With graphite becoming such a popular topic for investors these days, I thought I would share the full interview with you today. It's a comprehensive look at the forces driving this sector. And it contains some background material about me that you probably don't already know. Here's the Private Briefing interview. I hope you enjoy it.
Patalon (Q): Michael. . .during a recent discussion, you told me that we are entering the "Golden Age of Materials Science." What did you mean by that and what will this mean for investors? How long will it last?
Robinson (A): What I mean by that is that we haven't seen such an intense, specialized focus on new materials in many, many years. Here's the thing. We simply cannot get to the next level in a tech-oriented world without having the new materials to help us do so. And I'm talking about new materials of all kinds, novel compounds, tweaked molecules, special polymers and more. I recently had a three-hour dinner with a biotech CEO and we talked about why I think this is the Golden Age of Materials Sciences. I related that I am currently reading about hundreds of breakthroughs a month. . .taking place all over the world. . .and said that I'm struck by how many of these teams now include materials scientists as standard procedure. And he agreed. Remember, your smartphone is an amalgamation of materials of all kinds. . .of rare earths. . .of gold, silver, plastic, specialty polymers, specialty glass and more.
As I see it, this period will last for at least the next 20 years. If you're an investor, there will be lots of major breakthroughs that you can make money on. . .and I'm talking windfall profits. . .because the materials guys will keep finding new ways to push the tech boundaries forward. Remember, the world at this point runs very much on silicon. Graphene is important because it's a new, key milestone that is giving the materials guys new territory to explore. . .by taking the discovery itself and finding all sorts of new applications. The whole field of nanotech is itself pushing materials science forward. . .like carbon nanotubes and Nano gold that works great for medicine.
(Q): You were one of the first investment columnists to see the great potential in graphene. When was that and how did you manage to be so far ahead of the crowd on that great call?
Robinson (A): As I said, I have been interested in materials for some time. I first got interested in the summer of 1977 when I was working for (Congressman) Jack Kemp as a legislative intern. I commuted with my dad who used to tell me all about Star Wars and exotic materials that were then getting a lot of attention. That interest intensified in the late 1980s when I was writing about President Reagan's Star Wars program for a newsletter my father had for a time. Space-based lasers, charged-particle weapons and the like needed new materials—as did the detectors and other military gadgets created for the program. So I went to labs and talked to scientists about things like gallium arsenide and other materials used for a wide range of new tech applications.
A turning point that put me on the path toward graphene occurred in late 2009 when I attended a metals conference in San Francisco. It was there that I latched onto the investment potential for rare earths. Again, I had followed that field as it related to military high tech, but not yet for its investment potential
(Q): What made you see the profit potential for graphene?
Robinson (A): I remembered reading about the Nobel Prize that was awarded for graphene and being fascinated by it. Thanks to my years of researching high-tech materials, I very quickly realized this substance had an immense potential. The more I researched, the more I became convinced that this was a material with the potential to change basically any industry you could think of.
About that same time, I had a long conversation with my father-in-law about this miracle material. He had a doctorate in chemistry and did cold-temperature physics research at the University of California at Berkeley for 40 years. He told me that the materials scientists and related experts around the world were getting heavily involved in the field. See, the two guys who discovered graphene won the Nobel in only seven years, which is almost unheard of. That, my father-in-law told me, really got the whole field extremely excited about researching the many possible new uses for this unusual substance.
(Q): As you said in a recent column it's as if we're watching the birth of a brand-new industry.
Robinson (A): That's right, Bill. And as exciting as graphene is for scientists and researchers, it's even more intriguing for investors. I mean, how often to you really get the chance to be there when a new business begins? I'm not trying to be overly dramatic here. . .but what if you could go back in time. . .to Titusville, Pennsylvania, in August 1859. . .to see the first oil strike. . .or in (Alexander) Graham Bell's lab in March 1876. . .to see the telephone work for the first time.
