ETF Talk: Nanotech Offers a Fertile Future

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

In this week’s ETF talk, we take a look at an emerging segment of the technology sector called nanotechnology. This niche focuses on very small, even microscopic, technology. Nanotechnology has produced technological developments in medicine (lasers), in electronics (ink jet systems) and in biomaterials (chemical and bio-detectors). An exchange-traded fund (ETF) that tracks the performance of nanotechnology is PowerShares Lux Nanotech (PXN).

This non-diversified fund seeks investment results which, before fees and expenses, correspond generally to the performance of an index that tracks around 21 publicly traded companies in the nanotechnology field.

PXN already has gained a healthy 13.93% so far in 2013. In addition, this fund offers a 1.40% dividend yield. As a field, nanotechnology is relatively new. So, much of its potential is ahead. As developers of the technology perfect their techniques for working with their incredibly small inventions, anyone who got in early will enjoy the gains likely to be produced by the growth of this field.

Surprisingly for a technology ETF, only 40.23% of PXN’s assets are invested in the technology sector. This lack of bigger technology exposure most likely is due to the fund’s foray into public companies that support nanotechnology to help the young industry grow. The fund’s remaining assets are in the following sectors: healthcare, 23.77%; industrials, 15%; basic materials 9.48%; consumer cyclical, 7.53%; and financial services, 3.99%.

PXN’s top ten individually held companies comprise 43.07% of the fund’s assets. However, the fund’s investment distribution within its top-ten holdings is fairly even. The five biggest holdings among the public companies that compose PXN’s portfolio are: EMCORE Corporation, 5.01%; Flamel Technologies ADR, 4.87%; Gentherm Inc, 4.56%; SurModics, Inc., 4.34%; and FEI Company, 4.23%.

Unlike the ETFs covered in the previous few weeks, PXN really has not followed the pattern of declining in value in the summer as most technology stocks tend to do. The nanotechnology field has plenty of room to advance in the years ahead. You can grow your income alongside PXN as this fertile field of the future becomes a reality sooner than you may expect.

Meanwhile, if you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.

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