Nanotechnology Companies Stock

The emergent industry of nanotechnology has grown exponentially in the past ten years, and the stock market has struggled to keep up. As nanotech companies proliferate, there is some confusion over what constitutes a nanotech stock.

For example, the ISE-CCM Nanotechnology Index defines a nanotech stock like this:

“Companies involved in the science and technology of building electronic circuits and devices from single atoms and molecules. Applications involve the intended ability to manipulate materials to fundamentally improve processes, materials, and devices on an ‘atomic’ scale.”
Meanwhile, Merrill Lynch states in its documentation:

“Our new criteria for inclusion in the index is companies that indicate in public documents that nanotechnology initiatives represent a significant component of their future business strategy. We believe this definition, although still subjective, is more objective than our previous criteria that companies must have a significant percentage of future profits tied to nanotech.”
The problem with any attempt at defining a nanotech stock is that one must start with defining the nanotech industry. Nanoscience affects many scientific fields, industries, markets and products.
A “pure” nanotech stock for instance would be a company that manufactures nanoparticles, and nothing else. But as nanotechnology is an applied science, the plurality of nanotech companies have a particular product in development toward which their technology is directed. For instance, chemical giants BASF or DuPont produce nanomaterials–should they not as easily qualify as a nanotech stock, as a nanobiotech company like Geron or Amgen? Or companies that take “pure” nanomaterials and use them to make parts for end products that are not nanotech-specific, such as stain-resistant fabric or enhanced computer displays.

In the end, it must be decided what percentage of a company’s revenues should come from nanotech before they become a nanotech stock?

The volatile state of the three major exchange-quoted nanotechnology stock indices reflects this uncertainty.
Starting in late 2005, all three would have outperformed the Dow Jones Industrial Average. But in June of 2006, stocks dropped by 5-10%, with no clear reason for the sudden reversal.

As might be expected by a new industry whose primary funding is directed into research and prototype development, it is best to look into nanotech stock as a long-term investment. Growth over the next several years is likely, but there are equally likely to be bumps along the way.