It’s been a while since I ran down The Real Nanotech Investor Pioneers and Big Dogs.

Because I plan to give each set its due, I’ve broken this article up so you can digest one before moving to the next. The Pioneers are a little less challenging because most of these companies are still working on turning their stories into business models. And of those that have business plans, the jury is still out on whether they’ll be able to muster the long-term strategies to break through all the other similar stories on Wall Street.

Since August 2006, the Pioneers are down an average of 4 percent, which masks two things.

First, there are as many double-digit gainers as there are double-digit losers in the Pioneer section. Second, getting involved in developmental-stage companies is a long-term investment; when you’re trying to hit homers, you have to swing the bat more than you keep it on your shoulder. You buy a number of little companies, wait and watch what happens.

On the other hand, my Big Dogs are up almost 22 percent, with five of them up 20 percent to 50 percent since I added them. More on them later.

But this is why it’s essential to put money into Big Dogs for some stability and only then venture into the risk-capital world of the Pioneers. Granted, the Pioneers are the ones with the great stories and the whole “ground floor” ethos that investors love. But you have to kiss some frogs to get a prince, even when you have a pretty clear idea of what’s going on in a particular sector.

For example, Oxonica, the world’s first publicly listed pure nanotech company, is on the brink of oblivion, at least as far as an investment vehicle. As I noted in previous postings—and the fact I put the stock on hold months ago—it’s been dealt a couple major blows in a short period of time.

First, the paternity of one of its major products, the nanotech-based diesel fuel additive Envirox, is now under a cloud. A Dominican firm is suing Oxonica, alleging the latter stole the Envirox technology from them.

Then, its biggest Envirox contract with the national oil company of Turkey, Petrol Ofisi AS, is cancelled. I posted RNI’s nano science guy and Contributing Editor Tim Harper’s (www.cientifica.com) recent observations about Oxonica’s great unraveling.

Tim’s very familiar with the founder of Oxonica and many of its scientists. He’s already doing some digging on what’s going on with the company’s technologies as well as its business plans. Expect more from him in coming weeks on that.

One thing I appreciate about Tim is, while the nanotech sector butters most of his bread, he’s one of the most skeptical—dare I say cynical—voices in disruptive technologies. And that’s precisely why I asked to him to join me on this humble venture. I wanted a skeptical scientist’s view of what’s going on in this market.

For me, there was no point in doing a letter about cutting-edge materials science breakthroughs as a financial editor. There are already plenty of other people doing that with less-than-impressive results.

For RNI, I wanted to create a new paradigm—responsible investment opportunities in cutting-edge technology. I have no plans to build a readership based on ignorance (yours) and greed (yours and mine). I saw what happened to investors in the tech bust, and I want to make sure that doesn’t happen in this building nanotech frenzy.

But as Oxonica and a few other Pioneers illustrate, that doesn’t mean I’m always going to be correct on the investment side, just as Tim’s view of the science doesn’t always translate successfully to the business side. We’re going to be wrong, and sometimes, we’ll even disagree. But we’re both coming from different disciplines, so we tend to look at different aspects of a company, how it fits in with the competition, etc.

In Oxonica’s case, Tim is somewhat more optimistic than I am about its future. Much of this has to do with the amount of knowledge he has about the science and its management team.

I defer to his perspective, but I’m not going to ask anyone to commit any more money toward this stock until something really good happens or one or both of its current problems is resolved. We’re up about 10 percent in Oxonica, but it remains a hold until Tim finishes his analysis.

On the other hand, in Tim’s recent post on Oxonica, he compares it to a public company he views as more sizzle than steak–one of my favorites, Altairnano.

As I’ve said on numerous occasions, the old Altairnano bears little resemblance to the current Altairnano. From a specialty materials company posing as a nanotech company to a specialty materials company with some viable products is a big transition.

Zero-emission fleet cars with Altair’s NanoSafe batteries are selling, and global power company AES Corp dropped $3 million into the company’s coffers at 3.35 a share and also got a seat on the board. Now paint and pigment giant Sherwin Williams is forming a joint venture with Altair called Alsher Titania. The goal is to produce a high-quality titanium dioxide (TiO2) pigment for use in paint and coatings and nano TiO2 materials for various applications, including removing contaminants for air and water.

The biggest piece of this–aside from the continuing boost in Altair technologies’ credentials by major corporations–is that this confirms the company’s proprietary pigment process has some substance. This is a $9 billion global market.

The stock is moving in a trading range between the low to mid-3s, largely because all these development deals aren’t generating any revenue and momentum and day traders love to trade this thing. But by building these partnerships and creating a diversity of alliances off its core materials business, Altair is making all the right moves for a business that’s trying to create a consistent and successful operation in the intermediate to long term.

