It seems callous, I suppose, to enjoy the effects of a storm that has already killed scores and could still claim more. That, however, is exactly what I’m suggesting you do in regard to the economy.

An economic storm continues to wreak havoc globally. Moreover, the same idiotic policies that caused the problem are now being offered as solutions. The “crowding-out effect” guarantees that it will continue for some time.

This view, that government spending and debt crowds out investment in areas that produce the greatest economic growth, is widely held at the University of Chicago Economics Department. Though this department has dominated the Nobel Memorial Prize for economics for decades, it has little or no sway with the current Chicago-centric administration.

The House’s just-passed health care bill, for example, is written primarily by Ivy League lawyers. As a result, it contains no real malpractice tort reform, the one public policy change that has been proven to lower significantly both medical and insurance costs. Instead, it puts a huge and incredibly complex part of our economy under control of the same people whose blunders stalled H1N1 vaccine delivery. Additionally, uncertainty on the part of businesses about the costs that health care “reform” will impose on employers is a major contributor to the current unemployment rate.

Regardless, my job is to identify the financial opportunities created by such blunders. The answer, more than ever, is emerging technologies stocks.

The market in general has edged back somewhat. Index and other broad financial instruments are no longer the bargains they were when the market was on its knees and whimpering. No one has real faith that this uptick will last, though, so most investors are still “playing it safe.” This means they are avoiding emerging technologies, which are, in turn, underpriced.

This is always the case in uncertain markets. When markets are shaky, the vast majority of individual and institutional investors flee risk in favor of “proven” investment opportunities. This is clearly the case today, and we may never see another time like this.

So let’s review. Scientific and technological progress cannot be stopped. It is, in fact, accelerating. If you need evidence, check out the newly released Motorola Droid.

Moreover, globalization has expanded the scientific and financial playing fields dramatically. Top American researchers are being wooed by Asian and Eastern European companies. If the U.S. legal/legislative oligarchy hobbles our pharm industry, research and development will shift offshore. So will our portfolios.

That’s one reason I’m happy to see one of our most important companies is strengthening its global strategy. For about a year and a half, the company’s founder and chairman of the board has led the executive search to replace its former CEO, who died unexpectedly last year. In fact, he has been replaced by two people: one with important international connections and one with domestic big pharm experience.

The company just announced that a noted Russian scientist and businessman will become CEO. The press release makes it clear, I’m happy to say, that his selection is in keeping with plans to explore international opportunities. The new CEO is a member of the Russian Academy of Science, specializing in management theory, strategic planning and system analysis. He has written several books in those fields and is the recipient of the Russian Federation Government Award in Science and Technology.

This man has serious influence in Russia, which is one of the world’s hotbeds of stem cell science. I wrote about Dr. Sanjay Gupta’s book Chasing Life when Gupta turned down the administration’s request to become surgeon general. In his book, the neurosurgeon details trips to Russian stem cell clinics where some of the world’s wealthiest people are receiving crest-of-the-wave stem cell therapies that are years away from approval by the FDA.

Other Russian clinics, I should add, are selling pure stem cell quackery and snake oil, so I’m not recommending that you fly off to Moscow yet. Nevertheless, Gupta reports that the wealthiest of the wealthy have succeeded in virtually stopping the aging process.

But that’s not all…

The company’s new president brings connections and experience working with big pharm. He is trained in immunology, molecular biology, finance and marketing.

Moreover, he worked previously with companies that address many of the markets that I believe stem cell therapies someday will control. This puts him in a position to further collaborations with pharm. If the market misinterprets this bolstering of our company’s executive team, I’m recommending my Breakthrough Technology Alert readers to buy on the dip.

For transformational profits,
Patrick Cox

November 12, 2009

Profit from the Government’s Blunders with Overseas Breakthroughs was originally featured in the Penny Sleuth.

I’ve discussed before how transformative commercially competitive nuclear fusion would be. Clean and inexpensive fusion would completely disrupt the foundation of the global economy: energy. We don’t, in fact, know that it can be done. It looks like it, but there are many unknowns, and the timeline is even more obscure. The impact would be so profound, however, that we have to keep track of developments.

