Any seasoned
investor can predict, with some degree of confidence, which industry sectors
will be hot in 10 years. The skill is to identify the companies that will
make future headlines - and to do it before Wall Street gets wind.
Your Money asked fund managers and
analysts to focus on three industries that look likely to show rapid growth,
and to name the companies poised to lead the charge.
Energy and the environment
In its latest World Energy Report,
the International Energy Agency warned that unless business leaders embraced
renewable energy sources, the planet would suffer an acute power shortage
and a catastrophic increase in greenhouse-gas emissions.
The planet seems to be getting the
message. Investment in renewable energy, mostly in solar and wind power,
has grown from almost nothing 10 years ago to nearly $20 billion in 2005.
This is expected to increase steadily to about $100 billion a year by 2015
as other energy sources, including tidal power and biomass, or energy from
organic materials, are exploited.
The challenge is to find a stock
in the clean-energy space that checks off all the right boxes: low valuation,
strong cash flow, good business plan and leadership potential. It is a
tough call. Clean energy is hot and many stocks in the sector have moved
too far, too fast, according to some industry observers.
Michael Liebreich, director of New
Energy Finance, a London-based provider of data and analysis, said he would
be wary of adding to investments in solar power. "Demand for solar power
will continue to grow, but the enormous capacity being added to the sector
might eventually outstrip growth in demand," he warned.
Liebreich said he would feel more
comfortable holding wind-power companies. "Although wind companies have
also forged ahead this year, there is room for further upside," he said.
"The long-term fundamentals for wind power are also encouraging. Almost
every country has indicated that it will significantly increase investment
in this energy source."
Still, Liebreich cautioned against
buying a basket of wind-power stocks. "Investors need to identify which
pure-play companies in the sector have sufficient strength in their balance
sheets to become industry leaders," he said. "Over time, competition from
large engineering conglomerates like Siemens and Mitsubishi will whittle
away margins." He said that small-capitalization companies with modest
earning streams, like Gamesa, Vestas and Suzlon, should survive a sector
shake-up.
One segment of the clean-energy
sector that has yet to capture the market's imagination is hydrogen fuel
cells. The technology is in its infancy, but the ultimate aim is to deliver
zero-emission engines.
Emma Howard Boyd, head of
clean-energy investment at Jupiter Asset Management, is sufficiently impressed
with developments in fuel cells that she has invested in FuelCell Energy,
a pure-play company. She also holds Azure Dynamics and Quantum Fuel Systems,
which are developing systems to support hybrid electric and fuel-cell-powered
vehicles.
The race to see who can introduce
an affordable hydrogen engine first is symbolized by a flurry of recent
listings on London's junior exchange, the Alternative Investment Market,
or AIM. But Tim Dieppe, manager of Henderson's Industries of the Future
fund, said he would be hard pressed to make an investment case for the
vast majority of these stocks. "How do you value loss-making companies
and how can you be sure which company is likely to make that all-important
breakthrough - the production of smaller and more cost-effective fuel cells?"
he said.
Dieppe said he would rather
explore different angles on the renewable-energy theme, like energy efficiency.
His top pick is a Taiwanese company, Delta Electronics, which aims to be
one of the most efficient electronics companies in the world by reducing
the amount of power consumed in the production process. "As buyers of electronic
equipment face increasing pressure to opt for efficient producers, companies
such as Delta should prosper," Dieppe said.
Liebreich agreed that energy efficiency
would grow in importance. "It may not be a headline-grabbing concept,"
he said, "but with oil hovering at around $60 a barrel it makes sense for
companies to spend money on making energy savings."
And even if the oil price falls
back, Dieppe said, corporations are unlikely to divert their attention
away from energy consumption. "The past two years have been a wake-up call
for heavy energy consumers," he said.
Energy efficiency is a very fragmented
area of the resources industry, but Liebreich has identified a handful
of companies he thinks have decent business models and reasonable valuations.
They include Itron, Power One, Capstone Turbine and Echelon.
Health
Of all the industries of the future,
biotechnology has the greatest potential to enrich the greatest number
of lives. The decoding of the human genome has opened the door to a new
era of modern medicine. Major new drugs have been developed for the treatment
of the human immunodeficiency virus, arthritis and diabetes. Innovative
treatments for cancer and cardiovascular diseases are in the pipeline.