We’re up about 13 percent on Altairnano, and it’s a buy below 3.35.

There are two Pioneers from Down Under. Both are bio-nano companies.

The first is pSivida, which I wrote a lengthy posting about last Friday. This stock is down about 25 percent, and that’s why I felt it was necessary to take a three-hour train ride to New York to have a two-hour meeting with the managing director (CEO) and sales vice president. pSivida remains a buy.

The other is Starpharma. I’m down about 20 percent on this one, and I wanted to make sure it was still worth buying or holding.

So, a couple weeks ago, I interviewed the managing director regarding the company’s goals, challenges and timetables. The firm’s acquisition of US-based Dendritic Nanotechnologies (DNT) has already paid off in short order. DNT has landed deals with major global chemical company Sigma Aldrich as a unique supplier of dendrimers for some of Sigma’s testing kits for lab use.

That’s significant because it opens up a new market for Starpharma beyond medical applications. The research and testing market is a big step forward.

It’s second deal with a Merck & Co subsidiary places DNT dendrimers in one of the world’s leading pharma’s research and development (R&D) labs conducting dendrimer efficacy experiments in siRNA work. siRNA is now the hottest field for developing vaccines, anti-virals and cancer treatments. Having become the sole dendrimer supplier to such a major R&D firm adds enormous credibility to the quality of Starpharma’s products.

The company’s goal is to focus on the US market for its growth more and more in coming years but also maintain its base in Australia, where R&D costs are significantly lower. That helps keep Starpharma’s burn rate at reasonable levels as it attempts to complete its VivaGel trials, which should be in the next one to three years.

VivaGel is a dendrimer-based gel that, when applied, can prevent the transmission of HIV and genital Herpes B (HSV-2). Recent studies have also shown that VivaGel is a much-more-effective anti-spermicide than the nonoxynol-9 (N-9) currently used on premium condoms.

Because of its detergent nature, N-9 increases the risk of infection with HIV and other viruses such as HSV-2. Starpharma is in discussions with a number of potential partners about using VivaGel as a replacement for N-9. For regulatory reasons, the approval process for VivaGel in this application may offer a faster route to market than the standalone gel.

This kind of news, plus the company’s continuing efforts to make its over-the-counter listing more accessible to US investors, makes Starpharma a buy up to 4.

My next trio is the closest companies I have that derive an important part of their revenue stream from the government teat, specifically defense and aerospace industries. Maxwell Technologies started fundamentally as a government contractor, which helped it develop a unique niche in what I consider to be one of the potentially most influential nanotech-enabled sectors there is, ultracapacitors. And as they say, if you look up ultracapacitors or supercapacitors, the picture is a Maxwell unit.

The company has been around a long time. Within the past decade, it’s moved away from its government contracting work and is now establishing itself on the private side. It also has unit based in Switzerland, which helps it compete in the European space.

Navigating the waters in the public sector versus the government sector is a significantly different challenge, and that’s reflected in Maxwell’s dynamic price swings. Balancing important R&D efforts for its products with landing new accounts and increasing sales in such a nascent market isn’t easy.

The stock is off more than 25 percent since it became a Pioneer. But Maxwell’s management seems to making more good moves than bad, and it has footholds in the German car electronics market as well as the Chinese power market.

It won’t happen overnight, but Maxwell is a worthy ride up to 16.

Electro Energy is another energy storage manufacturer with a much-greater relationship to the military/aerospace sectors than any other Pioneer. That means steady income while it sorts out how it’s going to expand the market for its unique nickel-metal hydride and nickel-cadmium batteries as it develops its lithium-ion battery. Then, it has to find a way to sell the two former technologies into a lithium-ion culture where there’s plenty of competition.

Its future has spooked investors, and the stock is off more than 40 percent from my entry point.

The two advantages I see here—especially at current prices—are the company’s solid sales book, with its contracts with the government, and its purchase of an old Energizer battery plant in Florida. The new plant means the company is capable of producing large quantities of batteries—its own or on contract to another small company like Altairnano. And most of the good news with this company is practically ignored while the Street obsesses on potential fears.

For example, a few months ago, Electro Energy restated earnings. Always a bad thing, especially for little company, correct? No. Electro Energy restated earnings to the upside. It had undervalued the Florida factory and added a couple million its earnings. The stock didn’t budge.