(Q): So just what is it that's so special about graphene? You said it would benefit multiple sectors. . .is there one sector in particular that you think graphene will benefit the most?
Robinson (A): It's special because it is just one atom thick and occurs in a hexagonal pattern, kind of like chicken wire, but one heck of a lot more valuable. In layman's terms, it's the strongest and lightest material known to man.
As for what sectors it will benefit, I'd start with electronics. . .but only after some hurdles are overcome. The big one is getting graphene to conduct electricity: Right now, electrons don't flow as smoothly as they should. But hang-ups like that are to be expected in something so new. Now the materials guys and the electrical engineers are attacking that problem at a feverish pace, because graphene could be used for everything from capacitors to a new type of semiconductors.
And that's just the start. I've said here—and I know that I've told you in our many discussions about this—that there probably isn't an industry you can think of that won't somehow be influenced by graphene. This stuff is so unique, bendable, flexible and incredibly strong that the only thing constraining its use will be the imaginations of the researchers who are trying to discover the new applications.
Graphene is lighter than a feather, but 200 times stronger than steel. I know you're a big airplane nut, Bill. . .can you just image the fuel savings you could have by using this in aircraft to make parts of seats, panels, wing reinforcement, struts and more?
And how about medicine? There's a researcher at Wayne State who wants to use graphene for neural implants that would last much longer and be more benign than anything they have now.
(Q): You said during our discussion that we're in the very earliest stages of graphene-related investing. Do you see a proliferation in graphene-related investments?
Robinson (A): I do—both direct and indirect. Now, I want to emphasize that it is still early. No "pure play" investments exist for graphene. But don't be deterred. There are some indirect plays right now. And more profit opportunities—direct and indirect—will emerge. You'll no doubt even find some ETFs that hold graphene-related investments as this new business burgeons.
That said, there are some plays to consider right now.
One indirect way to play graphene is to invest in graphite. And there are two stocks that I like as graphite plays.
The first is GrafTech International Ltd., a Parma, Ohio, firm with 125 years of experience with carbon- and graphite-related technologies. It's a hybrid firm that produces both natural and man-made graphite. More than a century ago, it helped Cleveland, Ohio, become the world's first city with electric street lamps. Now it's involved in such high-growth businesses as energy storage, semiconductors, fuel cells, lubricants, electronics and aviation.
(Q): It's also a leading global holder of graphene-related patents.
Robinson (A): That's right. The stock has been hurt of late because of worries about the steel industry. But it's cheap and investors can look to invest for the long term by averaging in.
A second, more-speculative, graphite play is Northern Graphite Corp., an Ottawa-based junior producer. Northern Graphite's main asset is the Bissett Creek graphite project located 65 miles east of North Bay, Ontario, and nine miles from the Trans-Canada Highway (Route Transcanadienne).
With the shares trading at roughly $1.22 (Canadian) each, it goes without saying that this is a highly speculative play—a penny stock. It will be volatile, and could experience big swings. In fact, I would count on that.
(Q): Here at Private Briefing, we typically tell folks to cap their investment in such a stock to no more than 1% of their holdings. That will allow for a wider-than-usual "trailing stop." But it also caps their maximum loss at about one half of 1% of their total holdings.
Robinson (A): They should embrace the same mindset for my European play. . .Flinders Resources Ltd. Flinders was founded by two of the world's top rare-earths experts. The venture has both mining and materials down cold.
(Q): What about ETFs?
Robinson (A): There are none that play graphene. But there are several that stand to gain from the "Golden Age of Materials Science" that I often refer to. Industry insiders refer to them as "exotics". . .for "exotic materials."
You can do this by investing in one, or all, of three exchange-traded funds (ETFs) that focus on the materials sector. These three provide a good exposure to chemical firms, as well as to other resources, such as metals.
The ETFs are the Vanguard Materials ETF, the iShares Dow Jones U.S. Basic Materials ETF and the Materials Select Sector SPDR.
(Q): Thanks, Michael.
Michael Robinson, Money Morning