The "Magic" of Nanotech
08/26/2005 12:00 am EST
"Investors cannot ignore technology," says Josh Wolfe. "You are going to see new technologies that you never believed could exist. You will see things that appear to be magic in the coming years." Here, he looks at some stocks tied to the "magic" of nanotech.
"Strong growth in PCs was seen throughout the 1970s. Then the biotech move occurred in the 1980s. We then saw the Internet and telecom growth of the 1990s. In our view, n anotechnology is the next growth wave that will play out over this decade. Nanotech is the ability to control individual atoms and molecules and utilize the new magnetic, optical, thermal, and other scientific properties that exist at that scale. As a broad enabling technology, nanotech will touch many highly uncorrelated industries from homebuilding and construction materials to textiles and fabrics to medical devices and semiconductors and wireless devices. It’s our contention that the companies that own the patents in these areas will change the world.
"However, investors need to be aware that this is a choppy process. There will be lots of fits and starts. However, one sound fundamental theme in the sector is that a lot of government money is moving into nanotech. The US government is now spending about $1 billion a year and other governments are spending even more. Corporations and venture capital firms are investing. All of these start-ups and government labs require equipment. And this equipment is being sold primarily by two companies – FEI Co. (FEIC NASDAQ) and Veeco Instruments (VECO NASDAQ). They make the tools that allow you to measure and manipulate and see things at the nanoscale. These tools are seeing double- and triple-digit percentage revenue gains as demand for these products is growing exponentially for the tools that let people work at the nanoscale. Don’t look at the interim volatility.
"I’d also mention a very speculative pick in this sector, with the caveat that you could lose everything. The stock is Harris & Harris (TINY NASDAQ). During the Internet boom, this was a $2 stock that went all the way to $30 and then came back down. The company then transitioned from investing in Internet companies to investing in nanotech. We have invested in some deals with them. We think highly of the people and the management team. But there is always a distinction between a company and its stock. And this stock is subject to wild swings in retail enthusiasm and frustration. This will be a very volatile company. But it is a way for you to own a stake in some of the private companies that you can’t otherwise invest in."