Nanalyze

7 Synthetic Biology Companies to Invest In

When it comes to promising disruptive technologies, synthetic biology has to be in the top-5. The ability to create artificial living organisms that perform a wide range of useful tasks is an incredibly powerful thing. Perhaps the most talked-about synthetic biology stock right now is Intrexon (NYSE:XON) and with a market cap today of over $4.93 billion, they’re the leading synthetic biology pure-play by size having showed investors a return of +41% since their IPO. But not all synthetic biology companies have been kind to investors. Three synthetic biology stocks we wrote about recently (Gevo, Solazyme, and Amyris) have punished investors. While we can debate the merits of which stock to invest in ad infinitum, we’re more interested in putting together a portfolio of synthetic biology stocks that gives us an indication of how this theme performs over time. We’ve done just that by creating a motif called Nanalyze Synthetic Biology Stocks.

Nanalyze_Synthetic_Biology_Stocks

Our motif contains 7 synthetic biology stocks publicly traded on major U.S. exchanges. First, there’s Intrexon (NYSE:XON) which we’ve written quite a few articles on. Then there’s the 3 synthetic biology stocks that have punished investors over time; Gevo (NASDAQ:GEVO), Solazyme (NASDAQ:SZYM), and Amyris (NASDAQ:AMRS). Then there’s Codexis (NASDAQ:CDXS) with their  CodeEvolver protein engineering platform. Then you have Bioamber (NYSE:BIOA) which is looking to produce succinic acid using yeast. And finally you have Metabolix (NASDAQ:MBLX) which is creating PHA polymers within microbial cells and then harvesting them. That’s a total of 7 pure-play synthetic biology companies for investors to choose from. Instead of trying to pick which stock will provide the best returns, a more prudent approach would be to buy all 7 stocks and enjoy the benefits of diversification. Typically, this would require excessive transaction costs but not if we use the Motif Investing platform.

When constructing our synthetic biology motif, the first thing to decide is what weightings to give each stock. An objective method to determine weightings which is used by most index providers is that of market cap weighting. This approach gives each member of the index a weighting based on their size. This means of course that Intrexon would dominate a market cap-weighted portfolio. Intrexon is 16X the size of the next biggest synthetic biology stock, Amyris. In order to get around this, we’ve capped the weight of Intrexon in our portfolio to a maximum of 50%. This is what the resulting weightings look like:

Nanalyze_Synthetic_Biology_Stocks

Note that Intrexon has a weight less than 50% now because the motif was created a few weeks ago when Intrexon was at an all-time high. With the market volatility we’ve seen lately, it’s no surprise this portfolio has been volatile and hasn’t performed well with a 1-year loss of -29%. We’ve been long Intrexon since just after their IPO and believe this is a great way to play synthetic biology, however by using the above motif we can also get exposure to the other 6 synthetic biology companies that are publicly traded on major U.S. exchanges.

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