All these developments are creating investment opportunities.
One of the major themes, both of
research and of investment, is personalized medicine, which aims to understand
the effect of genetic variations on the development and treatment of diseases.
"We will not see quantum leaps in 2006 towards personalized medicine, but
it will become more and more important over the coming years," said Dr.
Nora Frey, founder of Adamant Biomedical Investments, a Swiss advisory
and investment firm. "Companies are already using techniques to select
patients more accurately for clinical trials. This should lead to fewer
side-effects and better and more appropriate usage of drugs. Ultimately
this will also lead to a reduction of costs for the health care systems,
since drugs will only be given to patients that respond to and tolerate
them."
Frey's picks included Roche and
Affymetrix, the latter for its leading position in gene chips, used in
research, screening and genetic profiling. She also singled out DeCode
Genetics: "The company has unique access to the genetic history of the
Icelandic population, which has undergone very little intermixing with
other population groups," Frey said. "In addition, the family histories
of the population can be traced back in history. The matching of these
two data sources provides DeCode and Roche, with which DeCode has agreements,
with substantial advantages for developing personalized medicines."
Companies based in emerging markets
will also play a more important role in the years to come, especially in
generics - unbranded, off-patent medicines - and their biotech equivalents,
biogenerics. Frey said she anticipated that these drugs would achieve successful
market penetration in the West in three years.
"We have found a number of companies
in India, for example, that are very active not only in their fast-growing
home market, but also in Europe and the U.S.," Frey said. Ranbaxy and Dr.
Reddy's are most familiar, but Frey said there were "at least 10 additional
companies in India that need to be watched," including Wockhardt, Strides
Arcolab, Matrix Laboratories and Orchid Pharmaceuticals.
Hospital chains in emerging markets
are growing rapidly as incomes rise, creating a middle class that can afford
the care of a private hospital. Publicly traded companies in this field
include Apollo Hospitals in India, Parkway in Singapore and Netcare in
South Africa.
Gareth Powell, manager of a biotechnology
fund for Framlington Group in London, said the importance of "anti-infectives"
would increase in the next few years. Major players here are Gilead, Anadys,
and Idenix in hepatitis and HIV, and the Swiss antibiotic companies Basilea
and Arpida. Powell recently invested in Panacos, which he said was close
to perfecting a new type of HIV drug. He also likes GlaxoSmithKline for
its cervical cancer vaccine.
Attracted by the huge potential
of biotech stocks, many managers of diversified funds have increased their
holdings. Ian Henderson, an investment manager with J.P. Morgan Chase in
London, said he had been following the work of Benitec, "a tiny, thoroughly
speculative company" that is developing therapies to treat diseases like
AIDS and certain cancers. The aim of the therapy, called RNA interference,
is to shut down the genes that cause the diseases. Scientists have had
success with plants and animals; now they are working on Phase 1 clinical
tests for the treatment of human diseases.
Nanotechnology
A major bet on nanotechnology could
be the payoff of the decade, or the stuff of investment nightmares. Nanotech
refers to the engineering of matter at the subatomic level. Since particles
at the nano scale do not adhere to the principles of classic physics, they
can be manipulated to achieve size-dependent properties and functions.
The applications of this technology
are seemingly endless. While most of the commercially viable nanotech products
enhance the properties of existing materials, making them stronger, lighter
or more reflective, other companies focus on the energy, water and health
care markets. The technology is already being used in the development of
hydrogen fuel cells, and there are products in the pipeline that could
revolutionize the way drugs are delivered.
Estimates suggest that sales of
products using nanotechnology could grow to $1 trillion in 10 years, from
$13 billion now. Little wonder that comparisons between nanotechnology
and the advent of information technology abound, though Heather Langsner,
an analyst with Innovest Strategic Value Advisors in London, said the comparison
was not perfect. "Product safety was not a concern for software," she said.
Nanoparticles demonstrate different
toxicity than larger particles because of their mobility and increased
reactivity. The main safety concern is that these particles might be able
to cross protective membranes like the skin and the blood-brain barrier.