Until now, the challenge has been the production of a sustainable fusion reaction that yields more energy than is initially required to keep the reaction “burning.” Since most of the methods for generating a fusion reaction require extremely high, sun-like temperatures, it has proven no easy task.

Most of the recent attention and funding in the fusion area are garnered by ITER, a large multinational research reactor being built in France. Several European governments have been throwing billions of Euros at this nuclear fusion research megaproject. Despite this, some of the most promising research is actually taking place here in the U.S., albeit on a much smaller scale and with much less attention.

The most promising method of producing energy through fusion may belong to a U.S. firm called EMC2. EMC2 was founded in 1984 by the late physicist Dr. Robert W. Bussard, well known for his work on nuclear rocket propulsion and power. While Dr. Bussard was very interested in nuclear fusion as a means to power spacecraft, it is his ground-based nuclear designs that are currently being developed by the company he founded.

Apart from private funding, EMC2 has received funds from the U.S. Navy over the years. After test runs of early prototypes showed promise, the U.S. Navy again funded the EMC2 to develop the next-generation prototype. The Navy is very interested in EMC2’s fusion reactor as a possible means of powering submarines and surface vessels.

The Department of Energy’s current director, Steven Chu, has also expressed interest in EMC2s technology, commenting in 2007 that he “wants more information.” I can only hope that the information he has received since then has been convincing, as EMC2 got $2 million in funding under the American Recovery and Reinvestment Act of 2009.

The actual fusion power plant, which Bussard called a polywell, produces no long-lasting nuclear waste. “Polywell”, by the way, is a combination of the terms “polyhedron” and “potential well,” which clues us in on the geometry and function of the device.

The current EMC2 fusion project leader, Dr. Richard Nebel, estimates that electrical production from commercial polywell fusion reactors would cost about 2–5 cents per kilowatt hour. This is cheaper than any current source of electricity, including coal and fission nuclear power. We’ve been in contact with Dr. Nebel, by the way, but he has told us that he is not free to discuss the details of the project at this time.

EMC2 is currently constructing the latest demonstration version of the polywell, designated WB-8, in order to validate the results received from a previous prototype, WB-6. EMC2 expects to know if this is a truly workable technology within two years. If this is the case, the second phase of its research track is to produce a full-scale example reactor.

If EMC2 is successful in its work, there’s little question that the company’s private backers will be sitting on one of the biggest investment windfalls in history. And it also opens the doors for a public offering of shares in the future. We’ll keep you posted on what’s to come.

For transformational profits,
Patrick Cox

October 30, 2009

Only Two Years to Practical Nuclear Fusion? was originally featured in the Penny Sleuth.

Now, with one company’s failure all but assured, our path to stem cell fortunes is clearer than it’s ever been.

If you had been listening to mainstream financial media, you probably believed that Osiris (NASDAQ: OSIR) was going to be the first company to deliver real stem cell-based therapies. Now Osiris is all but out of the running…

I’ve written about Osiris several times in the past to my Breakthrough Technology Alert readers, always to explain why I wasn’t recommending its stock. Briefly, I’ll recap.

Osiris has led the effort to utilize adult or mesenchymal stem cells. These MSCs are found in bone marrow and are capable of becoming multiple types of tissues. They are, therefore, “multipotent” stem cells. Embryonic and induced pluripotent stem cells, however, can become any cell types. They are, therefore, “pluripotent.”

Osiris was working on ways to jump the hurdles associated with programming embryonic stem cells to do specific tasks. This was before it became known that one researcher had figured out how to convert any cell in your body to an induced pluripotent stem cell with all the same potentials of embryonic stem cells. Big Pharm invested considerable hope and money in OSIR’s technology as a result.

At the time, I speculated that MSCs might have some therapeutic value, but even so, they would inevitably be superseded by pluripotent stem cells. I’ve spoken on several occasions to Osiris people, including one of its top scientists. He told me the company believed its MSC therapies had a 15-year window of profitability. Then he admitted programmed pluripotent cells would take the market away from less-effective MSCs.

I didn’t believe the 15-year projection for several reasons. One, I knew about the progress being made by elsewhere by one very exciting company. They’d essentially developed a methodology for cracking the programming codes that turn pluripotent cells into specific cell types.

