A STOCK ADVISOR SPECIAL REPORT

3 Stocks to
own for the
new industrial
revolution

Motley Fool Stock Advisor

December 2012
3 Stocks to Own For the
New Industrial Revolution
Brought to you by David and Tom Gardner, Co-founders, The Motley Fool

Dear Fool,
Welcome to Motley Fool Stock Advisor, where our goal is to show you a better way to invest, and make you wealthy along the
way. Which is exactly what we think the three stocks below could do now that the 3-D printing revolution is in full swing.
The first two are from Motley Fool Stock Advisor, and the last one is a bonus pick from Motley Fool Rule Breakers, David
Gardner’s growth-investing newsletter.
After you’re done reading this investing kit, we invite you to visit the Motley Fool Stock Advisor website at:
http://stockadvisor.fool.com/.
There you’ll be able to see all the stocks we’ve recommended over the past ten and a half years. You can also check out our latest
updates, our Best Buys Now, and our Core Stocks. You’ll also be able to interact with us, our community, and our team of analysts
on the Stock Advisor discussion boards.
So please make sure to visit http://stockadvisor.fool.com/ when you’ve finished reading the information we’ve prepared for you
below.
We look forward to investing alongside you, and here’s to many years of profits together.
Fool on!

David and Tom Gardner

Company Snapshots Data as of December 13, 2012

3D Systems (NYSE: DDD) Dassault Systemes Stratasys (Nasdaq: SSYS)

Market Cap: $2.6 billion
Recent Share Price: $46.08
Cash/Debt: $184 million / $124 million
52-Week Range: $14.30 - $49.35
P/E: 67.7
CAPS Rating: 4 out of 5 stars
(Pink Sheets: DASTY.PK)
Market Cap: $13.8 billion
Recent Share Price: $111.92
Cash/Debt: $1.9 billion / $368 million
52-Week Range: $75.70 - $114.79
P/E: 33.2
CAPS Rating: 5 out of 5 stars
Market Cap: $2.9 billion
Recent Share Price: $70.46
Cash/Debt: $52 million / $0
52-Week Range: $26.75 - $79.25
P/E: 83.0
CAPS Rating: 4 out of 5 stars