Innovest has reviewed about 300
companies to try to identify which show the most promise from an investment
perspective, both in terms of product potential and of the company's readiness
to deal with negative market sentiment. The Innovest index lists 15 companies,
from diversified manufacturing and chemical companies like BASF and General
Electric to more specialist companies like Altair Nanotechnologies, which
is pursuing nanotech applications in the medical sector and materials market.
There are also several instrument companies - like Fei, Veeco and JMAR
Technologies - that develop equipment to detect and view nano particles.
Although the index is not investable,
there are others that are. PowerShares Lux Nanotech Portfolio is the first
exchange-traded fund based on nanotechnology companies. The portfolio is
designed to track the Lux Nanotech index, which includes 26 public companies.
A significant proportion of these companies also are featured on the Innovest
index. Lux also includes food producers like Nestlé and Kraft, which
use nanotechnology to change the structure of food and food packaging.
Matthew Nordan, vice president of
Lux Research, said PowerShares was designed to appeal to investors who
want exposure to nanotechnology research and development and commercialization,
primarily in small, innovative companies, but also in the large caps like
3M and GE. The index is up 13 percent since its introduction Oct. 21.
The long term will tell the tale
in nanotechnology. Giulio Frisco, a scientist and member of the Future
Technologies Advisory Group, which promotes awareness of scientific advances,
said the next 20 years would see the first operational applications of
nanotech.
Any seasoned investor can
predict, with some degree of confidence, which industry sectors will be
hot in 10 years. The skill is to identify the companies that will make
future headlines - and to do it before Wall Street gets wind.
Your Money asked fund managers and
analysts to focus on three industries that look likely to show rapid growth,
and to name the companies poised to lead the charge.
Energy and the environment
In its latest World Energy
Report, the International Energy Agency warned that unless business leaders
embraced renewable energy sources, the planet would suffer an acute power
shortage and a catastrophic increase in greenhouse-gas emissions.
The planet seems to be getting
the message. Investment in renewable energy, mostly in solar and wind power,
has grown from almost nothing 10 years ago to nearly $20 billion in 2005.
This is expected to increase steadily to about $100 billion a year by 2015
as other energy sources, including tidal power and biomass, or energy from
organic materials, are exploited.
The challenge is to find a
stock in the clean-energy space that checks off all the right boxes: low
valuation, strong cash flow, good business plan and leadership potential.
It is a tough call. Clean energy is hot and many stocks in the sector have
moved too far, too fast, according to some industry observers.
Michael Liebreich, director
of New Energy Finance, a London-based provider of data and analysis, said
he would be wary of adding to investments in solar power. "Demand for solar
power will continue to grow, but the enormous capacity being added to the
sector might eventually outstrip growth in demand," he warned.
Liebreich said he would feel
more comfortable holding wind-power companies. "Although wind companies
have also forged ahead this year, there is room for further upside," he
said. "The long-term fundamentals for wind power are also encouraging.
Almost every country has indicated that it will significantly increase
investment in this energy source."
Still, Liebreich cautioned
against buying a basket of wind-power stocks. "Investors need to identify
which pure-play companies in the sector have sufficient strength in their
balance sheets to become industry leaders," he said. "Over time, competition
from large engineering conglomerates like Siemens and Mitsubishi will whittle
away margins." He said that small-capitalization companies with modest
earning streams, like Gamesa, Vestas and Suzlon, should survive a sector
shake-up.
One segment of the clean-energy
sector that has yet to capture the market's imagination is hydrogen fuel
cells. The technology is in its infancy, but the ultimate aim is to deliver
zero-emission engines.
Emma Howard Boyd, head of
clean-energy investment at Jupiter Asset Management, is sufficiently impressed
with developments in fuel cells that she has invested in FuelCell Energy,
a pure-play company. She also holds Azure Dynamics and Quantum Fuel Systems,
which are developing systems to support hybrid electric and fuel-cell-powered
vehicles.
The race to see who can introduce
an affordable hydrogen engine first is symbolized by a flurry of recent
listings on London's junior exchange, the Alternative Investment Market,
or AIM. But Tim Dieppe, manager of Henderson's Industries of the Future
fund, said he would be hard pressed to make an investment case for the
vast majority of these stocks. "How do you value loss-making companies
and how can you be sure which company is likely to make that all-important
breakthrough - the production of smaller and more cost-effective fuel cells?"
he said.
