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Nanotechnology is poised to change our world in unimaginable ways. It’s certainly emerging as an investment bonanza. But as with every new technology, a huge gap exists between the laboratory and the marketplace. Below, I highlight my favorite nanotechnology investment play.

Nanotechnology is not really a new field. Modern nanotech began in the 1980s, when the scanning tunneling microscope enabled scientists and engineers to see and manipulate individual atoms.

However, the recent advent of more powerful equipment, such as super lasers, is accelerating the development and application of nanotech.

Simply put, nanotechnology is molecular-level engineering, i.e. the manipulation of atomic scale devices, materials and processes. At a mere billionth of a meter, a nanometer is approximately three atoms wide, about 1/100,000 the diameter of a human hair.

Nanotech applies specifically to the ability to arrange atoms and molecules to create materials with radically new structural, electrical, chemical, and optical properties. By altering, for example, the chemical bonds of light metals, say aluminum, it’s possible to create an aluminum many times stronger than steel.

Nanotech applications can be found in a wide variety of sectors, including medical care, energy, cosmetics, textiles, electronics, manufacturing, biotechnology, space exploration, satellites, and aerospace/defense.

Nanotech makes it possible to create invisible particles that target cancer cells in the human body; faster microprocessors that consume less energy; electric vehicles (EVs) that run far longer on a single charge; lighter and more efficient aircraft; solar panels that are exponentially more efficient…you name it.

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Nanotech researchers are already experimenting with, for instance, liquids that, when stimulated by an electrical charge, become as hard as stone, and conversely, metals that take on the properties of a liquid.

According to Grand View Research, the global nanomaterials market size was valued at $2.0 billion in 2020 and it’s expected to reach $32.77 billion in 2030 (see chart).

A small-cap among giants…

Which brings me to my nanotechnology stock recommendation: Veeco Instruments (NSDQ: VECO), a maker of semiconductor and thin film process equipment primarily to make electronic devices worldwide.

Veeco markets and sells its products around the world to integrated device manufacturers and foundries; outsourced semiconductor assembly and test, hard disk drive, and photonics manufacturers; and research centers and universities.

To dispense with the technical jargon, suffice it to say that Veeco uses a proprietary NanoTech Atomic Layer Deposition tool that allows digital thickness control to the atomic level.

Veeco’s main competitors are diversified mega-caps, such as Taiwan Semiconductor Manufacturing Company (NYSE: TSM). However, Veeco is appealing as a growth investment because it sports a market cap of $1.1 billion, which officially makes it a small cap. The company’s size gives it further room to “move the needle.”

Veeco has been in acquisition mode, snapping up smaller tech “disruptors” and absorbing their know-how. Notably, in February 2023, Veeco announced that it acquired Epiluvac AB, a privately held manufacturer of chemical vapor deposition systems that enable advanced silicon carbide applications in the EV market.

Veeco’s cash on hand totals a robust $302.4 million (most recent quarter), which gives the firm plenty of financial wherewithal to make further acquisitions and invest in research and development.

More importantly, Veeco focuses on nanotechnology, whereas nano is just another business segment for most of its competitors. Based in Plainview, New York, Veeco is evidence that Silicon Valley doesn’t have a monopoly on leading edge technology.

On February 15, Veeco reported solid operating results for the fourth quarter and full year 2022. The highlights:

Fourth Quarter 2022:

• Revenues of $153.8 million, compared with $153.0 million in the same period last year.
• GAAP net income of $128.9 million, or $2.00 per diluted share, compared with $8.2 million, or $0.15 per diluted share in the same period last year.
• Non-GAAP net income of $21.9 million, or $0.38 per diluted share, compared with $22.6 million, or $0.43 per diluted share in the same period last year.

Fiscal Year 2022:

• Revenues of $646.1 million, compared with $583.3 million in the same period last year.
• GAAP net income of $166.9 million, or $2.71 per diluted share, compared with $26.0 million, or $0.49 per diluted share in the same period last year.
• Non-GAAP net income of $89.6 million, or $1.57 per diluted share, compared with $73.6 million, or $1.43 per diluted share in the same period last year.

The consensus expectation among analysts who follow VECO is that the company will rack up earnings growth of 91% over the next five years (on an annualized basis). VECO shares have risen about 17% year to date; the 12-month forward price-to-earnings ratio is 17.8, which is reasonable in light of its growth prospects.

PS: Looking for additional opportunities in the technology sector? In a new report, my colleague Dr. Joe Duarte unveils a tech disruption worth $75 trillion, and it all starts with one under-the-radar $3 stock. Learn more by clicking here.

John Persinos is the editorial director of Investing Daily.

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