Feb. 24, 2004 — Investors interested in tracking nanotechnology finally got what they wanted: a stock index.
It comes from Punk, Ziegel & Co., a New York-based investment bank specializing in health-care technology and biotech. The firm has been tracking nanotechnology closely the last two years and it successfully underwrote a 2.3-million-share secondary public offering for Harris & Harris Group Inc., (Nasdaq: TINY, News, Web), a venture firm specializing in micro- and nanotechnology, in 2003. The index includes 15 publicly traded companies active in nanotechnology.
“This is going to show you the perception of the market,” said Punk, Ziegel analyst Juan Sanchez. “It will show you what kind of value the market will give to companies in nanotechnology.”
The index includes companies that provide tools or equipment for nanotech research and development as well as those that sell or are developing nanotechnology-enabled products. Its status will be published daily on Punk, Ziegel’s Web site beginning March 1. Later in the year, Sanchez said, it could be updated more than once a day.
The list was generated by the investment bank with input from outside advisers. The companies are:
Altair Nanotechnologies Inc. (Nasdaq: ALTI)
BioSante Pharmaceuticals Inc. (AMEX: BPA)
FEI Co. (Nasdaq: FEIC)
Flamel Technologies S.A. (Nasdaq: FLML)
Harris & Harris Group, Inc. (Nasdaq: TINY)
JMAR Technologies, Inc. (Nasdaq: JMAR)
MFIC Corp. (OTC.BB: MFIC)
Nanogen, Inc. (Nasdaq: NGEN)
Nanophase Technologies Corp. (Nasdaq: NANX)
Nano-Proprietary Inc. (OTC.BB: NNPP)
NVE Corp. (Nasdaq: NVEC)
Pharmacopeia Inc. (Nasdaq: PCOP)
SkyePharma PLC (Nasdaq: SKYE)
Symyx Technologies Inc. (Nasdaq: SMMX)
Veeco Instruments Inc. (Nasdaq: VECO)
The index is calculated by dividing the sum of the market capitalizations of the 15 companies on any given day by their sum on the base day, Dec. 31, and then multiplying the result by 100. As of Feb. 19, the index was up almost nine points.
“I think this is a comprehensive list,” Sanchez said. He said that while large-cap firms such as IBM and Hewlett-Packard are active in the space, he chose not to include them because nanotechnology does not have an impact on their valuations.
But to investor Thiemo Lang, leaving out the big guys is problem. The portfolio manager with mutual fund firm Activest of Munich, Germany, said the index is too focused on small caps and has too few component companies to be bought and sold by mutual fund managers.
“If we did, we would create a new bubble in these stocks.”
Lang created the Activest Lux NanoTech mutual fund in 2002, which was up 54.4 percent in 2003. Some of his fund’s holdings, such as Veeco and Pharmacopeia, are included in the Punk, Ziegel index. However, Lang said, he also looks to the larger companies and tries to focus on firms with a market cap between $200 million and $2 billion, a range he considers reasonable for an investment portfolio designed to have reasonable liquidity.
“Personally, I think we should be very cautious and reluctant to increase the perception on a very few limited number of stocks.”
Punk’s Sanchez, however, was careful to point out the new index is not necessarily ready to be traded. Rather, he said, “whenever a sector is in the initial phases you want to build the simplest index.” Twice each year, Punk, Ziegel will add or delete index components based on whether new companies meet the inclusion criteria or existing components no longer merit inclusion.
“This index is going to change,” Sanchez said. But, he added, it all depends on how relevant or useful investors perceive it to be.