Dieppe said he would rather
explore different angles on the renewable-energy theme, like energy efficiency.
His top pick is a Taiwanese company, Delta Electronics, which aims to be
one of the most efficient electronics companies in the world by reducing
the amount of power consumed in the production process. "As buyers of electronic
equipment face increasing pressure to opt for efficient producers, companies
such as Delta should prosper," Dieppe said.
Liebreich agreed that energy
efficiency would grow in importance. "It may not be a headline-grabbing
concept," he said, "but with oil hovering at around $60 a barrel it makes
sense for companies to spend money on making energy savings."
And even if the oil price
falls back, Dieppe said, corporations are unlikely to divert their attention
away from energy consumption. "The past two years have been a wake-up call
for heavy energy consumers," he said.
Energy efficiency is a very
fragmented area of the resources industry, but Liebreich has identified
a handful of companies he thinks have decent business models and reasonable
valuations. They include Itron, Power One, Capstone Turbine and Echelon.
Health
Of all the industries of the future,
biotechnology has the greatest potential to enrich the greatest number
of lives. The decoding of the human genome has opened the door to a new
era of modern medicine. Major new drugs have been developed for the treatment
of the human immunodeficiency virus, arthritis and diabetes. Innovative
treatments for cancer and cardiovascular diseases are in the pipeline.
All these developments are creating investment opportunities.
One of the major themes, both of
research and of investment, is personalized medicine, which aims to understand
the effect of genetic variations on the development and treatment of diseases.
"We will not see quantum leaps in 2006 towards personalized medicine, but
it will become more and more important over the coming years," said Dr.
Nora Frey, founder of Adamant Biomedical Investments, a Swiss advisory
and investment firm. "Companies are already using techniques to select
patients more accurately for clinical trials. This should lead to fewer
side-effects and better and more appropriate usage of drugs. Ultimately
this will also lead to a reduction of costs for the health care systems,
since drugs will only be given to patients that respond to and tolerate
them."
Frey's picks included Roche and
Affymetrix, the latter for its leading position in gene chips, used in
research, screening and genetic profiling. She also singled out DeCode
Genetics: "The company has unique access to the genetic history of the
Icelandic population, which has undergone very little intermixing with
other population groups," Frey said. "In addition, the family histories
of the population can be traced back in history. The matching of these
two data sources provides DeCode and Roche, with which DeCode has agreements,
with substantial advantages for developing personalized medicines."
Companies based in emerging markets
will also play a more important role in the years to come, especially in
generics - unbranded, off-patent medicines - and their biotech equivalents,
biogenerics. Frey said she anticipated that these drugs would achieve successful
market penetration in the West in three years.
"We have found a number of companies
in India, for example, that are very active not only in their fast-growing
home market, but also in Europe and the U.S.," Frey said. Ranbaxy and Dr.
Reddy's are most familiar, but Frey said there were "at least 10 additional
companies in India that need to be watched," including Wockhardt, Strides
Arcolab, Matrix Laboratories and Orchid Pharmaceuticals.
Hospital chains in emerging markets
are growing rapidly as incomes rise, creating a middle class that can afford
the care of a private hospital. Publicly traded companies in this field
include Apollo Hospitals in India, Parkway in Singapore and Netcare in
South Africa.
Gareth Powell, manager of a biotechnology
fund for Framlington Group in London, said the importance of "anti-infectives"
would increase in the next few years. Major players here are Gilead, Anadys,
and Idenix in hepatitis and HIV, and the Swiss antibiotic companies Basilea
and Arpida. Powell recently invested in Panacos, which he said was close
to perfecting a new type of HIV drug. He also likes GlaxoSmithKline for
its cervical cancer vaccine.
Attracted by the huge potential
of biotech stocks, many managers of diversified funds have increased their
holdings. Ian Henderson, an investment manager with J.P. Morgan Chase in
London, said he had been following the work of Benitec, "a tiny, thoroughly
speculative company" that is developing therapies to treat diseases like
AIDS and certain cancers. The aim of the therapy, called RNA interference,
is to shut down the genes that cause the diseases. Scientists have had
success with plants and animals; now they are working on Phase 1 clinical
tests for the treatment of human diseases.