The company has already announced the discovery and successful creation of various cell types, including cartilage cells. Recently, as you know, the platform won the biggest grant in the history of the California Institute for Regenerative Medicine. Cartilage, incidentally, was the focus of Osiris’ MSC efforts. It was also testing what it believed were immune-suppressive qualities of MSCs.

Last week, however, it was announced that Osiris’ MSC-derived Prochymal failed two late-stage studies. The company’s stock plunged and the CFO resigned, “to pursue new professional opportunities, effective immediately.”

So what does this mean for stem cell stocks? It means that Big Pharm’s attention is returning to the stem cells that we know turn into cartilage: pluripotent stem cells. All the cartilage in your body, for example, came from embryonic stem cells. Now induced pluripotent stem cells can do the same thing.

Osiris, however, was among those companies that hoped a shortcut to effective SC therapies existed in MSCs. That hope has apparently been dashed, or at least severely set back.

This leaves a single researcher, the creator of the regenerative medicine industry, in the veritable catbird seat. Once again, I’m awed by his vision and dedication.

And as I’ve mentioned, on September 23, his presentation could be the next catalyst for his company’s share price to rocket – why not, the company has already shot up 150% in 2009. And with the developments going on behind the scenes, the chances of seeing even more triple-digit growth are phenomenal. Stay tuned for details on this one…

For transformational profits,
Patrick Cox

September 18, 2009

This Company’s Failure Clears Your Path to Real Stem Cell Fortunes was originally featured in the Penny Sleuth.

The sequencing of the human genome has resulted in the emergence of an enormously important new branch in the biotechnological sciences. The most common terms for this field are bioinformatics or computational biology.

You may have read about the discovery, recently, of a new and radically more effective mosquito repellant. Based on molecules found in black pepper, it was not discovered using traditional laboratory methods. Instead, it came about through computer simulations based on knowledge of mosquito cell biology. This is just the tip of the bioinformatics iceberg.

Until recently, cell biology has been something of a “black box.” We could observe how cells functioned, but had little insight into the actual mechanisms. Now, though, scientists are learning how cells work on the molecular level.

Using mathematical models and new technologies for detecting molecular processes, researchers are extracting raw data from DNA and modeling the ways genes work and interact. To understand this field, you should view your own genome as a giant software program for manufacturing proteins.

The process of unraveling and decoding the DNA software involves massive amounts of data collection. Then, once collected, correlation and other forms of computer analysis are performed on those data to figure out cause and effect. How big is this challenge?

Consider this: Each human cell contains about 3 gigabytes (3 billion bytes) of pure data and instructions. If this information were written in book form, it would require 5,000 volumes, each 300 pages long. That’s 120 times larger than the kernel of the Windows operating system, which is about 25 megabytes of code. This data resides, of course, in each cell’s pinpoint-sized nucleus. The human body, in turn, has approximately 100 trillion of these 3-gig cells.

Add to this complexity about 5,000 different proteins expressed by each cell. Different cells, however, express different proteins. These proteins, the proteome, behave as computer commands and serve to communicate between cells.

The decoding of all these systems is, obviously, a huge computational challenge. It has only just begun and it would not be possible, in fact, without recent advances in computer technologies. As more powerful computing comes online, the pace of bioinformatics discovery will accelerate. Quantum computing, because it is particularly suited to sorting out cell biology, will enable a “quantum” leap in understanding.

Today, there are three main areas of research in computational biology. These are genome analysis, protein structure prediction and drug design.

Genomic analysis is, as you would expect, the statistical analysis of genes. As more and more DNA is analyzed in conjunction with individual medical information, more is known. Among other reasons for performing this analysis, scientists are looking for the genes that cause or contribute to diseases.

Protein structure predictions are based on computer models that integrate information about the function of these proteins. This is an immense task, as there are tens of thousands of proteins. Ultimately, understanding the proteome will enable truly personalized medicine, with minimal side effects for patients.

With the knowledge gained from understanding the genome and proteome, computer models of target proteins can be created. Using these virtual proteins, drugs can be designed and tested using in silica simulations before testing in the lab.

