Trend: PXN is a new narrow sector ETF that allows investors to invest in a basket of companies focused on nanotechnology.
Business Week Europe on Yahoo! Finance describes an ETF that invests in nanotechnology.
Link: How to Invest in Nanotech
Nanotechnology, which involves the development, manufacture, and application of products at the molecular level, should have a profound impact on virtually every business if implemented successfully.
Late last year, Lux Research, in tandem with PowerShares Capital Management, launched an exchange-traded fund, the PowerShares Lux Nanotech Portfolio (PXN), for investors seeking to invest in nanotechnology. The tiny $89-million fund invests in 26 stocks in the Lux Nanotech index. Year to date through Mar. 28, the ETF gained 11.8%, vs. 3.9% for the S&P 500-stock index. [The portfolio is too new to be ranked by Standard & Poor's.]
The Lux index consists of companies that make tools used to develop nanotechnology, and well-established firms integrating nanotechnology into their existing products. Components are broken down into two basic types of stocks: "nanotech specialists" and "end-use incumbents." The specialists, including FEI Co. (FEIC) and Flamel Technologies (NASDAQ: FLML - news) (FLML), are small- and mid-size companies that focus specifically on developing or funding nanotechnology applications. The end-use incumbents are large-cap companies applying nanotech to existing product lines. The two groups are then equally weighted with 75% applied to the nanotech specialist components and 25% for the end-use incumbents.
PROMISING TRIO
While some see the ETF as a good vehicle for those who want to invest in nanotechnology, others point to its drawbacks, such as holdings that are not yet profitable and the extreme volatility associated with industry-specific funds that seem gimmicky.
Srikant Dash, index strategist at Standard & Poor's, notes that narrow sector ETFs have two legitimate uses. "First, money managers who have a view on a narrow industry, but do not have a view on individual stocks within that narrow sector, can use these ETFs to implement their views," he says. "The second user group consists of trading desks and active traders who trade frequently on news about a narrow industry, or want to manage their risk exposure to it."
Another way investors can play nanotech initially is by investing in large-cap companies applying the technology to their existing product lines, thereby avoiding unstable and unprofitable startups. Nanotech is expected to have a powerful impact on three major industries initially: semiconductors, life sciences, and energy.
FACTS VS. FAD
Many well-known firms are already integrating nanotech, says Peter Hebert, chief executive officer of Lux Research. "For example, 3M Co. (MMM) stated it has $800 million worth of nano-enabled products it is selling right now," he says. "American Pharmaceutical Partners (APPX) has a new cancer drug, Abraxane, that is enabled by nanotech. It is on the marketplace as we speak."
Big pharma companies are using new nano-particles to reformulate existing drugs to make them more effective and potent, and therefore extend the patent and lead to bigger revenues, experts say.
via Tom Lydon at ETF Trends
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