Nanotech Indexology

What is a nanotech company? That depends on who you're talking to. There are only a few publicly traded nanotech companies, but that hasn't stopped various financial companies from putting together nanotech portfolios designed to collectively reflect the industry. As an exercise, I decided to put five such portfolios side-by-side to see how they compare (shown in two panels below). The right hand column is a compilation of all the companies that appeared on more than one list. Four companies were contained on all five indexes, including a manufacturer of nanoparticles (Altair), two drug delivery companies (Flamel and Biosante) and a manufacturer of electron microscopes (FEI Co). Those that made it on all but one list included a molecular modeling company (Accelrys), a venture capital company (Harris & Harris), a manufacturer of X-ray lasers and microscopes (JMAR Technologies), and the market leader for atomic force microscopes (Veeco).



Click to expand.

The Lux Research Nanotech Index contains companies that you wouldn't normally associate with nanotech, like Toyota Motors, but I have given them enough grief for this previously. Their large cap stocks are considered nanotech-oriented because they are "incumbent end users." All of the portfolios include companies that might more properly be considered biotech. Admittedly, this is a hard distinction, because almost everything that biotech companies do is at nanoscale. But I don't think there is much to be gained by reclassifying all biotech companies.

What does this exercise in indexology tell us? Only that despite the small number of publicly traded nanotech companies, there's very limited agreement on which ones are important. If we put together five lists of say, carmakers, I think they would be substantially identical.

On Monday, I will add to the confusion by introducing the Edwards' Real Nanotech Index as a public service to the investment community. I hope you all are looking forward to it.