The development of these virtual molecules, the heart of computational biology, is ending the practice of shooting blindfolded while hunting for drug candidates. Instead of randomly testing different drug candidates and analyzing the results, the field of candidates can be significantly narrowed using simulations. This radically improves the “hit rate,” increasing the speed of drug discovery and lowering costs.

Moreover, computer cell simulations improve as additional data are collected and integrated back into the models. Significant advances have already taken place in this transformational space. Medicine, incidentally, is only one area that is benefiting from bioinformatics. Many of the benefits are taking place in the agricultural sector. The genetic engineering of microorganisms is another area of enormous potential.

This new science of building and experimenting on virtual molecules may be the most important new experimental tool since John Stuart Mill codified the scientific method in the 1840s. As Moore’s law (the exponentially increasing power and cost-effectiveness of computers) continues to prove true, so will the power and importance of bioinformatics.

Sincerely,
Patrick Cox

August 28, 2009

Your Chance to get Seriously Wealthy from the Next Wave of “Computational Biology” was originally featured in the Penny Sleuth.

Of course, we can only offer a deal like this for a few short days. So keep an eye on your inbox…

For now, enjoy transformational technology guru Patrick Cox as he explains how health care reform could negatively impact startups and small-caps…

The tiny startups and small caps that we invest in have just dodged a bullet.

Because American consumers are free to buy the health care they want, they currently fund most of the world’s medical innovations. Those innovations are not, by the way, coming from Big Pharma. Like any established industry, Big Pharma resists change and protects the status quo. It fears new technologies and changes only when forced to. That’s why it has signed onto government health care, which would institutionalize its lead positions and slow innovation.

Choice in health care leads to the funding of new technologies. Many innovators, ironically, have no idea that this is the case. Scientists absorbed by the details of their fields rarely have any interest in the macroeconomic forces that determine investment trends. In that, they are not alone. Regardless, I’m extremely pleased to see that the people who run the Post Office and “cash for clunkers” are not going to be making our medical choices.

It’s August again in South Florida. This means that everybody I know starts the day by checking the National Hurricane Center’s storm updates with their morning coffee. Currently, Hurricane Bill is emulating the million or so Canadians who winter here every year and heading north.

As I recall, Florida’s Canadian inflow accounts for about one in six retired Canadians. That, using the term my Canadian grandmother used, is a lot of Canucks. Florida is more than glad to host Canadian snowbirds. Those of us who winter down here in the hurricane zone are always a little relieved to see them go, however. It means, among other things, that we don’t have to stand in lines to get into good restaurants. It also means we can get a doctor’s appointment a lot easier. Canadians, you see, are big consumers of American health care down here in the subtropics.

I certainly don’t blame them. Dr. Anne Doig, the incoming president of the Canadian Medical Association, recently described the Canadian health system as “imploding.” Waiting times for critical procedures are increasing dramatically. Treatments available in the U.S. are now denied in Canada. Older citizens, who account for more than two-thirds of all medical expenditures, are impacted most.

Doig said, “We’re all running flat out. We’re all just trying to stay ahead of the immediate day-to-day demands.” In fact, we know they’re not able to “stay ahead.” If they were, so many Canadians would not be paying so much for U.S. health care down here.

I don’t say this to criticize Canadians, or even those Americans who dream of imposing government health care. My point is simply that statistics about the Canadian health system don’t reflect one simple fact. About 15% of their most-intensive health care consumers are every winter here in Florida, where they freely buy the health care they need. Having lived near the Canadian border in Idaho and Montana, I know that Canadians also buy significant quantities of medical services there. The same is true across the northern U.S. states.

And it looks as if it will stay that way. The political pendulum, as I predicted, is accelerating back to the center. Something called “health care reform” will probably pass, but it won’t be the complete bureaucratization of medicine that was the goal. This is enormously good news for investors.

For transformational profits,
Patrick Cox

August 20, 2009

How Breakthrough Medical Technology Investors Dodged a Bullet was originally featured in the Penny Sleuth.

I suspect that these defensive recommendations are worthwhile. They may, in fact, protect investors from the worst of this downturn. I don’t believe, however, that they are in any way trades “of the decade.”

