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By Leo Fasciocco, Syndicated Investment Columnist
October 2003 - Often, one fancy catchword or theme sparks a certain stock group, and it does extremely well, surpassing all mundane tries to box it in with valuation analysis. It is the old Wall Street story of investing in the dream. It can often be very rewarding to investors -- especially those who are the first to spot the new development.
Back in the 1980s, it was computers, then computer software, biotechnology, telecom, networking and the Internet -- the .coms.
What will the next big fad be that will drive up a new breed of tech stocks?
Could it be nanotechnology?
Nano what you say?
Is that something left over from Mork and Mindy?
No, it is a method of producing products starting with their smallest component, the atom. One scientist explains it like this, “Manufactured products are made from atoms. The properties of those products depend on how those atoms are arranged. If one rearranges the atoms in coal, one can make a diamond. If one rearranges the atoms in sand (and add a few other trace elements), one can make computer chips. If one rearranges the atoms in dirt, water and air, one can produce potatoes.”
Today's manufacturing methods are very crude at the molecular level. Casting, grinding, milling and even lithography move atoms in thundering herds. It is like trying to make things out of Lego blocks with boxing gloves on your hands. You can push the Lego blocks into great heaps and pile them up, but you can't really snap them together the way you'd like.
In the future, nanotechnology will let one take off the boxing gloves. One will be able to snap together the fundamental building blocks of nature easily, inexpensively and in the ways permitted by the laws of physics. This will be needed if the revolution in computer hardware is to continue. Nanotechnology has the potential to permit the fabrication of an entire new generation of products that are cleaner, stronger, lighter and more precise.
The word "nanotechnology" is used to describe many types of research where the dimensions are less than approximately 1,000 nanometers.
Investors should keep a keen eye on this potentially explosive area and the publicly traded stocks that have a big stake in it. Also, there is a chance some closely held "nanos" will go public in the future.
One nano stock that is doing very well this year is NVE Corp. (NVEC). This year, it soared from $8 to a peak of $45 by early September -- a 463 percent gain. The firm, based in Minnesota, develops sensors using spintronic materials called giant magnetoresistors. Spintronics differs from conventional electronics in that they use the spin -- rather than the charge of electronics -- to store and transmit data.
NVE's sensors are used in aerospace, automotive and factory automation. The word is that NVE's system (called MRAM) is expected to eventually replace currently used memories, such as DRAM, SRAM and flash memory, for use in computers, laptops and cell phones. MRAM is smaller, faster and more energy efficient. Other firms are working on the technology too.
Some analysts believe NVE will do well because of its potential for licensing MRAM. NVE earned 16 cents a share for the fiscal year ended March 30 compared with a loss of 60 cents a share a year ago.
Cypress Semiconductor (CY) holds a stake in NVE. Flamel Technologies S.A. (FLML), based in France, is a hot nano number that has streaked ahead from 4 this year to a peak of 38.90. It is working on a micropump, an oral, controlled delivery system for small molecular drugs. The company also developed a product called Medusa, which uses an amino acid polymer to microencapsulate proteins.
In addition, it is working with Monsanto on a nanoparticle delivery system for agricultural chemicals. Analysts expect Flamel's net to climb from 9 cents a share this year to 64 cents a share next year and $1.12 a share in 2005. Some other interesting nano plays are Skyepharma Plc. (SKYE), a developer of nanoscale drug delivery systems.
The stock has moved up from $8.44 to $13 this year. Net is expected to rise from 4 cents a share in 2002 to 23 cents this year, 35 cents next year and 50 cents in 2005. Another interesting play to watch is Nano-proprietary Inc. (NNPP), which holds patents involving carbon nanotubes for field emission displays, or flat panel screens.
The stock has climbed from 80 cents to $2. There are some non-public nano stocks that one should watch for if they go public. They include Nanosolar Inc., NanoStream Inc. and Nanosys. Of course, investors should not rush out and buy nano stocks without looking both ways -- at the technicals of the stock and the fundamental outlook for earnings.
The nano theme could last for some time. So, it would be best to be patient and pick your spot to enter these issues.
Mr. Fasciocco's articles appear on www.tickertapedigest.com. He is an independent contributing writer for several national publications. He is also president of Corona Investment Management. To get a free trial subscription to the Ticker Tape Digest Pro Report, which comes out daily on the web with midday updates, send an email message to freetrial@tickertapedigest.com. Mr. Fasciocco can be reached by email at leo@tickertapedigest.com.