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Nanotechnology investing: the multi-decade roller coaster

As has been pointed out repeatedly here, the term nanotechnology is very broadly defined, and the various “nanotechnology indexes” that try to track nanotech stocks have a tough job, to put it mildly.

To complicate matters, nanotech watchers distinguish at least four, and maybe five, different generations of nano, from passive materials to highly advanced molecular nanosystems and atomically-precise manufacturing via productive nanosystems. Each of these has applications across many industries.

Further, nanotech commercial efforts tend to be either small startups or small fractions of industrial giants. It’s hard enough to track the former, but how do you track the latter properly in a stock index?

This all makes following “nanotechnology” stocks, as a group, a challenging and perhaps impossible task. We can expect multiple waves of excitement, disappointment, and eventual solid profitable achievement as the various generations of nanotech affect different industrial sectors. This will go on for decades as the generations of nanotech each arrive and then develop fully.

Keep this all in mind as you read Bloomberg News’ Nick Baker’s Around the Markets: Waiting for the next big thing. Some excerpts, relevant to the current dip in this very long roller coaster ride called nanotechnology:

“I’m scared of anybody with nano in their name,” said Kevin Landis, who manages investments at Firsthand Capital Management in California. “With any new wave of technology, there’s ample opportunity to invest in companies that don’t end up being the winner”…

Higher interest rates worldwide this year led investors to avoid riskier assets, including nanotechnology companies…

Buying the shares of publicly traded nanotechnology companies, on the other hand, “makes virtually no sense,” [Whitney] Tilson said. “By the time a company has gone public and that area has been established as hot, the valuations usually reflect the good news that could possibly happen”…

“You have the luxury to take your time,” Landis said. “There’s time before you have to leap.”

Not a cheerful article for nanotech companies trying to make an initial public offering. But just wait. —Christine

2 Responses to “Nanotechnology investing: the multi-decade roller coaster”

  1. Tome Says:

    Hello Christine,
    I agree with you , It is not a happy time for all involoved with the IPO of Nanotechnology.Nanotechnology is an IPO in and of itself. Anyone who by chance just happens to come across this new technology quickly learns the immense complications involved. The average Joe & even if your a brain of sorts does not mean that you will be able to figure the end result of any new issue.It involves evaluating of sorts the cause & effects, that keep cross referencing to another science or industry . What it takes is a comprehensiion of the kind that unless your a brain (Einstein or better) all you got to work with is your wits & logic.The problem with the Academics of all this is that IPO’s are in the public sector and it is the public who is least educated. The Genie is out of the bottle, and as such. IPO’s will continue to be issued. What is needed is a cooperative effort of Academia, private & public companies & industry to create a Web explaining the science of IPO’s , keeping it as simple as possible(if that’s possible) so that the Public IPO of Nanotechnology can make a more educated decision to buy or sell. But who out there is smart enough to do that, and who would want to, not the powers that be I’m sure!

    Just one more thing about this new & exciting field of Nanotechnology which holds posssibilities beyond our comprehesion is the X factor in all this. At the start of public awareness there was mention of something described as “Goo”, and in some sectors of Academia it was explained away. Well let me say now for all the Einstein’s out there that “Goo” is still a possiblity, now & in the future, for as long as man exists. So tread likely, and maybe we’ll succeed in doing something great for mankind. Don’t be greedy about it , and most of all remember the “ID”

    Just A Though

    TM

  2. Teleos Says:

    Permit me to be a contrarian and say that I think it is a GREAT time to be an investor in nanotech stocks for several reasons:

    1. There are few investors involved and the field requires specialized knowledge. the markets are efficient because there are so many talented people making the market. The only places one can reasonably expect to realize abnormal gains (i.e. “alpha”) are EXACTLY in market segments where lack of competition and specialized knowledge permit one to leverage their unique talents. In fact, standard financial theory suggests that this may be some of the best time ever for investors with specialized knowledge to realize gains.

    2. Volatility represents opportunity. The fact that the article cites tremendous volatility should attract, not repel investors. I point out that the two classes of investors interviewed were precisely the type of investors that really have no business putting money to work in publicly traded nanotechnology stocks- one a long only fund with a history of Internet, seminconductors and network equipment and services, and the second, a venture capital company that has no clue about the public markets. I think that hedge funds that can benefit from a highly volatile sector and can access specialized research stand to make good money from publicly traded stock by being short as well as long.

    3. The majors are getting smart. They big investors are hitting the books and know that this represents the next wave of innovation- and they can be patient.

    All in all, what are you going to do as a growth investor? Keep investing in wireless chips manufacturers selling into a market that decline in price 20%+ annually? Face it- much of the “tech market” is rapidly maturing and headed toward normalized growth rates. To be a true growth investor going forward, you have got to look at the cutting edge and identify a rational strategy to invest- otherwise you are simply another one of the countless investors dedicated to mediocrity.

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