2023-05-12 16:00:04 ET
Summary
- PRNT invests in companies involved in 3D printing technologies.
- Many sectors could incorporate 3D printing on a greater scale in the future, but this prospect is only so graspable while 3D printing still faces several profitability hurdles.
- I rate this ETF a Sell for now, as even amid the ongoing robotics and automation hype, PRNT could struggle to gain the same momentum.
The realms of robotics and automation house many avenues for profit, and 3D printing could become a lucrative industry with time. As numerous industries still rely on outsourcing for various products, 3D printing could drastically improve the speed of business operations by allowing these industries to insource more. Not only could this save time, but also money and the liability created by potentially untrustworthy third-party sellers. On this same note, 3D printing becoming automated could make it all the more useful to individuals and large companies.
Though 3D printing could be essential to certain endeavors down the road, this specific industry is yet to fully grasp the momentum of the robotics and automation scene. As this scene is still somewhat clouded by uncertainty and risk over the full potential of robotics and artificial intelligence ((AI)), investors may be better off with broader exposure in the medium term. For these reasons, I give The 3D Printing ETF ( PRNT ) a Sell.
PRNT is one of a kind in that it's the only publicly-traded 3D printing ETF. I think the 3D printing industry has ample room for expansion across various sectors, which could catalyze the emergence of ETFs similar to PRNT. That being said, this ETF could be considered a pioneer down the road if 3D printing takes a bigger stance in the ETF scene. However, PRNT still narrowly focuses on 3D printing as opposed to more broadly grasping the power of automation, AI, and robotics that could fuel the 3D printing industry in the long term. For now, I believe this aspect puts this ETF at a significant disadvantage.
Strategy
PRNT tracks the Total 3D-Printing TR USD Index and uses a full replication technique. With this method, investors may attain more thorough exposure to the 3D printing market while also being spared of certain transparency concerns. At least 80% of the companies in the designated index derive at least half of their earnings or revenues from 3D-printing related activities, such as the development or distribution of equipment, materials, and software utilized in 3D printing. Companies within this index are primarily involved in the businesses of 3D printing hardware, 3D printing simulation software, and 3D printing materials.
Holdings Analysis
This ETF invests primarily in technology companies while sparing just over a third of sector allocation to non-technology stocks. Such non-tech stocks primarily identify as industrials, with even smaller appearances from healthcare, basic material, consumer cyclical, and consumer defensive.
Most of PRNT's holdings reside within the United States, with just over a quarter of holdings appearing outside of the country. This ETF represents a number of non-U.S. nations like France, Switzerland, and Germany.
The top 10 holdings in this ETF account for roughly 41% of the entire fund while the top 25 also comprise 84%. Given that PRNT consists of only 64 holdings, this ETF could be considered quite top-heavy. On this note, concentration risk could threaten this ETF in the long run in addition to its narrow, highly-niche focus.
ETF Performance and Future Implications
PRNT vs. Alternatives: Too Niche For Its Own Good
Though PRNT is the only 3D printing-specific ETF on the market, 3D printing dabbles in robotics and automation, similar to larger ETFs with broader focuses. Potentially comparable alternatives might include the Global X Robotics & Artificial Intelligence ETF ( BOTZ ) and the Robo Global Robotics and Automation Index ETF (ROBO). The relative YTD performance of BOTZ and ROBO against PRNT is depicted below.
This ETF could evidently have a harder time capitalizing on and fully benefiting from technological trends compared to potential alternatives. I still think 3D printing could have a significant spot in many evolving industries. However, less specific ETFs that instead cover all of robotics, automation, and AI may be the superior way to profit from these accelerating trends.
PRNT vs. The S&P: Burdened By Volatility
Compared to the S&P, this ETF's price trend during 2023 has been quite erratic.
PRNT's price oscillations are evidently larger than that of the S&P and though it reached some notable heights so far this year, it also appears to have declined just as fast as it jumped. As seen in the graphic below, this ETF's volatility metrics may raise cautionary notes.
When dating back five years, even more light shines on PRNT's high volatility.
On this note, PRNT could well struggle from lack of momentum as well as erratic price movements in the long term.
Artificial Intelligence and 3D Printing
AI could greatly enhance 3D printing in the long term. In specific, AI could automate industrial 3D printing, which could strengthen the entire supply chain and eventually make 3D printing companies significantly more efficient. AI could also enhance printing quality and allow for more intricate designs as this system may detect errors and respond to disturbances more efficiently than humans. Furthermore, AI could analyze consumer data to provide more personalized products and services. Ultimately, AI integrations within the 3D printing industry could enhance profits and drive up the price of PRNT down the road.
Sectors Set To Capitalize On 3D Printing Development
Healthcare
Healthcare is projected to be a significant player in the 3D printing scene in the coming years, as seen in the graph below.
Enhanced 3D printing could accelerate the development of prosthetic limbs , surgical models , and implants with limited contribution from humans. Furthermore, analysis of patient data by AI could make said products more personalized and user-friendly. Such developments could lead to more healthcare facilities capitalizing on 3D printing and subsequently greater revenues for 3D printing companies.
Aerospace
The aerospace industry could increasingly make use of 3D printing technology as such tech advances and has more to offer. As seen in the chart below, the Aerospace 3D Printing market could significantly expand before the end of the decade.
In specific, 3D printing could allow for greater production of more lightweight, aerodynamic components while spending less capital and producing less waste. In addition to design and construction, 3D printing could be quite useful in the repairing and general maintenance of aircraft.
Negative Outlook And Future Concerns
Labor Market Disruption
Revolutionary technology like 3D printing and AI have the potential to help humans, but also to replace them in some respects. For example, many manufacturing workers could find themselves unemployed as automated 3D printing tech proves to do the job better. Due to ethical concerns and possible stigma, this could lead to new laws and regulations regarding the role of 3D printing in the workforce , which could be detrimental for this industry. Furthermore, increasingly advanced 3D printing could create higher skill requirements that could become quite hard to meet at a certain point. On this note, a talent shortage could significantly hurt the profits of many 3D printing companies.
Lack Of Standardization
There still lacks a universal set of technological and design standards that 3D printers abide by. As a result, the many 3D printers across the market often have their own unique set of capabilities and features. This case makes it difficult to compare 3D printer models and accurately assess if a certain printer of choice is any better than its peers. Furthermore, this could make it difficult for companies to effectively market their 3D printers in a way that consumers can fully understand and trust. These conditions could make both individuals and corporations hesitant to adopt 3D printing technology, which could threaten the performance of PRNT.
Conclusion
I believe 3D printing could become an integral part of many businesses as this technology advances and has even more to offer to the manufacturing scene. Before this manifests in its fullest, PRNT could struggle to gain positive momentum. That being said, as the fields of robotics and automation gain momentum and become increasingly accepted by society, one is likely better off with a more broadly-focused fund. For these reasons, I rate PRNT a Sell.
For further details see:
PRNT: Patience Required As 3D Printing Finds Its Spot In The Market