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Through The Fly's Eyes: Nanotechnology
from Larry Ramer of Theflyonthewall.com
Nanotech: Looking for Big Profits in a Small Technology
Nanotechnology is a hot new technology that refers to the manufacture and manipulation of materials at the molecular or atomic level. “Nano” materials are usually one thousandth the size of the thickness of a piece of paper, or smaller. With its vast potential in a wide variety of areas, from easily eliminating tumors to making solar energy cheaper, to allowing semiconductors to become ever smaller, nanotechnology is drawing a great deal of interest around the world. While there are some concerns about the effect of nanotechnology on human health, no major specific problems have yet been found.
In 2006, $12.4B was invested in nanotechnology research, according to Lux Research, which studies new technologies for investors. By 2015, the market for nanotechnology products will reach $1T, the National Science Foundation predicts. Meanwhile, many companies, including General Motors (GM), Hewlett Packard (HPQ), IBM (IBM), and Exxon Mobile (XOM), have begun incorporating nanotechnology into their products, and $50B of nano-enabled products were sold last year, Luz reports.
So how can investors make a play on nanotechnology? The most conservative route would probably be to invest in a company that specializes in products which facilitate research and development in nanotechnology. With that approach, investors will not be burned if nanotechnology proves to be ineffective in a particular field. Also, by buying stock in companies that facilitate nanotechnology research, investors can eliminate the need to wait for new products to hit the market – they can benefit immediately from the rapidly increasing amount of research and development into nanotechnology.
One company worth checking out in this area is Accelrys (ACCL), a provider of modeling and simulation software for nanotechnology. The company’s products are used by nanotechnology researchers for product design as well as drug discovery and development. In May, Accelrys announced that it had narrowed its loss to $1.1M in its fiscal Q4 ending March 31, compared with a loss of $6.4M in the same quarter of 2006. Revenue only increased 2%, to $19.9 million, but the company said that was because of reduced sales of older products that it had decided to phase out. The company has been in existence for 20 years, and also offers products for scientific research that does not involve nanotechnology.
Another similar, but more prominent company is FEI Company (FEIC), which makes nanoscale imaging, analysis, and prototyping instruments. The products are used in a variety of industrial, manufacturing, and research applications. FEI’s core technologies include particle beams that can modify nano-size structures to enable imaging, analysis, and measurement, according to a March article about the company in Forbes magazine. In Q1, FEI’s earnings were $15.1M, compared with a loss of $5.2M the year before. Revenues grew to $148M, versus $112.3M in 1Q06. FEI is the leader in the nanotechnology equipment field, with 70% of the market.
Other ways to invest in nanotechnology include Harris & Harris (TINY), a venture capital company specializing in nanotechnology and Arrowhead Research (ARWR), which invests in a variety of nanotechnology companies. Lux Nanotech Portfolio (PXN) is an exchange traded fund that tracks 26 publicly traded nanotechnology companies while the Merrill Lynch Nanotech Index (NNZ) tracks 25 nanotechnology companies.
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