Going Long with Stigma Labs

Going Long with Stigma Labs

If you’ve ever bet on sporting events, then you probably know that professional handicappers look for strong trends to help determine winners and losers. In the stock market it’s no different—with the exception that uptrends in stock sectors are generally more reliable for generating profits than their sports counterparts. This year, it’s all about fuel cells and marijuana. Today, however, I want to revisit an under-the-radar play in one of last year’s strongest sectors—the 3D printing space.

While the pure momentum run in many large cap issues in the sector has cooled a bit (DDD, SSYS), there are a host of emerging plays related to the field that continue to attract marketplace attention, and appear to be true ground-floor opportunities in a rapidly expanding industry. One of the strongest, in my opinion, is Sigma Labs, Inc., currently trading over-the-counter under the symbol SGLB.

Based in Santa Fe, New Mexico, Sigma Labs, Inc. engages in the development and commercialization of manufacturing and materials technologies, and R&D solutions. It also focuses on commercializing technologies and products in various industry sectors, such as in process quality assurance for manufacturing; aerospace and defense manufacturing; additive manufacturing; active protection systems for defending light armored vehicles; advanced materials for munitions; advanced materials for sporting goods; advanced manufacturing technologies; and dental implant and biomedical prosthetics technologies. In addition, the company provides consulting services to the public and private sector, with regard to emerging technologies and alternative applications of established technologies for Federal government and commercial clients.

Sigma Lab’s ace-in-the-hole is its focus on developing advanced, real-time quality inspection systems for 3D metal printing and other technologies. Manufacturing integrity is key to the success of the 3D printing process, which presents unique quality-control challenges. Compared to traditional casting, welding, or machining manufacturing methods, additive manufacturing is slower and has its own issues with imperfections due to process variations. Any system that can minimize these quality issues will accelerate production, and that’s precisely what Sigma Labs’ PrintRite3D system is designed to do.

Unlike other micro-cap companies in the 3D space which are long on claims but short on real products or potential, Sigma is already doing business with manufacturing giant GE. GE has asked Sigma to develop its PrintRite3D system to the point where it will operate as a “closed loop”— feeding information back to the printer so it can make real time adjustments. GE’s key concern, and what Sigma Labs is best prepared to address, is unmelted metal powder entrapment in the additive manufacturing process.

Regarding the partnership, Christine Furstoss, Technical Director for Manufacturing and Materials Technologies at GE, stated “we have a joint technology development agreement with Sigma Labs Inc. to develop in-process inspection technologies of additive components with the goal of reducing production time up to 25 percent.” Currently, Sigma is the only company known to be working on this closed loop inspection technology, and their impressive array of patents protecting the process should make it difficult for other companies to compete any time soon.

Encouragingly, there are brains behind the brawn. Mark Cola, company President & CEO, Sigma Labs, developed one of the original approaches to 3D printing at Los Alamos National Laboratories. During his tenure there, he also led Los Alamos’s Manufacturing Science & Technology group, which researches the metallurgy and performance of metals in high-demand welding applications, considered a mirror of how 3D metal printing operates.

In yet another significant vote of confidence for the company, in mid-January Rockville Asset Management purchased 43.75 million SGLB shares at $0.15 each. That translates into a $3.5 million investment, accompanied by a nine-month warrant to purchase about 14.26 million more shares at the same price. Sigma also recently signed a development agreement with Metronic Systems, LLC for a 3D laser scanning technology, and received its largest order to date of PrintRite3D systems from a major international company.

As you’ve probably already surmised, all of the good news at Sigma—coupled with the market’s unbridled enthusiasm for anything in the 3D printing universe—had a soporific affect on SGLB’s share price last year. All told, the stock tacked on more than 1,000% in gains. In fact, SGLB ripped all the way from a 52-week bottom of $0.02 last spring, all the way to a momentum-fueled rally to almost $0.28 per share.

SGLB chart

That’s an impressive move to say the least, and even more so considering the company’s weighty float size listed at 404.5 million shares. Currently shares are trading at about $0.135, near the high end of the channel they’ve established throughout most of the year.

In my estimation SGLB presents the rarest of rare opportunities in the over-the-counter world to truly get early in on an extraordinarily promising opportunity with massive potential. Management has one of the best pedigrees in the business, the company has a working relationship with one of the biggest companies in the world, institutional support has already started to flow into the issue, and competition currently appears to be minimal at best. With the stock currently priced under the recent private placement value, now seems like an ideal time to invest.

Good luck with this and all of your trades.

Warren Gates
Senior Analyst
Normandy Research

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