Well, after many threats, I’m finally getting around to updating the Big Dogs piece of the RNI Portfolio.

Part of the difficulty has been that, because these companies are much more broadly diversified, the nanotech stories they have don’t possess the same flair as some of the Pioneers.

For example, if BASF (which is up almost 60 percent since I recommended it in August 2006) adds some nanomaterial to a line of refractive polymers to be used in industrial foam for furniture manufacturers, it doesn’t have the same zing as landing an exclusive marketing deal with a global leader for a company’s sole product.

So the Big Dogs can be a bit boring on the news side–but not on the stock side. The Big Dogs are up almost 30 percent in about eight months. That’s a nice run.

And it’s the other reason why I’ve been dragging my feet on reviewing these successful companies; they’ve done really, really well. In a limited universe of major nanotech-involved companies, you have to be pretty careful.

Should I sell these great companies, book the profits and make the marketers’ jobs easier, and then find some second-class companies to replace them? Should I hold them and risk alienating my readers who see these things moving but are told not to get in? Do I issue buys and hope to God these things stay in rally mode?

Doing nothing is also an active choice. And up to now, that’s what I’ve done. I’ve let the profits run, and I’ve asked subscribers to hold on to positions if they bought in time and to look for other opportunities in the meantime as I evaluated whether these current valuations were sustainable and higher prices were realistic.

Don’t expect the huge gains to continue forever. These were supposed to be rock-solid, steady growers, remember. But I’m pretty comfortable at this point that, even if these companies correct from their lofty levels, they’ll be significantly higher in a couple years.

And now it’s time to give you the lowdown on the Big Dogs.

German Giants

Siemens, like its German counterpart BASF, is reaching a profit near the 60 percent range.

What’s happening here isn’t that the companies are doing something new or different; it’s just that US institutional investors, hedge funds, etc., are discovering them. And what they’re finding is these companies are (were) undervalued and growing much faster than their US counterparts. Plus they’re much better positioned for future growth than many of the US conglomerates they compete with.

Most of the news out of Siemens has been about its bribery scandal and subsequent firings and hirings. Beyond that is a company that’s expanding in core growth markets such as China and the US, as well as continuing its successes at home in Europe.

I’m changing Siemens to a long-term buy below 125.

As mentioned earlier, BASF is up about 60 percent and this rally has only put the company into a position where it’s fairly valued now versus its US peers. The only difference is BASF has a much brighter future than its US competitors like DuPont.

Contributing Editor Tim Harper and his economic team at Cientifica delivered their assessment of nanotech industrial growth in the coming decade. One of the most promising sectors is textiles. BASF is all over this and most of the hot nanotech sectors. No wonder the company has one of the largest nanotech patent portfolios in world—and knows how to use it.

There are few companies this size that have so successfully committed to optimize cutting-edge technology into their enormous industrial operations. BASF is a long-term buy up to 125.

My third and most-recent German company is pharmaceutical and chemical giant Bayer. This puppy is up almost 30 percent in less than three months.

The German government has been very supportive of nanotech research and development, so it’s no surprise that the trio of German industrial titans I hold exemplifies that mandate. Bayer holds significant numbers of nanotech patents for medical, therapeutic, industrial and chemical applications.

And like its sister companies, it’s been significantly undervalued until now. Luckily, we grabbed on as the market corrected that oversight. Now, even as it’s competitively valued to its peers, it’s still a great value for long-term investors.

In March, it reported a record quarter, with profits up 12.7 percent and more growth expected. It also announced more than 6,000 job cuts, which is quite a statement for a German company. (Generally, German companies are less investor friendly than similar US firms, where layoffs or job cuts to meet growth targets are common practice.)

Although I don’t find it an ideal strategy for long-term success, organizations the size of Bayer need to be re-evaluated constantly. If something isn’t working or isn’t fulfilling the broader corporate mission, good management dictates you take action.

Bayer is buy up to 75.

Made In The USA

Armor Holdings has been purchased by up-and-coming UK defense contractor BAE Systems for $88 a share. That means we scored an almost 70 percent gain in less than six months–not bad.

As I mentioned in an earlier post, I really like BAE, which purchased Bradley Fighting Vehicle maker United Defense a few years ago and continues its strategic acquisition of US defense assets. Apparently, the buyout for current Armor Holdings stockholders will be in cash, not stock. That means once the buyout occurs I’ll remove Armor Holdings from the Portfolio.

I would love to keep BAE in the Big Dogs, but I’m going to hold off recommending this swap for a while. The defense sector is very hot right now, and some of these stocks are getting a little ahead of themselves.

I’m going to wait to see how BAE digests this purchase and where it is after the next few months. Hold Armor Holdings until the buyout, and wait to buy BAE until I give the signal; Big Dog QinetiQ is a better option at this point.

Motorola is the only stock that’s underwater in my Big Dogs posse, down about 20 percent. It’s also one of the least diversified Big Dogs, and that’s been its downfall of late.

