5 Top Nanotechnology Stocks to Buy

MarketsMotley Fool

Scientists like to joke that realizing the promise of nanotechnology has been five years away for the last 35 years. That would imply that there isn't a single nanotech stock available to investors. But while we don't yet have quantum lightbulbs or graphene-based water desalination, this list of nanotechnology stocks proves that nanotech products actually touch our lives every day:

You may not think "nanotech" when you see the big names in the list above, but a closer look reveals how they're leading the evolution of the field.

Continue Reading Below

Is nanotechnology the future?

First, let's start with a simple question investors might want to ask: What is a nanomaterial? There's no universally accepted definition, but regulators around the world have generally defined a nanomaterial as a product that (1) has at least one dimension of 100 nanometers or smaller and (2) gains unique properties from that dimension. The second part of the definition is often forgotten, but it's what gives such tremendous potential to nanotechnology.

Some materials become more magnetic or better able to kill pathogens at the nanoscale, while others can access different physical phases entirely. It all depends on the material, which is what guides applications and product development for the top nanotechnology stocks.

R&D needs to start somewhere

All that research and development needs equipment, reagents, and services -- all of which are provided by Thermo Fisher Scientific. The company is most closely associated with life-sciences research, a growing area of the nanotechnology field. Whether enhancing MRI contrast agents or using DNA origami to build nanostructures that deliver therapeutics to specific locations in the body, the company has played a pivotal role spurring innovation from the earliest stages of research.

Last summer Thermo Fisher Scientific boosted its ability to serve the nanotechnology field by acquiring FEI Company for $4.2 billion, incorporating high-powered transmission electron microscopes (TEM) -- the only way to image nanomaterials such as metals, living cells, and semiconductors -- into its expanding empire of analytical lab services. In case investors are wondering how it's going, fully 90% of the company's backlog increase from 2015 to 2016 comprised rising orders for analytical instruments. Only 20% of total sales last year came from the segment.

Nanomaterials behind the scenes

Of course, the point of R&D is to turn discoveries in the lab into real products. How else would companies make money from nanotech? It may not always be obvious, but you use products enhanced with nanomaterials each and every day. Here are a few examples:

  • T-shirts, underwear, and socks with odor and moisture protection built in are using silver nanoparticles to keep odor-causing bacteria at bay. The Dow Chemical Company and Fruit of the Loom (a subsidiary of Berkshire Hathaway) have a partnership to do just this.
  • Similarly, PPG Industries and BASF include offering several coatings that incorporate nanomaterials. Infusing ceramic nanoparticles can produce self-healing paints that protect cars against minor scratches, while nanopolymer coatings applied on top of car paint can reflect heat to regulate temperature and make air conditioners more fuel-efficient.
  • The ingredient in sunscreen that blocks UV (ultraviolet) rays from ravaging your skin is nano titanium dioxide, which is also a useful pigment and coloring agent for industrial applications. It's the most widely produced nanomaterial in the world, with companies such as Chemours leading the way.
  • The semiconductor industry relies heavily on nanotechnology, a driving factor enabling Moore's Law(that the number of transistors per square inch on integrated circuits will double every year). Intel Corporation recently launched a 10-nanometer manufacturing technology that will increase the number of transistors per chip by a factor of 2.7 compared to current nanotechnologies.

What does it mean for investors?

Nanotechnology isn't usually associated with these businesses -- it's just part of the table stakes for competing in today's coatings and microchip industries -- and doesn't comprise a majority of product sales for most companies. Chemours Co. may be the sole exception, as it derived 43% of total sales last year from titanium dioxide, and another 42% from fluoroproducts such as nonstick Teflon coatings.

Still, these companies are the best nanotechnology stocks to buy today. Furthermore, they have the size and financial flexibility to make big moves quickly, should major advances allow the field of nanotechnology to deliver on its science-fiction-like potential.

10 stocks we like better than PPG IndustriesWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and PPG Industries wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of July 6, 2017

Maxx Chatsko has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.