First, we happen to be living through a radical acceleration of the medical sciences. This acceleration has not only left laypeople in the dust. Scientists are unable to keep up with research outside their own areas. As a result, the companies that own these breakthrough technologies are not widely understood or properly valued.

It is also true that health care stocks are traditionally countercyclical. This isn’t surprising since consumers tend to cut back on everything else before sacrificing medical care. It’s no accident that biotechs in our portfolio have done well.

There is, however, another aspect of companies that control these new medical technologies that makes them immune to downturns. Their initial customers include extremely wealthy early adopters.

One of the most notable economic developments of the last decades is the remarkable growth of “high net worth individuals” (HNWI). As defined by the U.S. Securities and Exchange Commission, HNWIs are people with at least $750,000 managed by the reporting investment adviser or whose net worth the investment adviser reasonably believes exceeds $1,500,000. Others define HNWIs as people controlling at least $1 million in assets excluding primary residence.

Regardless, the number of these people has been growing dramatically for decades, far outpacing inflation. If you pay attention to politics, you know how upset this makes people who worry about the big increases in income or wealth “disparity.” While the biggest concentrations of HNWIs are still in North America and Europe, the fastest growth, by far, is in China and India.

This category of people controls so much wealth that, even after the financial meltdown, they remain relatively unscathed. If you loose a third of a portfolio worth $2 million, which is below the average for many HNWIs, you still have lots of options.

The total wealth at the disposal of HNWIs is immense. Though it is difficult to know exactly, it is probably around US$40 trillion, along with the associated annual income it generates. Today, according to Merrill Lynch and Capgemini, there are more than 8.5 million of these people in the world. They and their immediate families comprise a population that may exceed 25 million people. Spending on luxury items by HNWIs and family members remains strong.

According to Bertrand Lavayssière, managing director of global financial services Capgemini, “Even as financial market turmoil impacted the United States during the second half of the year, luxury goods makers, high-end services providers and auction houses all found ready clients in the emerging markets of the world — most notably, China, India, Russia and the Middle East — thereby sustaining their own growth.”

Nothing better describes the market for emerging breakthrough health care. The market segment that continues to buy Ferraris, yachts and private jets will also buy regenerative therapies for themselves and their loved ones. I don’t doubt that certain metals will do OK in the years to come. Even they, however, are subject to the vagaries of the overall economy. HNWIs, however, are largely immune to the big economic fluctuations. When stem cell therapies bestow the power to rejuvenate hearts, livers, skin and cartilage, even at sky-high prices, there will be millions and millions of happy buyers.

I mention stem cell therapies specifically, by the way, because most of the important patents are concentrated in a few companies. We own, I am convinced, the key companies now. I will, however, be adding more in the future as new enterprises spin off and develop alternative approaches.

Incidentally, two major news magazines have had prominent stem cell-related stories in the last week or so. Both of these stories, in Newsweek and U.S. News & World Report, were marked by bias and error. That, however, is not the point. Nor is it new.

They do reflect the growing public awareness of stem cell technologies. One of the most interesting aspects of these articles is their limited, even insular, perspective. Both focus on the U.S. market.

HNWIs, however, are an international group, and they are used to traveling to get the best health care. As I’ve been saying since I started with Breakthrough Technology Alert, the U.S. market is overregulated and overtaxed. We are, unfortunately going to see these technologies come online elsewhere first.

Regardless, I believe regenerative medicine is the play of the decade. No, I take it back. It’s the play of the century. Go ahead and invest in resources. I believe in a diversified portfolio. However, I remain convinced that the surest way to join the ranks of HNWIs yourself is to bet on the willingness of the very rich to buy the ultimate resource: longer, healthier lives, i.e. “time.”

For transformational profits,
Patrick Cox

August 6, 2009

Regenerative Medicine Is the “Play of the Century” was originally featured in the Penny Sleuth.

Currently, medicine is, to a large degree, a “one size fits all” proposition. Doctors watch for adverse effects and check personal and family histories. Medical technologies, however, are designed for the general population, not individuals.

That’s going to change…

The Problem With the “Normal Curve”

We know that many current treatments work on some people, yet not others. Some drugs are safe for many people, but have dangerous side effects for others. This is because all of us have individual differences in our genetic code based on heredity and environment. Even slight differences can lead to very different reactions to medications.

