Dear Strategic Tech Investor reader,
Over the past 20 years, I’ve been lucky enough to have regular talks with Dr. Robert Fisher, one of America’s top chemistry experts.
Fisher, now retired, was a researcher at the University of California, Berkeley for nearly 40 years.
And he just happens to be my father-in-law.
In a stroke of luck, he just clued me in on one of the biggest tech-sector profit opportunities heading our way.
And I want to share it with you now.
By now, the new “Miracle Material” scientists are calling “graphene” isn’t news to any of us. Graphene is the carbon-based creation that is equally strong and thin. In fact, it is the thinnest man-made material on Earth.
Graphene has become the public face of the “Golden Age of Materials Science.” But this incredible substance is still being commercialized, meaning there aren’t a lot of direct profit opportunities yet.
Don’t let this worry you.
Thanks to my talk with Dr. Fisher over dinner the other night, I know that graphene isn’t the only Miracle Material that is reshaping technology today.
In fact, I’ve uncovered one Miracle Material that could bring you substantial profits – not in the future, but today.
I’ll show you how in a minute. But first, let me tell you why we’ve entered the Golden Age of Materials Science.
A New “New Age”
When it comes to materials science, we have finally reached a point where opportunity and science are intersecting.I’ve kept my eye on this innovation sector since the late 80s when I was writing about the Reagan-era defense buildup.
Back then, scientists had begun experimenting with different types of compounds and materials with the hope of giving our troops an edge on the battlefield.
These experiments invented all sorts of cool things, but they were often classified as “secret,” meaning they were very expensive and had few commercially viable applications.
Science of that time was simply far ahead of business opportunity.
Things have certainly changed. The Soviet Union is gone, and so is the threat of Mutually Assured Destruction (MAD). But what they left behind is a slew of Miracle Materials.
These materials – everything from rare earths that drive precision lasers to the cobalt needed for rechargeable batteries – are going to touch every aspect of the economy. We will use them in smartphones, semiconductors, consumer electrics, satellites and even medical devices.
In fact, they’ve become so critical to global economy that we’re on a $1 trillion market opportunity threshold.
The windfall on this is going to be staggering.
It’s a Miracle
Graphene is clearly one of the heavyweights of this Golden Age.And with good reason.
I mentioned before that graphene is thin – thin enough that if you stacked 3 million sheets of this stuff, the entire pile would be just a single millimeter in height.
Despite its skinniness, this two-dimensional structure made from carbon is incredibly strong. It would take an elephant balanced on a pencil to break through a graphene sheet as thin as Saran Wrap.
So you can see why CNN describes graphene as “a natural wonder of the materials world that’s destined to transform our lives in the 21st century.”
It has the potential to yield nanotech supercomputers, neural implants that combat brain disease and paper-thin televisions.
We’re really only limited by our imaginations.
There is just one major downside – graphene is not globally marketable.
Not yet, at least. Scientists are still working on a way to adapt the material for commercial use. As a result, there haven’t been many direct ways to invest in graphene.
What most people don’t know is that the researchers behind these materials have found other ways for us to invest in this red-hot sector of technology.
And we’ve identified the best…
Honeycomb Gold
A few years back, on a flight to the San Francisco Bay Area, I was fortunate enough to be seated next to the corporate vice president of a top-tier technology firm.In fact, it’s a company I knew well. They were a leading supplier of advanced materials – such as carbon-fiber “composites” – that were just starting to see broader industrial uses in the aviation and automobile industries.
The executive chatted with me as we crossed the country together, laying out his company’s “big” plans.
After taking careful mental notes, I vowed to follow this company to see if it made good on its plans. Today I am happy to announce that every single prediction came true.
This company has evolved into the best profit play I’ve seen in the Miracle Materials sector.
The upside is huge. The company is predicting record financial results for 2014, and Wall Street has put a target price of $49.20 on it. I also think we’re looking at possible sales growth of nearly 50% through 2017.
What all of this means is that the time to move is now.
This “Honeycomb Gold” Miracle Materials company, Hexcel Corp. (NYSE: HXL), is at the forefront of one of the greatest global commercial aviation booms in history. It’s helping jet makers turn out faster and more aerodynamic planes.
The company, which is now headquartered in Stamford, Conn., was founded in 1946 in the basement of a Bay Area home. Hexcel became the first company to develop a honeycomb-shaped adhesive for bonding metal to metal, which gave aircraft manufacturers the freedom to make lighter planes due to thinner sheets of metal being bound together.