This production facility is a significant advantage to smaller companies trying to hit the big time. It’s like going fishing in a row boat and catching a killer whale; now that you’ve hooked it, how do you land it? You have a company with the ability to produce, say, 10 batteries a week on a lab bench, and then you land an order for 1,000 batteries next month. Where does your product get made to where you can guarantee quality control, etc.?

Yet there’s a lot that has to happen before that scenario pays dividends for the company. The Street has little interest in the company, but having met some of the engineers, reviewed its business strategy and talked to competitors, it’s worth some risk capital if you can leave it in the stock for a while. Electro Energy is buy up to 1.50.

Last in this trio is one of the most-recent additions to the Pioneers, iRobot Corp. A couple subscribers chided me about putting a fundamentally artificial intelligence (AI)-based company in an RNI Portfolio, worried about mission creep. But this is a disruptive technology, and it derives a lot of income from the defense industry, the latter being a major growth market for the former.

Also, I’m a firm believer that AI machines will become as commonplace in our daily lives as nanotech will. So don’t worry; this is a unique stock added at a unique point in time.

When I added this stock, it was like trying to catch a falling knife. I moved in around the mid-15s to 16; it was hard to tell as the stock plummeted so quickly. After the initial recommendation, I advised subscribers to hold off buying it until it stabilized. And now that we’re near my original entry price, and another earnings report has passed with far less fanfare, it’s time to move in again.

iRobot may have an interesting home appliance business with its vacuums, but the real money to be made is in defense and homeland security bots. The US military is buying them, Germany is now buying them, and there’s a whole new generation that’s being co-developed with Boeing.

Can you imagine if Border Patrol were to buy these things and let them loose on the Mexican border? That’s not farfetched; Boeing is a major contractor for border security. Buy iRobot up to 16.25.

Another recent addition is Feel Good Cars Corp, a Canadian plug-in electric vehicle (PEV) maker. This is really an indirect play on FGC’s partner, Texas-based EEStor, a very reclusive ultracapacitor maker. EEStor is being backed by FGC as well as Kleiner, Perkins, Caufield & Byers, the venture capital firm that brought you companies such as Google and Amazon.com.

The stock is up almost 25 percent in about three months, but this summer is where the big money lies. If EEStor delivers the drive unit it’s promised, the PEV market will change forever.

This drive unit would weigh about 70 pounds, last longer than the chassis of the vehicle and could be retrofitted to current internal combustion model cars. It would power cars at highway speeds for 200 miles and be able to be recharged in minutes.

Too good to be true? We’ll see. But we’re making some nice money waiting. Feel Good Cars is a buy up to USD3.10.

It’s not mere platitude that I saved the best for last. I love Spire. And it’s not because I’m up almost 30 percent in the stock. Heck, I was up almost 50 percent a couple weeks ago.

This little guy is diversified—four divisions, medical devices, solar, R&D and custom semiconductors—and moves among them with great aplomb. As the semiconductor market has begun to get much tighter and, therefore, R&D money is harder to come by, its medical device unit has made some major breakthroughs and its solar division is landing contracts on both sides of the Atlantic.

Earlier this month, Spire entered into a teaming agreement with Germany’s KUKA Schweissanlagen GmbH, under which these companies will combine their machine technologies to meet growing demand for fully automated large-scale photovoltaic (PV) manufacturing lines. Europe is going solar, and the fact that KUKA is working with this US company says a lot for Spire’s expertise in this sector.

This is a very closely held company among management and a couple private equity firms. I like that; there’s not a lot of idiots mucking about where they don’t deserve to be. Buy Spire up to 10.

GS Early is editor of The Real Nanotech Investor.
  Portfolio Precepts

I follow four precepts in screening companies. They are as follows:

• It’s What You Do With Size That Matters There’s an old Texas saying: It’s not the size of the dog in the fight, it’s the size of the fight in the dog. Size has a point of diminishing returns. Intellect and agility are always prized attributes in the race to the top of the food chain.


• Show Me The Money A big firm has to be looking for a way to make the economies of scale work. Ideas being tweaked in R&D year after year without management committed to rolling out a product are worse than worthless.


• Friends In High Places Being well-connected can be an enormous benefit if you’re big or little. The national defense industry is always looking for the Next Big Thing and usually has the money to throw at anything reasonably attractive. It’s always encouraging to see little guys working with the big guns for a piece of the subcontractor crumbs–it’s the best way to make it big or get bought out.


• Wake Up, Sleepy Dreamer Companies have to pick a spot and do battle—with a plan. Cool ideas with 50 different applications mean a company is looking for handouts for a buyout of the idea, not any specific product. Until a company has the guts to develop a clear strategy on how it plans to exploit a market, its investment value is limited at best.