise was 'organic growth.' Applying that measure to a well established company that is also in a well established (mature) market may be reasonable. Applying that measure to a growth company in a market that is young and immature may be much less valid. In immature markets, growth through acquisition is normal - and actually important to establish the company's market share and stay ahead of competitors. (The acquisitions do indeed warrant watching to be sure they contribute to revenue, but revenue is revenue for growing companies - organic or not.)

In this latest article, the emotional trigger word is 'bubble.' I don't think the concept conveyed by 'bubble' is valid for a single stock. I remember the dotcom 'bubble.' It wasn't one company. It was many, many companies - mostly new startups. And yes, people were throwing money at all of them. I think it takes a far stretch of the imagination to apply 'bubble' to 4 or 5 stocks, and an even greater stretch to apply 'bubble' to only one.

Has DDD run up significantly? Yes. That is, to me, a valid reason to watch the stocks performance. But, because of that, I expect pull backs and consolidation. Happens to all stocks. Nothing new here. It is a concern if you are a short-term trader. Far less concern if you are a long-term investor. It is important to know which you are.

Are many years of future growth factored into the price? Yes. But this also is normal. All prices reflect expectations for future growth. If they didn't, P/E would always be 1. It is the 'potential' for growth (which is always ignored in these short-attacks) that drive P/E's above 1. Well established companies in mature markets (where there are other well established companies for competition and the potential for capturing a significantly larger share of the market is small)should not normally command a high P/E - their potential for significant growth isn't normally there.

3d printing is a very immature market. That it has been around a long time doesn't make much difference - if the market is yet to be defined and the potential is just now being realized, it doesn't matter how long it took to get to this point. That's history. Investors are concerned with the future. The few companies poised to exploit that potential are indeed worthwhile investments. No, that doesn't mean it doesn't come with risk. But the 'potential return' must be weighed against the 'potential risk.' And that is something each investor must do for themselves.

If your risk tolerance isn't up to dealing with these swings, then you probably shouldn't be investing in these types of stocks. That isn't a poor reflection on you - it is just the way the world works. Some situations warrant more conservative investment approaches. If, on the other hand, you can tolerate these swings (financially and emotionally) - and are personally confident in the potential returns, then these types of stocks are good investments for you.

I emphasize 'personally' because, as can be seen by these types of articles, if you are going to rely only on 'recommendations' from others you are going to get some that say 'buy' and some that say 'sell.' You'll be bouncing in and out frequently - and that is market timing and 'trading,' not investing.
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