Aixtron is Not a Graphene Stock
Graphene is an exciting material, make no mistake. When investors read about the potential applications for this miracle nanomaterial, they want in on the ground floor and look for companies that can give them pure play exposure to the graphene theme. However, caution is warranted. Some companies purport to be in the graphene business but in fact, they aren’t. Take for example Graftech, a company we warned about before that is not a pure play on graphene. If you would have invested in Graftech when we published that article a few years back, you would have lost -39% of your investment as of today. That loss would be all but locked in now since Brookfield recently announced the acquisition of Graftech at $5.o5 a share.
However, there are some pure play opportunities available in the market. A few years ago we saw the first graphene IPO of Applied Graphene Materials (LON:AGM) which also trades as an ADR on the pink sheet market under the ticker of (OTCMKTS:APGMF). Neither issue has treated investors well since both have lost -41% since the IPO. Another graphene IPO we saw recently, Haydale, hasn’t done so well losing -34% of their value since IPO. Just yesterday, an article was published on Seeking Alpha titled “Aixtron Is The Top Stock In The Graphene Industry” which states that AIXG is “a leading graphene company”. Let’s take a closer look at that statement.
German-based company Aixtron (NASDAQ:AIXG) is an $800 million market cap company that manufactures chemical vapor deposition (CVD) equipment that is used for the production of LEDs, carbon nanostructures such as carbon nanotubes and graphene, organic solar cells, memory chips, and many other applications. Aixtron was a member of the Lux Nanotechnology Index and we highlighted the company before as a possible “picks and shovels play” on nanotechnology but one that is competing with Veeco in a market that appears to be shrinking rather than growing.
The question is, what pure play exposure will you get to the graphene theme if you invest your capital in AIXG? The answer is very little. Here’s a breakdown of Q1 2015 revenues by application:
Based on the above graph, we could make a solid claim that AIXG is a play on LEDs, not graphene. However, the Company does recognize the potential of graphene by stating that they expect to see an increase in demand in their CVD systems beyond 2018 for uses in graphene and carbon nanotubes. That’s 3 years from now.
If we’re going to conclude that CVD equipment is a pure play on graphene, then we’d also have to say that companies such as Veeco (NASDAQ:VECO) or CVD Equipment (NASDAQ:CVV) are also pure plays on graphene. Investing in chemical vapor deposition equipment does seem like a viable investment to make given it is used for disruptive technologies such as solar, LEDs, and carbon nanostructures. We might look at putting together a list of CVD companies and then building a motif on the Motif Investing platform to get exposure to CVD equipment. But we’re not going to invest in AIXG because it’s “a leading graphene company”. It just isn’t.
Here at Nanalyze, we hold the lion's share of our investing dollars in a portfolio of 30 dividend growth stocks. Find out which ones in the Quantigence report freely available to Nanalyze subscribers.