2 Motley Fool Stock Advisor Special Report — December 2012  stockadvisor.fool.com

3D Systems (NYSE: DDD)
This company was originally recommended on January 20,
2012. The numbers below have been updated.
Suds are spilling out the side of your dishwasher, and you
need to replace the little plastic bracket that stops them. No
problem — just get the specs online and print out the part.
Or you’re designing a new laptop and you want to get a feel
for the ergonomics, so you print out a model. Or maybe you
need a hearing aid fitted exactly to your ear, so a technician
prints out a custom earpiece.
If all that sounds like sci-fi, that’s because for most of human
history, making things has been a process of subtraction.
Michelangelo said, “Every block of stone has a statue inside
it, and it is the task of the sculptor to discover it.”
But technology developed since the late 1980s has made it
possible to do additive manufacturing — laying down only
what we want with little or no waste. (Think Michelangelo’s
David without all the dust.) Sometimes called 3-D printing
or rapid manufacturing, the revolution began with my recom-
mendation of 3D Systems (NYSE: DDD).
Another Dimension
In 1986, Charles Hull coined the term “stereolithography” to
describe a process during which print heads deposit very thin
layers of resin in an exact location, building a finished, 3-D
object one layer at a time. Hull founded 3D Systems that same
year, and he remains the company’s chief technology officer.
Additive manufacturing has made great advances in speed,
accuracy, and quality since its early days, and it’s now being
eagerly adopted by many industries that ignored it for decades.
That shift is reflected in the company’s growth; over the past
five years, its sales have climbed at an average annual pace of
just 15.9%. But over the past three years, that rate was 42.5%;
over the past two years, 49.2%; and in the past year, 51.7%.
Best of all, its sales of $322 million over the past twelve
months barely scratch the surface of the $3 billion to $5 bil-
lion market 3D thinks its current technology can serve.
Because although it was once a way to make a one-off proto-
type, 3-D printing is now used for all kinds of high-value, low-
volume functional parts — specialty tools, parts for fighter
jets, and other objects with complex geometries that would be
difficult or impossible to manufacture conventionally.
3D Systems offers parts made not just from a variety of
tough plastics, but also waxes, nylons, rubbers, metals, and
composites. That makes its offerings attractive to all kinds of
industries.
What’s more, 3D’s technology is changing not just manufac-
turing but the design process itself. As CFO Damon Gregoire
put it, “complexity is free” with 3-D printing. Intricate objects
3 Motley Fool Stock Advisor Special Report — December 2012 
are no more time-consuming or expensive to produce than
simple ones. This gives designers freedom to create differ-
ently -- and that’s how world-changing ideas take shape.
The Future Is Now
Companies’ newfound love of additive manufacturing has
brought 3D Systems consistent profitability and improving
margins.
Management believes revenue will hit $400 million to $500
million over the next three or four years — an inexact target,
but one suggests 20%-plus annual growth in the near future.
And if 3-D printing takes off among individual consumers,
even that could prove conservative.
No company is doing more to advance that next revolution
than 3D Systems. At this year’s Consumer Electronics Show,
the company launched Cubify.com, a forum where consumers
can access design tools, share 3-D designs, and even sell their
creations. Objects can either be printed and delivered through
3D Systems’ network of service providers on professional
machines, or made at home using the company’s 3-D printer
called the Cube, which retails for $1,299.
Even more tempting for everyday users, 3D Systems’ “Kinect-
To-Print” application uses Microsoft’s Kinect — yep, the
hands-free Xbox game controller — as a 3-D scanner. That
and other tools offer what the company calls “coloring-book
simplicity” for creating designs. We think such ease of use
will eventually bring 3-D printing into the home, with huge
implications for a variety of industries — and huge profits for
3D Systems shareholders.
Risks and When We’d Sell
3D Systems’ chief rival is Stratasys (Nasdaq: SSYS), a com-
pany you can read about below.
While I obviously like both companies, Stratasys uses different
technology and has focused mostly on high-end printers. 3D
Systems, in contrast, has made a greater effort to bring 3-D
printing to consumers.
It also has a different business model, focused not just on
selling printers and supplies (a classic razor-and-blade model)
but also snapping up a number of service companies that
create objects on spec. Its large installed base drives a high
level of recurring revenue, powering about 70% of sales.
The other significant industry player, Objet Geometries,
recently gave up plans for an IPO and decided to merge with
Stratasys — something that should bring more attention to the
industry. I’m not worried, though; I think this is a case where
better, more widely accessible technology lifts all boats.
stockadvisor.fool.com
There’s room for more than one player here, and 3D Systems
has a host of advantages.
3D Systems’ acquisitions are another potential risk. While
most have been relatively small service providers, the com-
pany issued $152 million in debt to pay for Z Corp., which
brought the total goodwill it already carries on its balance
sheet to $221 million.
The company’s strategy of growth by acquisition has also
obscured the fact that organic growth has slowed somewhat.
The debt should be manageable, but we’ll be keeping an eye
on organic growth as well as looking for margins to keep
climbing. We’re counting on this business to boom, and if it
stumbles, we’ll print ourselves a pair of walkin’ shoes.
The Foolish Bottom Line
Companies are already embracing additive manufacturing
like never before, and tomorrow we may all be printing up
our own bling. With change coming so fast, it’s hard to know
what the future of 3-D printing will look like. That’s why 3D
Systems offers the industry’s broadest range of solutions —
high-end systems, low-end printers, service agencies offering
a variety of materials and capabilities.
Unless the world suddenly goes flat, 3D Systems should con-
tinue to drive a powerful — and profitable — trend.
To learn more about 3D Systems, visit this link:
http://newsletters.fool.com/18/recommendations/DDD.aspx
Dassault Systemes
(Pink Sheets: DASTY.PK)
This company was originally recommended on September 18,
2009. The numbers below have been updated.
French philosopher Jean Baudrillard famously argued that
in modern society, reality has been replaced by simulations.
We’ve grown so thoroughly accustomed to placeholders for
real things that we’ve lost contact with the original. 