Nanotechnology
A major bet on nanotechnology could
be the payoff of the decade, or the stuff of investment nightmares. Nanotech
refers to the engineering of matter at the subatomic level. Since particles
at the nano scale do not adhere to the principles of classic physics, they
can be manipulated to achieve size-dependent properties and functions.
The applications of this technology
are seemingly endless. While most of the commercially viable nanotech products
enhance the properties of existing materials, making them stronger, lighter
or more reflective, other companies focus on the energy, water and health
care markets. The technology is already being used in the development of
hydrogen fuel cells, and there are products in the pipeline that could
revolutionize the way drugs are delivered.
Estimates suggest that sales of
products using nanotechnology could grow to $1 trillion in 10 years, from
$13 billion now. Little wonder that comparisons between nanotechnology
and the advent of information technology abound, though Heather Langsner,
an analyst with Innovest Strategic Value Advisors in London, said the comparison
was not perfect. "Product safety was not a concern for software," she said.
Nanoparticles demonstrate different
toxicity than larger particles because of their mobility and increased
reactivity. The main safety concern is that these particles might be able
to cross protective membranes like the skin and the blood-brain barrier.
Innovest has reviewed about 300
companies to try to identify which show the most promise from an investment
perspective, both in terms of product potential and of the company's readiness
to deal with negative market sentiment. The Innovest index lists 15 companies,
from diversified manufacturing and chemical companies like BASF and General
Electric to more specialist companies like Altair Nanotechnologies, which
is pursuing nanotech applications in the medical sector and materials market.
There are also several instrument companies - like Fei, Veeco and JMAR
Technologies - that develop equipment to detect and view nano particles.
Although the index is not investable,
there are others that are. PowerShares Lux Nanotech Portfolio is the first
exchange-traded fund based on nanotechnology companies. The portfolio is
designed to track the Lux Nanotech index, which includes 26 public companies.
A significant proportion of these companies also are featured on the Innovest
index. Lux also includes food producers like Nestlé and Kraft, which
use nanotechnology to change the structure of food and food packaging.
Matthew Nordan, vice president of
Lux Research, said PowerShares was designed to appeal to investors who
want exposure to nanotechnology research and development and commercialization,
primarily in small, innovative companies, but also in the large caps like
3M and GE. The index is up 13 percent since its introduction Oct. 21.
The long term will tell the tale
in nanotechnology. Giulio Frisco, a scientist and member of the Future
Technologies Advisory Group, which promotes awareness of scientific advances,
said the next 20 years would see the first operational applications of
nanotech.
Any seasoned investor can
predict, with some degree of confidence, which industry sectors will be
hot in 10 years. The skill is to identify the companies that will make
future headlines - and to do it before Wall Street gets wind.
Your Money asked fund managers and
analysts to focus on three industries that look likely to show rapid growth,
and to name the companies poised to lead the charge.
Energy and the environment
In its latest World Energy Report,
the International Energy Agency warned that unless business leaders embraced
renewable energy sources, the planet would suffer an acute power shortage
and a catastrophic increase in greenhouse-gas emissions.
The planet seems to be getting the
message. Investment in renewable energy, mostly in solar and wind power,
has grown from almost nothing 10 years ago to nearly $20 billion in 2005.
This is expected to increase steadily to about $100 billion a year by 2015
as other energy sources, including tidal power and biomass, or energy from
organic materials, are exploited.
The challenge is to find a stock
in the clean-energy space that checks off all the right boxes: low valuation,
strong cash flow, good business plan and leadership potential. It is a
tough call. Clean energy is hot and many stocks in the sector have moved
too far, too fast, according to some industry observers.
Michael Liebreich, director of New
Energy Finance, a London-based provider of data and analysis, said he would
be wary of adding to investments in solar power. "Demand for solar power
will continue to grow, but the enormous capacity being added to the sector
might eventually outstrip growth in demand," he warned.
Liebreich said he would feel more
comfortable holding wind-power companies. "Although wind companies have
also forged ahead this year, there is room for further upside," he said.
