Investors are getting excited about nanotechnology. The promise of quantum leaps in electronics, communications and medicine mean that investors who get in early with the right company can make a fortune. Of course, that’s the rub: finding the right company. “Nanotech” is being marketed today the way artificial intelligence was hyped a decade ago, as if you could add some to your product the way a chef adds spices to his dish. Thus, investors have to be savvy about nanotech investments in order to avoid throwing their money away on vaportech.
The first question an investor must ask is whether a company can actually produce the technology it is touting. You must get several independent assessments of the company’s potential before you write a check. Next, you need to ascertain whether the promised technology fulfills any need. A bright idea with no market is a money-loser. Third, what’s already out there or being developed that might be more attractive? Perhaps a competitor has come up with a better manufacturing method for the same idea. All three questions frame the type of risk a nanotech investor assumes. Risk is good as long as you have a handle on the downside. Always know how much money you are prepared to lose before entering into an investment.
Notwithstanding the risks of nanotech investing, blue chip companies, exchange-traded funds and hedge funds are all getting into this area in a big way. Giants like IBM, General Electric and Intel are all pursuing nanotech projects. Hedge funds are setting up trading desks devoted to the nanotech phenomenon. Revenues in the next few years will flirt with $3 trillion as nanotech becomes mainstream.
Individual investors can look at ETF’s like the PowerShares Lux Nanotech Portfolio as a vehicle for acquiring nanotech shares. Another way to play the industry is to research which drug companies are most aggressively pursuing nanotech as a means of creating drug delivery systems that have pinpoint accuracy. Drugs like Abraxane are pioneering the use of nanotechnology for treating cancer. Abraxane inhibits cell division in tumors, and it can be bound to nano-albumin molecules.
Despite some skepticism from observers, most fans of nanotech do not think it will be a fad like the dot.coms of the last decade. The main difference between then and now is that current nanotech efforts require companies to have a strong scientific and technical background. This requirement will tend to prohibit vaportech companies from proliferating in the marketplace.