And that wasn’t even Hexcel’s most famous innovation. The company had been responsible for parts that helped Neil Armstrong‘s Apollo 11 crew during its historic July 1969 moon landing. The energy-absorbing footpads that Hexcel outfitted onto the Lunar Module (“LM”) allowed the spiderlike craft to safely touch down.
And, as you read this, Hexcel’s materials are headed for Mars aboard an observation satellite recently launched by the Indian Space Research Organisation.
But what is going to be the most profitable for investors is a novel compound the company formulated back in the late 2000s.
Hexcel engineers combined carbon fiber and epoxy resins to create eight different super-light but super-strong composites tailored for global aviation.
The U.S. Federal Aviation Administration (FAA) estimates that the number of annual air travelers will double over the next decade – from 750 million today to about 1.2 billion by 2020.
That means we need a lot more airplanes.
Between now and 2032, The Boeing Co. (NYSE: BA) says we will need 35,280 new commercial airplanes, with a total value of $4.8 trillion. The company predicts that 14,350 of these new airplanes (about 41% of the total new deliveries) will replace older, less-efficient airplanes. The remaining 20,930 airplanes will be needed to expand global carrier fleets – especially in fast-growing markets such as East Asia.
This leaves jetliners such as Boeing and rival Airbus Group (OTC: EADSY) scrambling to purchase more of Hexcel’s light-but-durable miracle glue.
Boeing designed the Dreamliner as a new jet with unmatched fuel efficiency for an airplane in this class. The 787 provides carriers increased cargo capacity by 45% while slashing fuel consumption by 20%
Boeing attributes the Dreamliner’s great benefits to its “suite of new technologies and its revolutionary design.” And that “revolutionary design” is due to the fact that composite materials – among them Hexcel’s – account for a full 50% of the 787′s primary structure, including the fuselage and wings.
For each Dreamliner built, Hexcel sells to Boeing about $1.5 million worth of composites and other exotics. Because Boeing right now has unfilled orders for 916 Dreamliners, we’re talking about as much as $1.3 billion in new sales for Hexcel.
I believe the Dreamliner will become a huge success for the nation’s leading builders of passenger jets.
And that success will enrich suppliers like Hexcel.
But here’s what really jazzes me: As nice a deal as Hexcel has with Boeing, it has an even better relationship with Airbus – thanks to the European firm’s new A350.
For example, Hexcel materials are used throughout the A350-900 model. They’re in the cockpit, passenger doors, main fuselage, tail section and engine.
Like the Boeing Dreamliner, the Airbus A350 features a composite content of about 50%. But while Hexcel reaps $1.5 million in sales for every Dreamliner built, it sells $5 million worth of products to Airbus for every A350.
Airbus says it has already received orders for 814 A350s from 39 global customers.
Given that two-thirds of Hexcel’s sales come from a commercial-aviation sector that expects to remain in full-out “boom” conditions through at least the end of the next decade, the company’s growth prospects in this part of its business are excellent.
Hexcel is forecasting record revenue performance, with sales in the range of $1.8 billion for 2014 alone.
Executives have recently issued new “guidance” that projects overall sales to reach $2.5 billion by 2017 – a jump of 50%. That will translate to earnings-per-share (EPS) growth “in the teens.”
Wall Street analysts think that the stock could trade as high as $54 in the next year – a not-bad-at-all return of 20%. But we see a much bigger upside.
Indeed, based on a thorough review of the company operations and its financials, I’m projecting gains of as much as 50% in less than two years.
Hexcel is a company that gives a strategic growth play on the aviation boom and the long-term expansion in the global market for materials science, where Hexcel is a clear leader.
Those materials are like a key that unlocks the future. And they will also unlock massive profits.
Two Bonus Miracle Material Profit Plays You Can Invest In – Today
While Hexcel is our clear Miracle Materials winner, that doesn’t mean there aren’t other ways for you to invest in the Golden Age of Materials Science. I’ve identified two bonus plays that have huge upside potential.Let’s look at them now…
- Bonus Play No. 1: Profits in “Silica Valley”
The 30-year pact is threatening to upset the delicate global balance of power. And Putin is further meddling by vilifying the process of hydraulic fracturing, aka “fracking,” in Western Europe.
There’s just one problem with Putin’s agenda…
The United States is in the midst of a major natural gas boom. That means we will most likely be supplying Europe with natural gas exports in the near future.
And it’s all because of fracking, the process of using water, sand and other agents to fracture rocks and earth deep underground – releasing previously inaccessible oil or natural gas.
It’s a highly lucrative technology that gives energy companies economically practical access to vast new deposits of oil and natural gas in those underground bands of shale. And it’s the key technology paving the way for America’s new “energy independence.”
