A few weeks ago I set out on a mission to uncover the next Netflix, eBay, Apple, or Amazon. Admittedly, that is a formidable task. But I am up to the challenge and with time I feel confident that I will uncover more than a few hidden gems. After all, I did find some very interesting, innovative companies that might present worthy investments.
That said, this article is sort of an in progress review, or an analysis of a few companies that I came across that are worthy of consideration of investment dollars. All of these companies have three things in common: they have profitable business models, they have the potential to grow at very high rates, and they have very interesting stories.
The first company that I came across was the highly touted 3D Systems. The printers that this company manufactures can print almost anything, from smartphone and tablet covers to customized kitchen gadgets, jewelry and toys, individualized prosthetics and orthodontics, airplane and car parts. The company’s printers covert data input from CAD software or 3D scanning and sculpting devices to printed plastic or metal parts using proprietary engineered plastic, metal and composite print materials. The company’s portfolio of 3D printers includes personal ($1,300 – $20,000), professional ($20,000 – $250,000), and production ($250,000 – $950,000). The portfolio is based on several unique print engines that use a proprietary additive layer printing process designed to meet customers design, prototyping, testing, and production requirements. On one hand, this technology levels the playing field for entrepreneurs by giving them access to the same resources of a company with deep pockets, eliminates much of the expert-user friction, and empowers them to unleash their creativity. And it really hits the sweet spot in the design to manufacturing value chain. On the other hand, many 3D printer companies have tried and failed at large-scale manufacturing and the technology is not fully understood by many investors yet. Furthermore, with the recent initial public offering of ExOne, there are now four publicly traded 3D printing companies: ExOne Co (NASDAQ:XONE), 3D Systems, Stratasys, Ltd. (NASDAQ:SSYS), and Proto Labs Inc (NYSE:PRLB). Still, it is unclear whether or not 3D printing is an ephemeral fad or a technology that will revolutionize manufacturing.
ARM Holdings plc (ADR) (NASDAQ:ARMH)
ARM is the world’s leading semiconductor intellectual property supplier. ARM Holdings is engaged in the licensing, marketing, research and development of RISC-based microprocessors, fabric IP, video processors, physical IP and associated systems IP, software and tools. ARM has an innovative business model – instead of bearing the costs associated with manufacturing, this company licenses its technology to leading semiconductor manufacturers. Then manufacturers incorporate their designs alongside their own technology to create smart, low energy chips for modern electronic devices. This model works because ARM has demonstrated that it is cheaper for companies to license technology than it is for them to develop it in house. ARM contends that by designing once and licensing many times it spreads R&D costs over the whole industry and makes digital electronics cheaper. All in all, given that (1) the majority of royalties are profits and (2) revenues are expected to grow faster than costs, margins should expand and ARM should become increasingly profitable.
