3 Nanotechnology Stocks to Watch in 2020
When one thinks of technology, one may think of things like televisions. IPhones. Computers. And the internet. One may even be thinking about today’s most innovative technologies like blockchain and artificial intelligence. One may be less inclined to be thinking about matter working on an atomic level. But for those keeping an eye on nanotechnology stocks, atomic level matter is precisely what the tech stock investor has in mind.
Nanoetchnology is a tech innovation conducted at the nanoscale. The nanoscale is between one to 100 nanometers. To think about this in more concrete terms, a nanometer is 1/90,000 the width of a single human hair.
Nanotech could affect the future of industries like…
- pharmaceuticals and biotechnology
and more. One interesting feature of nanomaterial is that it begins to take on new properties when reduced to its small size. For example, some materials at that tiny scale become more magnetic than larger amounts.
Another example of this is that some nanomaterials are better able to kill pathogens than larger sized quantities.
Characteristics like these obviously have large potential for technology and commerce. There are many other uses of nanotechnology as well.
The State of the Nanotechnology Industry and Nanotech Stocks
According to BCC Research, the global market for nanotechnology was about $2 billion in 2018. It should grow at a compound annual growth rate of 19.24% through 2023.
Much of this growth is expected to come from China and the Asia-Pacific region. This is already one of the largest markets for nanotech and advanced materials.
Zacks data has the nanotechnology industry performing relatively well compared with the broader stock market over the past year. The S&P 500 returned nearly 27% in that period. Whereas nanotech’s return on investment was a slightly higher 28.5%.
That disparity increases over a longer time line. Over the last five years, nanotechnology stocks earned a whopping total return of 128% versus 73% for the S&P.
On the other hand, one must consider the fact that these returns are based on expected future earnings growth rather than present earnings. Nanotechnology’s profitability will hopefully be the future. But it isn’t quite yet the present.
Nevertheless, it has a relatively average price-to-earnings (P/E) ratio of 20.52 for the industry. And it has high stock returns over the past five years. So one can surely see the appeal of taking a stake in this sector.
But which individual nanotechnology stocks should you consider? Here are a few we like:
Nanotechnology Stocks to Watch
Taiwan Semiconductor Manufacturing (NYSE: TSM)
Taiwan Semiconductor Manufacturing is one of the top nanotechnology stocks in the business. It has a strong record of success with the tiny tech. This makes its stock a more expensive pure-play investment.
The firm is the world’s largest dedicated integrated circuit manufacturer. And its goal is to become one of the world’s leading semiconductor foundries.
The company’s stock has climbed from $36.29 about a year ago to around $55 now. That’s a gain of about 53%. Quarterly net income in December 2019 was reported at $116.04 billion. And that’s a 3.69% year-over-year gain on $317.24 billion revenue.
With lots of cash flow and healthy profit margins, there’s good reason to think that Taiwan Semiconductor Manufacturing has room to continue increasing. So this makes it a good nanotechnology stock to keep watching.
Thermo Fisher Scientific (NYSE: TMO)
Thermo Fisher Scientific is a biotechnology company based in Waltham, Massachusetts. It had 2018 revenues of $24.36 billion. And its mission is to “improve the human condition through systems, consumables and services for researchers.”
Thermo Fisher Scientific acquired FEI, the leader in high-performance electron microscopy. This helped augment its nanotechnology business. For example, its high-powered transmission electron microscopes (TEMs) are the only way to image nanomaterials.
Thermo Fisher Scientiric has been a terrific stock over the past year. It has jumped nearly 100 points from a low of $235.90 to around $330. This is where it is currently hovering for a return of about 40%.
Revenue has remained steady in the $6 billions each quarter over the past year. And net income hasn’t dropped lower than $760 million in any of those periods.
This nanotech stock does have a high P/E ratio of 37. But its continuing performance and overall growth seems to justify its high prices.
The stock has dropped 10 points over the past week, so you may want to keep your eyes open for a good buying opportunity in the weeks ahead.
Onto Innovation (NYSE: ONTO)
Onto Innovation is the result of a merger between Nanometrics and Rudolph Technologies. It is a global semiconductor capital equipment supplier.
The company has a broad portfolio of technologies. These include those for wafer manufacturing, front-end process control and advanced packaging.
Some of their other cutting-edge technologies for semiconductors include 3D metrology, macro defect inspection and metal interconnect composition.
Onto’s stock has been another nanotechnology winner over the past year. Though there has been significant volatility along the way, a $26.51 low price in August has given way to a price hovering around $38 today.
The stock is not cheap, with a P/E ratio of 41. And year-over-year fundamentals have been trending the wrong way.
In the quarter ending September 2019, net income was down almost 9% from the previous year despite a 4% increase in revenue. Nevertheless, its profit margin was still more than 10% and cash on hand increased from $112 million the previous quarter. That put it up to almost $140 million.
Onto Innovation may be a riskier play than the other two nanotech stocks listed here. But as you know, with great risk comes great potential for reward.
Final Thoughts on These Nanotechnology Stocks to Watch
Sometimes very small technologies can lead to very large profits. And the universe of things you can do with nanotechnologies will be ever-expanding as research and development continues.
There are other less pure-play stocks to consider, like IBM (NYSE: IBM) and Intel (Nasdaq: INTC) for example. But to really leverage the profit potential, Taiwan Semiconductor Manufacturing, Thermo Fisher and Onto Innovation remain terrific nanotechnology stocks to watch as we continue into Feburary 2020.
Nanotechnology Stocks are just one of many different tech plays you can make. And for more insightful content on tech stocks like blockchain, artificial intelligence, the Internet of Things and more, be sure to sign up for the free Investment U eletter by filling in your email address below!
About Brian M. Reiser
Brian M. Reiser has a Bachelor of Science degree in Management with a concentration in finance from the School of Management at Binghamton University.
He also holds a B.A. in philosophy from Columbia University and an M.A. in philosophy from the University of South Florida.
His primary interests at Investment U include personal finance, debt, tech stocks and more.