There is no doubt that Miracle Materials are revolutionizing the tech industry, and everyone is on board to pick up stocks quick. However, there is one hidden gem that many investors and Wall Street tycoons have failed to notice, and that is sand.
It’s one of the simplest and most abundant materials on Earth. But when used for things like hydraulic fracking, industrial sand, known as silica, unleashes a gusher of profits.
Because of the promise of fracking – it is important that we take a good look at U.S. Silica Holdings Inc. (NYSE: SLCA).
This Frederick, Md.-based outfit faces a “profitable future.”
This stock has already soared more than 105% – in the past five months alone. But don’t worry. I still see plenty of upside left.
This midcap company, which dates back to the late 1800s, remains a leader in supplying the silica sand the energy industry needs for hydraulic fracking.
Often the only supplier its customers have, the exciting part of U.S. Silica is that the firm usually ships the sand by its own rail, truck or barge assets to all the major shale plays.
That transportation network gives them firm control over their own destiny – and makes it even more attractive to investors.
Earlier this year, the company received approval from the town of Fairchild, Wis., to begin development of a new fracking sand mine and processing plant. U.S. Silica says the facility will produce 3 million tons of fracking sand and is expected to open by the fourth quarter of next year. U.S. Silica sold 8.2 million tons of the material last year, so the Wisconsin mine will be a significant growth factor.
In the first quarter of this year profits surged 6%, and U.S. Silica boosted full-year earnings guidance from its previous estimates of $180 million to $200 million.
Trading at roughly $56 a share, the company has a $3 billion market cap. It has operating margins of 19%, a return on equity (ROE) of 26% and a three-year sales growth rate of 35%.
And remember: I’m predicting an earnings growth rate of 24% over the next few years. That would give us another double in just a few years.
- Bonus Play No. 2: “Earth Calling Investors”
As many of you know, rare earths are at the heart of multiple defense applications, including laser-guided weapons, jet-engine parts and night-vision goggles.
Rare earths are metals with high electrical conductivity that react with other metallic and nonmetallic elements to generate a broad spectrum of compounds.
What this means is that these rare earths will soon make major improvements in the auto and audiovisual industries. And in health care, rare earths will improve MRI machines and high-intensity imagers and tracers.
But the one thing that most investors don’t realize is that there’s also a huge need for rare earths in many consumer applications. We’re talking everything from smartphones and tablets to digital cameras and fiber optics to LED lighting.
This technology is so advanced it almost sounds like something out of a Jules Verne novel.
That’s why I’ve chosen rare earths as our third “Miracle Material” profit play that you can cash in on today.
The company I’ve identified for you is Tasman Metals Ltd. (NYSE: TAS), a possible REM gold mine.
I have been fortunate enough to meet with Tasman CEO Max Saxton on a number of occasions.
Saxon, one of the world’s top geologists, discovered the Nora Kaar rare-earth mine in Sweden few years back.
This is a discovery that will be invaluable to Europeans who hope to source rare earths on their own continent – rather than importing them from China, which has used export restrictions to hoard its supply.
European leaders have guaranteed Tasman Metals a built-in customer base when Nora Kaar opens.
And that means profits could skyrocket for early investors.
Tasman officials recently said they are in negotiations to merge with Flinders Resources (TSX.V: FDR/OTC: FLNXF), which owns a large graphite mine in Sweden that could begin production by next year.
And the timing couldn’t be more excellent for you.
After three years of struggle that has been tied to fears of a slowing Chinese economy, the rare-earth sector is headed for a rebound. This rebound could send Tasman stocks soaring through the roof, leaving investors who buy in early with monstrous profit gains.
Tasman’s shares have already rallied about 30%, while still trading at about $1.30 each.
And that’s still well below their three-year closing high of $6. I’m projecting a high estimate of $6.94 for the year. If the stock can recover half that amount in the next two years, you’d be looking at a potential upside of nearly 150%.
Let me be clear about a couple of things here.
First, Tasman is the embodiment of a high-risk stock.
Given the fact that it’s both a turnaround play and a merger candidate, this is only appropriate for the high-risk portion of your portfolio – and then only for investors who are able to stomach the volatility we all know is possible, even probable, with a small-cap stock like this.
So you should only invest an amount that you feel comfortable tying up for two years – but certainly no more than 1.5% to 2% of your total holdings. This is definitely not a “back-up-the-truck” stock.
But I feel strongly that all investors should have at least one stock like this in their portfolio.
As we talked about in the past, once you have your solid foundation in place you can look for these kinds of unique investments to help turbocharge your returns.
Don’t worry, we’ll be keeping a close eye on this for you.
Happy trading,
Michael
