Investing In Nanotechnology: Nanotech's Four Profitable Categories

Alexander Green
by Alexander Green, Chief Investment Strategist

Investing In Nanotechnology: Nanotech's Four Profitable Categories

by Alexander Green, Investment Director

Thursday, February 8, 2007: Issue #648

The Industrial Revolution of the 21st century is underway...

Like the one that occurred 200 years ago, this one is tremendously important, affecting virtually every industry worldwide. And while you stand to benefit greatly from this new wave of applied technology, you'll never see it with your naked eye.

(Unless, that is, you're familiar with atomic force microscopes, electron beam lithography, and similar esoteric equipment.)

This sounds futuristic, I know. But more than 600 companies worldwide are already involved in this exciting new sector. Later in this issue, I'll share the best ways to go about investing in nanotechnology. But first, let me tell you more about nanotechnology.

The new industrial revolution I'm talking about is nanotechnology, the precision creation and manipulation of matter on the atomic scale.

An Introduction to Nanotechnology

In the last 15 years, at least a dozen Nobel prizes have been awarded in the field.

The outlook is so promising, in fact, that corporations and governments worldwide have pumped over $4 billion into research and development here in the last year alone. Almost every university in the world with a scientific curriculum has created a department for further exploration, or applied for the funding to start one.

More importantly, companies have already applied this technology to a variety of consumer products, including automobile parts, semiconductors, clothing, sports equipment and toys, to name just a few.

It's also being used to develop high-tech sensors, radioactive waste processors, information storage devices for computers, high-performance catalysts for industry, and contrasting agents for CAT scans.

Chances are you've already read something about the exciting developments occurring here. Yet most investors have absolutely no exposure to this fast-moving sector.

It's the End of the World As We Know It... But Not If You're Investing In Nanotechnology

Last month, I wrote to you addressing the question of whether the world is running out of oil.

My answer was "no." Higher oil prices are an incentive to explore more broadly, extract more efficiently, and continue the search for better technology and energy alternatives.

Higher oil also tends to be self-correcting. Why? Because it encourages greater conservation.

But looking out a little further, I mentioned another solution that is seldom considered. According to scientist and author Ray Kurzweil, nanotechnology will make crude oil obsolete within two decades.

This sounds outlandish at first blush But hear him out.

"Even though our energy needs are projected to triple within 20 years," he wrote recently, "we'll capture that .0003% of the sunlight needed to meet all of our energy needs with no use of fossil fuels - by using extremely inexpensive, highly efficient, lightweight, nano-engineered solar panels. From there, the energy will be stored in safe, highly distributed fuel cells."

"Solar power," he insists "is now providing one part in a thousand of our energy needs. But that percentage is doubling every two years, which means multiplying by a thousand in 20 years. Almost all of the discussions I've seen about energy fail to consider the ability of future nanotechnology-based solutions to solve this problem. This development will be motivated not just by concern for the environment, but by the $2 trillion we spend annually on energy. This is already a major area of venture funding."

Plenty of scientists, including pioneering nanotechnologist Dr. Eric Drexler, argue that Kurzweil is right. Investors, take notice.

Nanotechnology Investing's Four Profitable Categories

The U.S. National Science Foundation has predicted that the global market for nanotechnologies will reach $1 trillion dollars or more within the next 20 years.

And that's only the applications that are currently well understood; literally hundreds of new applications are being pursued by the research community right now and this has the investing community salivating.

Commercialization of nanotechnology is incredibly broad-based, but can generally be divided into four basic groups or categories:

  • Nanomaterials are the basic building blocks usually employed to make other more complex structures. "Nanotubes," for example, are specialized nanoparticles now used in the manufacture of flat-screen TV and computer screens.
  • Nanointermediates are larger, more complex products that usually contain nanoscale features. Examples include coatings, optical components, orthopedic materials, super-conductors, memory and logic chips for computers and contrasting agents for CAT scans.

The biomedical field is manufacturing artificial bone composites utilizing nanomaterials made from the same mineral as natural bone, yet they have strength equal to that of stainless steel.

Zinc oxide nanoparticles are now being used in sunscreen, and other nanoparticles are being used in soaps, bandages, plastics and textiles.

  • Nano-enabled products are finished goods incorporating nanotechnology. These products are now in cars, airplanes, computers, consumer devices, processed foods, pharmaceuticals, appliances and the like. Next generation Lithium-ion batteries will utilize several different kinds of nanoparticles.
  • And, finally, nanotools are capital equipment and software used to manipulate, visualize and model basic materials at the nanoscale level. Atomic-force microscopes, scanning tunneling microscopes and molecular modeling software are examples of nanotools.

Full Steam Ahead for Nanotech Companies and Investors

Today, nanoparticles are being introduced into many existing materials, making them stronger or improving their conductive properties. Much stronger chemical compounds called polymers, for instance, make up plastics that can be used to reinforce materials and replace metals, even for semiconductors used in computers.

If you've ever had to undergo a CAT scan or an MRI and an intravenous fluid was used, chances are good it was a contrasting agent containing Quantum Dots. When these semiconducting nanocrystals are bathed in ultraviolet light, they emit a spectrum of very bright colors that are up to 1000 times brighter than conventional dyes.

This fluid can be interpreted by special imaging software, and radiologists can then identify and locate cell structures and other biological areas of interest.

Have a laptop, cell phone or digital camera? Chances are good that its display technology makes use of nanostructured polymer films.

OLEDs, or organic light emitting diodes, have been used for several years already. Among OLED screen advantages are brighter images, lighter weight, less power consumption and wider viewing angles.

The oil industry and the automotive industry are currently using nanoscale catalysts for refining petroleum and for making catalytic converters used in cars and trucks. In both cases, less material is required, allowing substantial costs savings.

Large-scale water purification plants take out chemicals and eliminate the tiniest bacteria and viruses from dirty water, thanks to nanotechnology.

Conclusion

I could go on, but the point is this: While the future for nanotechnology is bright, it's pretty much here already. And that means it's not too early to consider investing in nanotechnology. Stay tuned for updates on nanotech stocks and the companies behind them here at Investment U. Meantime, read the Investment U Crib Sheet below for more on the companies currently both manufacturing, and benefitting, from nanotechnology.

Good Investing,

Alex

Today's Investment U Crib Sheet

  • Just how small is a "nano," anyway? In the metric system of measurement, a nano equals a billionth. So, a nanometer is one-billionth of a meter. Things that can be measured in nanometers are well beyond the viewing capacity of even the best conventional microscopes. Nanoscale materials, for example, are at least a thousand times smaller than a human hair. And human red blood cells are more than 2,000 nanometers long.
  • What companies are benefiting from cutting-edge nanotech? DuPont, General Electric, BASF, Hewlett Packard, Intel, IBM, Toyota and 3M, to name a few. GE, for example, produces silicones that measure less than 100 nanometers to improve the scratch resistance of its plastics.

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