How appropriate, then, that Baudrillard’s countrymen have
created the world’s leading computer design and simulation
company. Dassault Systèmes (Pink Sheets: DASTY.PK) soft-
ware that allows designers and engineers to work in simulated
3-D environments. It creates virtual objects, then tests how
they will react to simulated use and stress.
While we at Stock Advisor stubbornly insist that the real world
still exists, consider some of the uses:
 ground to keep the company technologically competitive and
• Engineers at an Australian nickel mine used Dassault’s
4 Motley Fool Stock Advisor Special Report — December 2012 
Abaqus software suite to simulate deep digging,
successfully determining how to safely and efficiently
exploit real-world resources. 

• Researchers at Frankfurt University used Dassault soft-
ware to model the forces on the human body at rest,
in order to design a better mattress. 

• Engineers in Germany simulated how a nuclear facility
would stand up to earthquakes and airplane strikes. 

And it’s not just about physical modeling. Dassault’s Delmia
division lets clients test a manufacturing process in a virtual
environment. A Japanese company that makes wire harnesses
says it cut production time 67% by simulating and optimizing
its assembly process with these tools. 

To give Baudrillard a
little credit, we live in a world where it is increasingly pos-
sible — and therefore competitively necessary — to represent,
manipulate, and test reality in digital form. Investors should
get excited, because Dassault is on the cutting edge of this
endeavor.
Financials, Valuation, and Management

Dassault is relatively large, with a market cap of $13 billion,
so it doesn’t generate the runaway growth you might expect
from a smaller and less mature company.
Nonetheless, its revenue has increased at an 10% compound
rate over the past five years. It’s been a steady climb: The top
line has grown every year since 1998, with the exception of a
2.5% dip in 2003. Even during the recession, Dassault’s sales
held steady, and a key part of that was high retention. 

Considering Dassault’s stable earnings, strong balance sheet,
and 0.8% dividend yield, now looks like the best way to
buy into the long-term growth of simulation and modeling,
particularly since Dassault’s broad range of products exposes
it to more industries — and more opportunities — than its
smaller competitors. 

Dassault is impressively efficient, with the strong margins of
a successful software company — an 86% gross margin over
the past year and a net margin that typically runs north of 15%.
Moreover, it achieves these returns with a business that’s light
on shareholders’ capital. Return on invested capital was more
than 24% in 2008, an indication not only that our money goes
a long way but also that management isn’t overspending to
buy growth or fend off competition.

That team is led by CEO Bernard Charlès, who has been
with Dassault since not long after it was spun out of Dassault
Aviation in 1981. Charlès has been president since 1995 and
CEO since 2002, but he’s an engineer by training and came up
through the R&D side of the company. He’s used that back-
to make some of the key acquisitions that have put Dassault
on top. 