This has created serious regulatory problems. Drugs are denied regulatory approval not because they do not work, but because some fraction of the population suffers adverse effects. As a result, we are often denied incredibly effective therapies simply because they are not universally effective.

This shockingly primitive state of affairs exists because, until very lately, we simply have not had the tools to get to the genetic roots of disease. Scientists and pharmaceutical companies haven’t precisely known how a particular drug’s chemical profile interacts with a genetic one. Medical science, in turn, has been unable to tailor drugs to work with a specific genetic makeup.

The Impact of the Genome

This is rapidly changing. Just a few short years ago, the human genome was first mapped. The genome, as you know, is the entire collection of genetic code that defines us at a biological level. Now scientists are studying single genes and their individual expressions.

It is meaningful, from the investor’s perspective, that Dr. Francis Collins, the head of the Human Genome Project, has just been selected by the Obama administration to head up the National Institutes of Health. Collins has long been a prominent champion for using the knowledge gained from human genome to accelerate personalized medicine. 

This is important because institutional forces, with lobbying clout, always resist change. Much of Big Pharm, and its regulators, are vested in the “one size fits all” model. Many of the old players fear personalized medicine because it threatens the existing hierarchy. Collins’ presence at the top of the NIH will help counter this institutional resistance.

Incidentally, Collins has stated that genomics is currently where the computer industry was back in the 1970s – at the beginning of a technological revolution. While he was speaking in scientific terms, we should remember that the ’70s was also the right time to begin investing in a diversified portfolio of breakthrough computer technologies. Those who did so, despite claims that it was too risky or early, were made rich.

Dr. Collins is not alone in his views about personalized medicine. Former FDA director under G.W. Bush Dr. Andrew Von Eschenbach urges that the FDA approval process be overhauled and streamlined to help accelerate the adoption of personalized medicine. He is on record predicting that the medical industry will, in fact, undergo this profound metamorphosis.

For transformational profits,
Patrick Cox

How to Make a Fortune From the Personalized Medicine Revolution was originally featured in the Penny Sleuth.

The deal is to develop and sell drug-discovery technologies derived from two stem cell lines approved by the Bush administration. The stock rose over 10%, adding about $70 million to Geron’s capitalization.

I don’t write this to crow about being right. I write this because it is critically important that you understand that this is just the tip of the iceberg. For anybody familiar with the way pharma interacts with disruptive startups, it was inevitable. New products from Big Pharma have slowed to a trickle in recent years. The old platforms have largely played out. Slowly, recognition is dawning on the world’s medical giants that it’s time to invest in the most disruptive technology the world has ever seen — stem cell technologies.

Let’s look at the implications.

Pharm is a lumbering behemoth. It may take years for the industry to change focus, but it spews cash wherever it turns. The Geron deal is only the first, so let’s consider what’s next.

Geron has had years to cultivate its Big Pharm contacts, but Geron’s founder, Dr. Michael West, was busy creating and acquiring his own stem cell lines. His inventory, as a result, dwarfs Geron’s.

He has, in fact, most of the stem cell lines approved by the Obama administration’s new funding guidelines. They comprise, remarkably, more than 50% of all known eSC lines. At last count, he had over 200 lines, and 88 had important genetic diseases.

These cell lines, incidentally, were acquired from genetic screeners who help parents who carry genetic diseases assure that they do not pass them onto their children. They include cystic fibrosis, Huntington’s, muscular dystrophy and breast cancer.

Ironically, these cell lines hold the promise of producing treatments for birth defects that currently motivate a significant percentage of abortions. This means, of course, that the utilization of these cells may produce cures that reduce abortion rates.

The story does not end there. West’s ACTCellerate platform is producing the tools for potentiating stem cells into different cell types. Currently, West knows how to turn stem cells, including induced pluripotent stem cells created from adult cells, into more than 140 cell types. Recently, for example, he announced the ability to program cells to repair cartilage and connective tissues.

Therefore, the real number of cell lines that he can produce is in excess of 200 eSC lines times 140 SC types, which is over 28,000 cell types. If only a fraction of these cell types have drug discovery potential, West will do very well, indeed.

