What Happened to the Merrill Lynch Nanotech Index?
Around the year 2004, nanotechnology seemed like the next big thing for investors and even the large investment banks took notice. In March of 2004, Merrill Lynch released their “Merill Lynch Nanotech Index” which “provided a diversified representation of nanotechnology stocks and ADRs in the United States”. Since the index is no longer calculated, and no funds or ETFs appear benchmarked to it, we can only speculate as to how it might have performed to date. What might be of interest is to see just how all of the “nanotechnology companies” that belong to this index have performed over the past 10 years since the index was first formed.
If you had invested in an S&P 500 index fund or ETF exactly ten years ago today, you would have realized somewhere near a +70% return as of today. The same investment in the tech-heavy Nasdaq would have realized a gain of around +116% over the same time frame. If any member of the Merrill Lynch Nanotech Index did not at least provide better returns than the Nasdaq over the past 10 years, then it would have under-performed this broad index and would not have given an investor sufficient rewards for the risk taken.
Below is a list of the 25 companies that comprised the Merrill Lynch Nanotech Index in March of 2014:
Just how did all these companies fare over the years?
Two of these companies are no longer around:
|Three-Five Systems Imaging||Bankrupt|
Another five companies underwent corporate events in the form of acquisitions and mergers. The percentages shown below reflect the acquisition prices compared to the price of these companies on March 19, 2004:
|Applied Films AFCO Materials||Acquired by Applied Materials for $464 million (-1%)|
|Pharmacopeia||Acquired by Dassault for $750 million (+59%)|
|Westaim (Nucryst)||Acquired by Smith & Nephew for $21 million (-88%)|
|Caliper Life Sciences||Acquired by PerkinElmer for $600 million (+221%)|
|Symyx Technologies||Merged with Accelrys|
|Biosante Pharmaceuticals||Merged with ANI Pharmaceuticals|
Out of the 17 remaining companies, 12 had negative returns over the past 10-year period:
|Altair Nanotechnologies (NASDAQ:ALTI)||-64%|
|Emcore EMKR (NASDAQ:EMKR)||-21%|
|Flamel Technologies (NASDAQ:FLML)||-33%|
|Nanophase Technologies (OTCMKTS:NANX)||-91%|
|Harris & Harris (NASDAQ:TINY)||-44%|
Of the 11 remaining companies, 7 showed positive returns but did not manage to beat the Nasdaq’s returns of +116% over the past 10 years:
|MTS Systems (NASDAQ:MTSC)||+84%|
|NVE Corp (NASDAQ:NVEC)||+18%|
|Cabot Corp (NYSE:CBT)||+84%|
The 4 remaining companies below all managed to beat the returns of the Nasdaq over the past 10 years:
|Amcol International (NYSE:ACO)||+207%|
|Universal Display (NASDAQ:OLED)||+370%|
Amcol also pays a meaningful dividend of 1.75 %, so this extra income has to be taken into consideration as well. All of these 5 companies may merit a further look to determine whether or not their strong historical performance was enabled in any way by the use of nanotechnology.
So what about the investor who would have decided to place an equal bet of $1000 on every member of the Merrill Lynch Nanotech Index in March 2004? Well since we know the exit price or current share price for 21 of these 25 companies, we can calculate the approximate returns of that investment (excluding dividends) over the past 10 years. An investor who invested $1000 in each of these 21 companies would have spent $21,000 and have $33,729 just over 10 years later for a return of around +61%. Given that the Nasdaq returned +116% in the same period, investors may have been better off putting their money in a Nasdaq fund or ETF instead of investing in the Merrill Lynch Nanotech Index.
NOTE: When the article was originally published, we incorrectly used Cabot Oil and Gas instead of Cabot Corporation. This has since been corrected.
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