stockadvisor.fool.com
He’s also been canny about opening the 3-D experience to
new users and planting the seeds of future products. The com-
pany’s free 3DVia Shape modeling software lets users easily
create and share 3-D images by tapping into community-
generated content libraries. Thousands of people use this
platform, making models of homes and buildings that they
then contribute to Microsoft’s Virtual Earth.
Risks and When We’d Sell
Because of its high recurring revenue stream, industry lead-
ership, and limited competition, Dassault falls on the lower
end of the risk spectrum for my side of the Stock Advisor
scorecard. The big caveat is that buying on the Pink Sheets
can expose you to extremely low liquidity. 
 our entry point to this exciting field. Its proprietary fused de-
On the operational side, a substantial portion of Dassault’s
sales, 35% in 2007, come through IBM (NYSE: IBM), which
markets and distributes many of the company’s products
worldwide.
Dassault has been steadily reducing its reliance on IBM
since the agreement started in 2005, but a disruption in this
relationship would lead us to reevaluate our recommendation.
We’ll also be watching the net margin, which has declined
with recent R&D spending and higher taxes, to make sure it
returns to historical norms.
 you’re designing a critical part, you don’t want to go into mass
The Foolish Bottom Line
Look before you leap, the old saying goes. And thanks to
the convergence of sophisticated modeling, high-powered
computers, and 3-D visualization tools, it’s now possible to
do just that.
Dassault’s simulations can predict the future — or at least
how some scenarios and variables will play out. Its design
tools refine and optimize manufacturing, while its process
tools let users fine-tune production before building factories
or hiring employees. Not many customers will give up that
kind of visibility once they have it, and Dassault is here to
make sure that simulation becomes reality.
To learn more about Dassault Systemes, visit this link:
http://newsletters.fool.com/18/recommendations/DASTY.
aspx
Stratasys (Nasdaq: SSYS)
This company was originally recommended on September 18,
2009 by Motley Fool Rule Breakers service. The numbers
below have been updated.
“But you can’t get a cup of coffee over the Internet.” I
remember hearing this skeptical quip a decade ago as the e-
5 Motley Fool Stock Advisor Special Report — December 2012 
commerce revolution took off. Instant global communication
might have streamlined business, but it didn’t really change
how we deal with tangible objects.
Well, you still can’t get that coffee over the Internet, but you
may soon be able to get the cup.
Thanks to the wonder of 3-D printing, it’s possible to go
from computer design to physical object without ever leaving
the digital domain. As the technology gets cheaper, it could
one day reach your home: Find a coffee cup design you like
online, download it, and “print” real cups at home.
Stratasys creates the printers that make this possible, and it’s
position modeling (FDM) is the cheapest method for building
professional-grade plastic parts, with systems costing as little
as $18,900 and requiring relatively inexpensive spools of fila-
ment rather than lasers and messy or dangerous liquids and
powders. You can use FDM inside an ordinary office without
safety concerns — a key advantage over the other main tech-
nology, stereolithography.
3-D printing has been around in some form for decades, but
better quality and lower prices have taken it from prototyping
rough models to actually making components for end use. If
production without an accurate prototype in hand — some-
thing you can test, tweak, and improve through several itera-
tions. Traditionally, that meant machining and handcrafting
parts, a slow and expensive process. Rapid prototyping lets
a machine read a computer-aided design file and re-create
the exact design, layer by layer, out of polymers, metals, and
ceramic materials.
It operates in a classic razor-and-blade model: Each unit uses
$3,000 to $5,000 a year in consumables, plus service and
maintenance. Those who don’t want to invest in the equipment
can send a CAD file to the Paid Parts division, and Stratasys
will deliver a completed part.
Where Can This Go?
The low cost of Stratasys’ technology is bringing 3-D printing
to more users; it’s even sold more than 500 rapid prototyping
systems for use in high school shop classes. So is it coming
to your home?
As we saw with 3D Systems, the day is basically here.
But even if it’s not in your home, the technology will spread.
Need a replacement part for your dishwasher or a custom jig
for a special job? It’s not a stretch to see a Stratasys system at
Home Depot, where you could bring in a CAD file and walk
out with your part.
As speed and sophistication increase and costs fall, the tech-
nology isn’t limited to one-offs and prototypes. BMW uses a
Stratasys system to create specialized tools whose complex
stockadvisor.fool.com
shapes would be difficult to fabricate by traditional means.
Another company describes how it quickly created a new
pulley to replace a broken part on a heavy-duty belt sander.
This quick fix kept the company from shutting down produc-
tion, and the plastic composite continued to work for months
in place of a metal part.
These aren’t just prototypes — they’re real products coming
out of a printer.

Built for Success

Stratasys has been profitable every year but one since 1995,
and it earned $20.6 million in 2011.
But perhaps the risk here comes from the reality that Stratasys
is committed to its proprietary technology. This is neither the
fastest (at least for larger objects) nor, according to some,
the highest-quality rapid prototyping. But it is, I think, the
cheapest way to produce high-quality results. That’s the
sweet spot — the “good enough” inflection point that Harvard
Business School professor Clay Christensen has observed
leads to widespread adoption and allows the technology to
improve.
I don’t think the cheaper V-Flash will replace Stratasys as
the low-cost leader for professional-grade rapid prototyping.
Nevertheless, if a competitor figures out how to improve an
alternative technology to present a better value than FDM,
that could be a major stumbling block for Stratasys.

Foolish Bottom Line

I can barely write an article or brainstorm stocks without
my computer at hand. Likewise, most product design now
takes place digitally. The idea of turning designs into three-
dimensional products at the push of a button is revolutionary.
Just like desktop computing, it’s taken 3-D printing years to
move from elite technology to broad availability, but we’re
seeing adoption accelerate. As it continues, the result will be
gloriously disruptive and nothing short of staggering — and
Stratasys is the company to own.
The Motley Fool owns shares of 3D Systems, and has written
covered calls on this company. David Gardner owns shares
of Stratasys.

6 Motley Fool Stock Advisor Special Report — December 2012  stockadvisor.fool.com