Yours for transformational profits,
Patrick Cox

July 8, 2009

Stem Cell Breakthroughs and Investor Fortunes was originally featured in the Penny Sleuth.

Currently, most applications simply integrate superior nanotech materials into existing products. Carbon allotropes are used to produce gecko tape. Antibacterial nano-silver is used in clothing, food packaging, disinfectants and household appliances. Nano-sized cerium oxide is employed as a fuel catalyst. Increasingly sophisticated products are appearing at the rate of two-four per week.

This month, we’re going to invest in 33 nanotech companies. Almost all are pre-IPO privately held startups. And we’ll do it in one step while retaining complete liquidity.

In the process, I’ll describe how one company is altering the DNA of viruses to attack cancers. I’ll also talk about a company that gets oils from algae. Another company that we’ll be adding to our portfolio is the leading contender in the race to make your current computer as obsolete as an abacus.

It’s Time to Get into the VC Business

One of the greatest frustrations about this job is coming across fantastic startups that I can’t add to the portfolio. I’ve written at length about a few of these pre-IPO companies with enormous, nearly inevitable returns. There are many more, in fact, that I haven’t mentioned. As a result, I truly envy venture capitalists. For some time, I’ve been fantasizing about a breakthrough technology venture capital fund. This isn’t quite that, but it’s close.

The attractions of the VC (venture capital) business are obvious. One is simply the ability to go where equity investors cannot. It irks me that VCs get to buy into obviously transformational companies when we can’t. The other reason is the rate of return enjoyed by VCs is typically so much higher than the stock market’s. I really want you to get in on the high yields earned by angel and venture capitalists.

This is why I’m so pleased to have come across our newest addition to the Breakthrough Technology Alert portfolio. Buying stock in this company allows you to participate in some of the most exciting and promising nanotech startups in existence – on better than VC terms.

This company acts as a kind of VC mutual fund, investing only in privately held early-stage breakthrough technologies. Moreover, your participation in the VC market remains liquid because you can sell the fund at any time. That’s a privilege that normal venture capitalists don’t have.

Not only does the VC fund take positions in important startups, it is actively engaged, bringing its expertise to and working side by side with the management of its portfolio companies. With its broad knowledge of the nanotech industry, the fund can help portfolio companies with general strategic and operational problems, as well as business and intellectual property strategy. It helps with executive recruiting, fundraising and compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

Perhaps most importantly, it is in the position to build collaborations with strategic partners.

In the process of vetting this company, I spoke at length with the company’s CEO. I was pleased, by the way, to hear he had enjoyed reading some of our past issues of Breakthrough Technology Alert.

He took the time to explain the VC fund’s investment philosophy to my associate Ray Blanco and me. According to this CEO, the current team has grown from four to 11 members since 2002. Five have extensive VC experiences. Additionally, team members have expertise in solid-state physicists, biochemistry and other technologies that intersect and converge with nanotechnology.

This team constantly monitors the world of nanotech. Additionally, it maintains contact with nanotech scientists in academia, where much cutting-edge research is taking place. While academic research is typically too early a stage for investors, these relationships allow the fund to identify important spinoffs as they occur.

We know that the long-term promise of nanotech is world changing. The immediate challenge for nanotech investors is finding companies in the commercialization stage. As I’ve explained, we at Breakthrough Technology Alert don’t mind getting in a little early, because the eventual returns will be so high. Investors do, however, want to know that their portfolios will maintain and increase in value while waiting for those eventual huge returns. Everyone at this unique venture capital fund clearly understands this need for liquidity.

The Only Publicly Traded Liquid Nanotech VC Firm

To my knowledge, this investment is the only truly liquid nanotech venture capital company available to stock buyers. Diversification is at the heart of its investment philosophy. It generally doesn’t put more than 5% of its gross assets in any single holding.

It also maintains large cash reserves as a means of counterbalancing the inherent risk of investing in young nanotech businesses that are not yet profitable. As its CEO says, the fund offers a “diversified way to play the emergence of nanotechnology – when most of the companies are still private – in a public vehicle.”