"The long-term fundamentals for wind power are also encouraging. Almost
every country has indicated that it will significantly increase investment
in this energy source."
Still, Liebreich cautioned against
buying a basket of wind-power stocks. "Investors need to identify which
pure-play companies in the sector have sufficient strength in their balance
sheets to become industry leaders," he said. "Over time, competition from
large engineering conglomerates like Siemens and Mitsubishi will whittle
away margins." He said that small-capitalization companies with modest
earning streams, like Gamesa, Vestas and Suzlon, should survive a sector
shake-up.
One segment of the clean-energy
sector that has yet to capture the market's imagination is hydrogen fuel
cells. The technology is in its infancy, but the ultimate aim is to deliver
zero-emission engines.
Emma Howard Boyd, head of clean-energy
investment at Jupiter Asset Management, is sufficiently impressed with
developments in fuel cells that she has invested in FuelCell Energy, a
pure-play company. She also holds Azure Dynamics and Quantum Fuel Systems,
which are developing systems to support hybrid electric and fuel-cell-powered
vehicles.
The race to see who can introduce
an affordable hydrogen engine first is symbolized by a flurry of recent
listings on London's junior exchange, the Alternative Investment Market,
or AIM. But Tim Dieppe, manager of Henderson's Industries of the Future
fund, said he would be hard pressed to make an investment case for the
vast majority of these stocks. "How do you value loss-making companies
and how can you be sure which company is likely to make that all-important
breakthrough - the production of smaller and more cost-effective fuel cells?"
he said.
Dieppe said he would rather explore
different angles on the renewable-energy theme, like energy efficiency.
His top pick is a Taiwanese company, Delta Electronics, which aims to be
one of the most efficient electronics companies in the world by reducing
the amount of power consumed in the production process. "As buyers of electronic
equipment face increasing pressure to opt for efficient producers, companies
such as Delta should prosper," Dieppe said.
Liebreich agreed that energy efficiency
would grow in importance. "It may not be a headline-grabbing concept,"
he said, "but with oil hovering at around $60 a barrel it makes sense for
companies to spend money on making energy savings."
And even if the oil price falls
back, Dieppe said, corporations are unlikely to divert their attention
away from energy consumption. "The past two years have been a wake-up call
for heavy energy consumers," he said.
Energy efficiency is a very fragmented
area of the resources industry, but Liebreich has identified a handful
of companies he thinks have decent business models and reasonable valuations.
They include Itron, Power One, Capstone Turbine and Echelon.
Health
Of all the industries of the future,
biotechnology has the greatest potential to enrich the greatest number
of lives. The decoding of the human genome has opened the door to a new
era of modern medicine. Major new drugs have been developed for the treatment
of the human immunodeficiency virus, arthritis and diabetes. Innovative
treatments for cancer and cardiovascular diseases are in the pipeline.
All these developments are creating investment opportunities.
One of the major themes, both of
research and of investment, is personalized medicine, which aims to understand
the effect of genetic variations on the development and treatment of diseases.
"We will not see quantum leaps in 2006 towards personalized medicine, but
it will become more and more important over the coming years," said Dr.
Nora Frey, founder of Adamant Biomedical Investments, a Swiss advisory
and investment firm. "Companies are already using techniques to select
patients more accurately for clinical trials. This should lead to fewer
side-effects and better and more appropriate usage of drugs. Ultimately
this will also lead to a reduction of costs for the health care systems,
since drugs will only be given to patients that respond to and tolerate
them."
Frey's picks included Roche and
Affymetrix, the latter for its leading position in gene chips, used in
research, screening and genetic profiling. She also singled out DeCode
Genetics: "The company has unique access to the genetic history of the
Icelandic population, which has undergone very little intermixing with
other population groups," Frey said. "In addition, the family histories
of the population can be traced back in history. The matching of these
two data sources provides DeCode and Roche, with which DeCode has agreements,
with substantial advantages for developing personalized medicines."
Companies based in emerging markets
will also play a more important role in the years to come, especially in
generics - unbranded, off-patent medicines - and their biotech equivalents,
biogenerics. Frey said she anticipated that these drugs would achieve successful
market penetration in the West in three years.
