Take it a step further. Imagine if it were possible to create machinery, tools and materials the size of nanometers or at the nanoscale. Imagine investing in that technology. Welcome to the world of nanotechnology stocks. This article will review the potential and risks associated with investing in nanotech stocks.
What is Nanotechnology?
Nanotechnology is the science of creating, using and applying materials or structures that are less than 100 nanometers or one-millionth of a millimeter (nanoscale) to create something to serve a purpose or function. It alters and manipulates components and the size of atoms and molecules to create materials, ingredients, substances and compounds. In other words, it's the manufacturing and application of products at the nanoscale. You can find nanotechnology across many industries.
Immunotherapy and precision medicine use nanoparticles, where drugs and genes are delivered directly to cancer cells. Manufacturers are already using it to create nanocomposites, which are more potent and lighter materials used in the packaging, construction and aerospace industries.
Overview of Nanotechnology
The nanotech industry focuses on creating and monetizing new products that utilize materials created at the nanoscale. Many industries have already implemented nanotechnology, including electronics, food, robotics, automotive, chemicals, textile, technology, apparel, cosmetics, medicine, healthcare, industrial, energy and construction. With the advancement of new products, the demand for nanotechnology should grow.
For example, the electronics industry will benefit from the smaller and smaller components needed to produce faster and smaller semiconductors. Smart televisions and smartphones use carbon nanotubes and quantum dots. The applications continue to grow and will foster new technologies and industries as it evolves.
Future of Nanotechnology
The future of nanotechnology will be the continued evolution and commercialization of products created by materials at the nanoscale. Advancements in nanocomposites and nanostructured catalysts will develop more efficient clean energy, which can improve the efficiency of batteries and solar fuel cells. Nanotechnology will enhance quantum computing, further revolutionizing materials science and drug discovery.
Nanostructured metals, materials and ceramics will improve the construction, automotive and aerospace industries. Nanotechnology will help clean the environment as products clean oil spills, reduce emissions and remove pollutants from water and soils. These lighter, more robust, efficient and improved products will transform industries and reverberate into our daily lives.
Pros and Cons of Investing in Nanotechnology
Before investing, you must weigh the pros and cons, and nanotechnology is no exception. Here are some of the key pros and cons of nanotech investments.
The benefits of nanotechnology include the following:
- New industries and products: Cutting-edge innovations and technologies can foster new industries and products as evolution accelerates. The developments can be exciting, and getting in early can lead to a significant upside.
- Growth potential: High growth potential can foster demand for nanotechnology. You may see the potential for hefty investment returns as new products and breakthroughs help spike share prices.
- Social benefits: Nanotechnology's uses range from improving clean energy, boosting food supply and accelerating medical breakthroughs to help society and its inhabitants. There is a feel-good factor that comes with investments that have reverberating benefits in our daily lives.
Now, the downsides of investing in nanotechnology:
- Still young technology: There are high risks of losing your investment because the technology is still in its infancy. While nanotechnology promises fantastic products and innovations, many companies will fall flat and either run out of money or fail to follow through on execution.
- High costs: It costs a lot to advance technology and develop products. Prototypes can take years and billions of dollars to create successfully, just like investing in biotech stocks.
- Regulation risk: Regulation is always a risk regarding the safety of the products, especially in the medical field. Materials may have side effects or environmental risks associated with the dosage or usage. Since the technology is still new, it will take time to settle clear regulatory guidelines.
How to Invest in Nanotechnology
When it comes to investing in nanotech, it pays to filter down the areas of nanotechnology you wish to explore. Here are five steps to help you invest in nanotechnology.
Step 1: Research specific industries.
Start researching nanotechnology and then filter down to select industries where you can apply it. While nanotechnology is a science, it's not yet quite an industry. As mentioned earlier in this article, it is a technology used to improve and accelerate improvements in existing industries. Find specific industries you see the most potential in and start there.