The stock began its slide in late December when it looked like deep discounting of its wildly popular Razr cell phones was going to affect margins and profits for the quarter. Because Moto’s cell phone division represents a lion’s share of the company’s revenue, Wall Street began to panic.

It was at this point the uber-investor Carl Icahn decided it was time to see if he could shake things up with Moto’s management. He went out and bought about a 4 percent chunk of Moto stock in the hopes of getting a seat on the board. His goal was to use the huge amount of cash the company has in the bank to buy back some of its stock and get the company back on its path of innovation.

This didn’t sit well with CEO Ed Zander, who’s been less than enthusiastic with Icahn’s interest and opinions. Luckily for Zander, Icahn’s bid didn’t work, which also–coincidentally, I’m sure–was met with the launch of a new Razr model and its new Q9 multimedia phone.

There was also some speculation that Moto was interested in buying languishing Palm because it hasn’t made much headway in the handheld device market now dominated by Blackberry. But that remains to be seen.

At this point, Motorola is in transition with its cell phones, and Zander & Co likely have a couple more quarters to deliver some kind of vision before Ichan gets more support from institutional holders like Calpers. But whether Zander pulls off some innovative moves or its left to a new board and management, Motorola has significant technology assets, including some very good nanotech-driven screen display technology.

Motorola remains a buy below 20.

Japanese Gentry

Toshiba is finally moving after treading water for the first three to four months in the Portfolio. We’re now up a little more than 20 percent on this Japanese electronics conglomerate.

While its consumer electronics division continues to expand into the US marketplace, the company is also making significant inroads into China’s nuclear energy infrastructure.

Japanese company’s have been shunned by US institutional and individual investors for a decade or more, but that’s changing. The dollar is losing its luster; while the euro and British pound are seeing increasing popularity, so is the yen. And after numerous threats that the Japanese economy is finally out of the doldrums, this time around it looks like it’s actually true.

I recently spent time with a trader and money manager who splits his time between the US and Japan, speaks fluent Japanese and has been integrated into the culture for decades. He was very bullish on the Japanese economy and stock market moving forward.

It also helps that China-Japan relations have warmed and both countries are seeing the strategic advantages of maximizing regional cooperation. Japanese firms are landing numerous significant infrastructure and commercial contracts in China.

Toshiba, having one influential foot in China in particular and Asia in general and one in the US consumer market, makes a great long-term buy up to 9.

NEC’s visibility is even lower than Toshiba’s simply because it doesn’t really make retail products. Granted, the company discovered the multiwalled carbon nanotube, as well as the carbon nanohorn, and has those patented and licensed. But even in nanotech circles, you don’t hear a lot about this IT firm.

Much of NEC’s business is done at the component and commercial levels. Even there, most of the company’s revenue comes from Asia and Europe, not the US.

This is precisely why I have it in the Big Dogs. It’s a great play on everywhere but the US. If the US economy cools, NEC stays largely unaffected, while other companies with significant US exposure will be hurt.

I’m also convinced its pioneering nanotech work will also pay off in coming years, most likely by either creating nano-engineered components for one of its current product lines or by licensing its technology to aspiring manufacturers or distributors. And as Japan begins to reinvigorate, NEC will be a direct beneficiary.

One cool new thing from this company is a corn-based bio-plastic that conducts heat faster than stainless steel. NEC aims to replace 10 percent of the plastic used in its products with bioplastic by 2010.

The bioplastic is cheaper than other fiber-reinforced plastics because it requires less carbon fiber to conduct heat. But it’s still more expensive than stainless steel until manufacturing reaches higher levels.

NEC is buy up to 7.

The British Invasion

QinetiQ had a good run late into 2006 but sold off in early 2007. We’re up about 7 percent or so at this point.

But I expect BAE-type things from this UK-based defense company. It’s already moving into the US market–buying up companies to credentialize its US presence and landing contracts with the armed forces as well as the Dept of Homeland Security and Transportation Security Administration. And that doesn’t even include the subcontracting work it’s receiving from top-tier US defense contractors or its substantial UK and European work.

The British government has a big stake in the firm, and private-equity player The Carlyle Group sold much of its stake to make some cash available for another more-pressing investment. Ex-CIA director George Tenet sits on the board, which means QinetiQ is politely gaining entrée into the US intelligence community. That’s a big market.

Before going public, QinetiQ was the largest research and development organization in Europe; that heritage is still obvious in the systems and technologies the company implements and innovates. One of its spinoff technologies, BioSilicon, is the basis of Pioneer pSivida’s business model.

And how can you not want to own a company that Ian Fleming used as the basis for James Bond’s clever gadget developers? Remember the head inventor’s name? Q–it’s no coincidence.

This won’t be a shot to the moon, but it’s going to be a great stock for long-term investors; buy QinetiQ up to GBP2.15 (around USD4.25 a share).

  Portfolio Precepts

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