Several of its holdings are, however, already earning significant revenues. Companies in the portfolio generated $242 million in revenue for 2008, a 22% increase over 2007. Other companies are on track to becoming revenue producers or to significantly increase revenues.

Since I recommended this unique venture capital fund to my readers last week, we’re already closing in on double-digit gains. If you want access to my full report on this stock – as well as new transformational technology stocks each month – visit the Breakthrough Technology Alert website.

Sincerely,
Patrick Cox

July 2, 2009

Earn Venture Capital Profits for Your Stock Portfolio was originally featured in the Penny Sleuth.

If you missed the chance to buy into the computer industry when it was young, this is a second shot…

Currently, the mainstream electronics industry processes data by moving bunches of electrons about in huge batches. Think of the components in your PC as electrical plumbing. Data are usually stored as batches of electrons. Imagine your computer’s hard drive as a bunch of very small buckets, some full of water, some not. This will change.

Improved materials technologies from emerging nanosciences are allowing us to replace batches of electrons with the smallest individual unit: the electron. As a result, computers will work at far higher speeds. Additionally, far less electricity will be required to do the same amount of work.

Much of this exciting news is being ignored by the market. It’s an unfortunate truth that investors often lose sight of long-term opportunities to create wealth because they get distracted by the short-term noise and news in the markets. When it comes to big transformational technologies, don’t worry about timing. The returns that disruptive technologies yield justify getting in early.

Quantum Superposition

One important quantum effect that will be used in future generations of computer technology is “quantum superposition.” In a nutshell, this means that a quantum particle can exist in multiple states and everything in between at the same time. This is because a quantum particle, such as an electron, behaves as both a particle and a wave.

Have you heard of the particle wave theory? In practical terms, it means that bizarre and counterintuitive effects occur on very small scales, and they can be harnessed.

This “quantum superposition” effect will, for example, utterly transform how we do “computer math.” Currently, nearly everything done by computers is done in binary. The smallest piece of information a computer handles, the bit, is either one or zero. A quantum computer, though, would be able to store and work with number systems other than binary.

This means computers would become exponentially more powerful because each “quantum bit” (qubit) could store a much greater range of numbers than the two that binary math restricts us to. Imagine a laptop with the computing power of the world’s 10 most powerful supercomputers. Then you begin to grasp the potential of quantum computing.

Decoding Quantum Encryption

Quantum computing also offers the means of making our communications and business transactions far more secure than they are today. Quantum cryptography exploits several remarkable effects of “quantum entanglement.” One is the ability to generate pairs of utterly unique and unbreakable keys. Basically, two random but identical particle keys can be created using entanglement. Since reading a quantum particle alters it, any effort to eavesdrop on communication is detected and that communication is either disrupted or ended.

Using this technology, we can create completely secure communications networks. Recently, Toshiba’s R&D labs announced the successful testing of quantum cryptography over fiber-optic networks. Austrians were able to send entangled photons between two Spanish islands nearly 90 miles apart.

Spintronics

One of the likeliest quantum technologies to go mainstream is the field of spintronics. This is the exploitation of different electron states. The only property of the electron that we use in electronics now is charge. Electrons, however, have another property called “spin.” Because we can change and read this spin, it can be used to compute. Already, the tech giants are investing in this technology. And there’s a reason.

I’ve written a lot about HP’s work on memristor technology. Memristors are going to provide the next great leap in computer technology. HP has been making rapid and well publicized advances. It could, in fact, have product on the market next year. This initially concerned me because HP is too big to get us anything close to a memristor pure play.

Fortunately, memristors can be built using techniques other than HP’s. My associate Ray Blanco has been poring through patents and tech journals. What he’s found is enormously exciting.

Basically, a number of other groups have made similar memristor advances using different technologies. One is based on spintronics. Seagate Technology scientists believe, in fact, that spintronic-based memristors would be more efficient and customizable than the ion-based tech debuted by HP’s labs. There are other players here, and we’ll tell you about them in the future.

The big question now, however, is not which of these technologies will emerge as the best solution. The question we’re looking at today is who will build these new components. Who, in effect, will be the Intel of the future?

For transformational profits,
Patrick Cox

June 1, 2009

The Quantum Leap of Quantum Computing was originally featured in the Penny Sleuth.