Step 2: Find companies.
You may come across specific companies as you learn about the industries that can benefit most from nanotechnology. Find those public companies that can either benefit from implementing nanotechnology or the companies that are facilitators of nanotechnology. These are top-rated tech stocks for investors. Include companies you may be familiar with, some of which you may have never heard. Once you gather a list of public companies, the actual legwork begins.
Step 3: Complete fundamental analysis.
Next, research each company's fundamentals, which includes reading research reports and gauging growth in terms of revenues and profits or losses. Get an understanding of its business strategy and how they are performing. Be sure to distinguish whether the company is already producing products and generating revenues from nanotechnology or is still in the conception phase.
One company may have tangible assets, while the other may be based on hype and speculation. Both may still have risks, but the degree of risk can be a night and day difference. Compare technology stocks, including industrial and healthcare stocks, using nanotechnology. Select the stocks with the best fundamentals in growth potential and profits.
Step 4: Apply technical analysis.
To perform technical analysis, it helps to familiarize yourself with candlestick charts, trends, support and resistance levels. The underlying stock price action is just as necessary as the business itself. You want to find price support and resistance levels and understand the price trend, whether it goes up or down.
If the shares are very cheap, then know that the risk is higher, as the company may be burning a lot of cash and still in the early stages of creating or selling its products. As you run technical analysts through your select stocks and their charts, find the support levels to watch for pullbacks for potential entries.
Step 5: Plan your investment.
Determine your final selection(s) of stock(s). Your technical analysis should provide opportunistic price support levels where you can enter on a price pullback rather than chasing a higher-priced entry. Make sure you allocate a percentage of your portfolio correctly. The more speculative an investment, the smaller your portfolio allocation should be. Consult with an investment advisor before pulling the trigger. Make sure you quantify your risk in terms of capital invested and where you will throw in the towel and take a stop-loss to protect your investment.
Manage Your Risk with Nanotechnology Investing
While nanotechnology is exciting, you must also limit your risk as it is still a speculative industry. Risk is proportionate to reward. The best way to limit risk is to limit the allocation in your portfolio to speculative investments. Depending on how a company uses nanotechnology, you can face a high- or low-risk investment. If the company has grown revenues and profits are rising, the risk is less than a penny stock with no revenues and just the concept or IP. Investing in nanotechnology can mean investing in large-cap stocks that apply the technology but also have mainstream sources of income. Some stocks will cover many different industries and forms of nanotechnology, so be sure to allocate them properly.
Be aware of the Gartner Hype Cycle, where conceptual companies tend to raise the initial speculation wave higher but are the first to crash and burn as the hype dies down. Companies with actual applications will rise from the ashes and become leaders. This has happened with every stock market theme, from internet stocks to solar energy, 3D printing and cloud computing.
Understand your risk profile and consult an investment advisor as needed. The market climate makes a significant impact on stock price action. Rising bull markets result in more hubris while falling bear markets are risk-off periods where prices fall further for companies that can't show tangible top and bottom-line growth. Awareness of the overall market direction and sentiment can help you price your entry and expectations for both the upside and downside of your investment(s).
Here are some common questions frequently asked about investing in nanotechnology.
What is nanotechnology?
Nanotechnology is the science of producing, creating and applying materials and products at the nanoscale (less than one-millionth of a meter) to improve existing or new capabilities and industries. Nanotechnology is an evolving science but has the potential for mega growth.
What is nanotechnology stock?
A nanotechnology stock is a publicly listed company that creates, applies, uses or facilities materials and products at the nanoscale. These range from highly speculation over-the-counter (OTC) stocks to S&P 500 index component blue-chip stocks.
Is nanotechnology worth investing in?
Yes, nanotechnology is a natural science with practical applications, but it has much more potential. There is tremendous upside to investing in nanotechnology, but it also involves significant risks. As with any portfolio, it pays to be diversified and make sure not to place all your eggs into one basket.