"We have found a number of companies
in India, for example, that are very active not only in their fast-growing
home market, but also in Europe and the U.S.," Frey said. Ranbaxy and Dr.
Reddy's are most familiar, but Frey said there were "at least 10 additional
companies in India that need to be watched," including Wockhardt, Strides
Arcolab, Matrix Laboratories and Orchid Pharmaceuticals.
Hospital chains in emerging markets
are growing rapidly as incomes rise, creating a middle class that can afford
the care of a private hospital. Publicly traded companies in this field
include Apollo Hospitals in India, Parkway in Singapore and Netcare in
South Africa.
Gareth Powell, manager of a biotechnology
fund for Framlington Group in London, said the importance of "anti-infectives"
would increase in the next few years. Major players here are Gilead, Anadys,
and Idenix in hepatitis and HIV, and the Swiss antibiotic companies Basilea
and Arpida. Powell recently invested in Panacos, which he said was close
to perfecting a new type of HIV drug. He also likes GlaxoSmithKline for
its cervical cancer vaccine.
Attracted by the huge potential
of biotech stocks, many managers of diversified funds have increased their
holdings. Ian Henderson, an investment manager with J.P. Morgan Chase in
London, said he had been following the work of Benitec, "a tiny, thoroughly
speculative company" that is developing therapies to treat diseases like
AIDS and certain cancers. The aim of the therapy, called RNA interference,
is to shut down the genes that cause the diseases. Scientists have had
success with plants and animals; now they are working on Phase 1 clinical
tests for the treatment of human diseases.
Nanotechnology
A major bet on nanotechnology could
be the payoff of the decade, or the stuff of investment nightmares. Nanotech
refers to the engineering of matter at the subatomic level. Since particles
at the nano scale do not adhere to the principles of classic physics, they
can be manipulated to achieve size-dependent properties and functions.
The applications of this technology
are seemingly endless. While most of the commercially viable nanotech products
enhance the properties of existing materials, making them stronger, lighter
or more reflective, other companies focus on the energy, water and health
care markets. The technology is already being used in the development of
hydrogen fuel cells, and there are products in the pipeline that could
revolutionize the way drugs are delivered.
Estimates suggest that sales of
products using nanotechnology could grow to $1 trillion in 10 years, from
$13 billion now. Little wonder that comparisons between nanotechnology
and the advent of information technology abound, though Heather Langsner,
an analyst with Innovest Strategic Value Advisors in London, said the comparison
was not perfect. "Product safety was not a concern for software," she said.
Nanoparticles demonstrate different
toxicity than larger particles because of their mobility and increased
reactivity. The main safety concern is that these particles might be able
to cross protective membranes like the skin and the blood-brain barrier.
Innovest has reviewed about 300
companies to try to identify which show the most promise from an investment
perspective, both in terms of product potential and of the company's readiness
to deal with negative market sentiment. The Innovest index lists 15 companies,
from diversified manufacturing and chemical companies like BASF and General
Electric to more specialist companies like Altair Nanotechnologies, which
is pursuing nanotech applications in the medical sector and materials market.
There are also several instrument companies - like Fei, Veeco and JMAR
Technologies - that develop equipment to detect and view nano particles.
Although the index is not investable,
there are others that are. PowerShares Lux Nanotech Portfolio is the first
exchange-traded fund based on nanotechnology companies. The portfolio is
designed to track the Lux Nanotech index, which includes 26 public companies.
A significant proportion of these companies also are featured on the Innovest
index. Lux also includes food producers like Nestlé and Kraft, which
use nanotechnology to change the structure of food and food packaging.
Matthew Nordan, vice president of
Lux Research, said PowerShares was designed to appeal to investors who
want exposure to nanotechnology research and development and commercialization,
primarily in small, innovative companies, but also in the large caps like
3M and GE. The index is up 13 percent since its introduction Oct. 21.
The long term will tell the tale
in nanotechnology. Giulio Frisco, a scientist and member of the Future
Technologies Advisory Group, which promotes awareness of scientific advances,
said the next 20 years would see the first operational applications of
nanotech.
|
Stay
Updated every week With a Free Subscription To "Inside
The Industry"As Well as a Weekly Updated Patents Page
