24/7 Wall St. was given a chance to ask Tim Keating some questions in an interview about Keating Capital, as well as regarding industry trends and some recent deals that have been seen.  He has roughly 26 years of history in the capital markets and investing and his Denver, Colorado-based Keating Investments was founded in 1997.  Its site can be accessed here.

Keating has raised roughly $53 million through the end of May and that figure is expected to be roughly $70 to $75 million upon completion.  It is also expected to have about 3,500 shareholders by the time it is said and done.  Keating’s specialty is making pre-IPO investments in innovative and high growth private companies that are committed to becoming public within roughly eighteen months of the investment coming about.  Each investment is expected to be about 5% of the fund’s capital, implying up to $3 million to $4 million per investment.

The firm has already enjoyed some success even before being truly public on the markets.  Two of its investments have already made it to come public: Solazyme, Inc. (NASDAQ: SZYM) is a renewable oil and green bioproducts company; and  NeoPhotonics Corporation (NYSE: NPTN) a developer and manufacturer of photonic integrated circuit based components for use in telecommunications networks.  The group has also recently been involved in several other capital transactions and investments:

• Xtime, a service provider of Web scheduling and CRM solutions for automotive service departments;
• BrightSource, a developer solar energy generating facilities for utility and industrial companies;
• MBA Polymers, a company engaged in plastics recycling;
• Harvest Power which acquires and operates organic waste facilities.

We asked Tim Keating about this week’s news that GSV Capital Corporation (NASDAQ: GSVC) had announced a tentative transaction to buy shares in Facebook that reportedly assigned a $70 billion valuation.  On this front Keating noted the successes of Michael Moe, GSV’s chairman and CEO.  As far as the valuation, Keating noted that the Facebook valuation is dependent upon its real financial situation and we all know that the internal finances of that social media giant are under lock and key.

As far as the valuation for LinkedIn Corporation (NYSE: LNKD), Tim Keating noted that limited float and high valuation multiples seem sustainable “only if that dramatic growth can remain in place.”

Solazyme priced its IPO of 10,975,000 shares at $18.00 per share and Harris & Harris invested into the company back in 2004.  Its preferred shares were converted in 2,304,149 common shares with a carry of just over $10.00 per share.  Solazyme closed at $20.71 last Friday and closed at $22.53 on Tuesday.  It was also announced last week in a grouped portfolio announcement that another portfolio company, privately held D-Wave Systems, Inc., was given an order from Lockheed Martin Corporation (NYSE: LMT) to purchase a quantum computing system from the company. It was just recently that Harris & Harris gave a performance update with a net asset value as of March 31, 2011 at $146,632,745 and $4.73 per share.  Shares closed at $5.73 on Tuesday but this was at $4.95 less than two weeks ago.  It was the Solazyme IPO that contributed to much of the excitement here.

You have heard that “there is an ETF for that” and the same can be said for nanotech if you look at the PowerShares Lux Nanotech (NYSE: PXN) ETF.  Harris & Harris is actually the ETF’s third largest position with a 7.3% weighting.  This ETF trades at $9.21 versus a 52-week trading range of $7.74 to $10.62, but it only trades about 15,000 shares per day.  Still, it is up 3% to 4% in the last week.  The Lux offering was also featured as one of our top ETF trends for investing like a futurist.

So, if you are wondering how all of this ties together it is simple.  Nanotech, or at least small technology, continues to offer many great products in the years ahead and even today.  Harris & Harris won from this investment in Solazyme, but generally these “hidden-IPO-holdings” trades start to see some profit taking going into the IPO rather than just after and that appears to be the case as it peaked two days last week at $5.92.  If computing, engineering, biotech, drug delivery, chemicals, and many other industries can use nanotech, then there is going to continue to be a steady news flow on the subject for years and years.

To get an idea of just how small nanotechnology is, it is generally manipulation of matter on an atomic and molecular scale that deals with structures sized between 1 to 100 nanometers in at least one dimension.  1 nanometer is one-billionth of a meter.  The definition of true nanotech has changed to include many small

JON C. OGG

Predicting markets and economic patterns is difficult over the next 20 years because there are many unknowns.  After all, who will be President in 2016?  What will tax laws be in 2020?  Which of today’s deadly diseases will be cured in 2020?  Which regions will experience wars by 2020?  This is why futurism may be one of the more unique approaches in investing. ETFs are often called the mutual funds of the future and our goal is to meld a futurist outlook into an investing strategies.

A rule of long-term investing is that what investments feel good today, such as those in Chinese and Indian markets, may not generate returns tomorrow.  Investors will face short-term pain for long-term gain. Futurists are always thinking beyond the next recession and the next boom behind it.

Beyond Emerging Markets… Frontier Markets

If you are thinking about China or India over the next 10 to 20 years, there is plenty to consider.  Both countries have grown exponentially as they became some of the world’s largest economies. Think post-Chindia and post-BRIC.  ”Frontier markets,” a term which has come up in recent years that goes beyond ‘emerging markets’ is ‘frontier markets.’  These “frontier market” economies still have room for growth.  Perhaps nothing illustrates this better than The NatGeo World Map at Night.

When it come to Africa and other Frontier Markets, there are three exchange-listed vehicles that we usually choose.  All are generally more volatile than the broader market stock indexes in the developed world.  Many frontier funds base performance  off of the MSCI Emerging Markets Index rather than the S&P 500.

Morgan Stanley Frontier Emerging Market Funds, Inc. (NYSE: FFD) is a small closed-end fund with roughly $105 million in assets.  This fund has diverse investments in banks, breweries, miners and utilities.  At its semi-annual report, the fund listed holdings in 21 nations including Nigeria, Argentina, Bangladesh, U.A.E., Kenya, Kuwait, Pakistan, Serbia, Qatar, Lebanon and Greece.  Average volume is light at just under 20,000 shares in a day and its 52-week range is $10.52 to $15.23.

Market Vectors Africa Index ETF (NYSE: AFK) from Van Eck seeks to track the performance of the Dow Jones Africa Titans 50 Index, which is full of companies that are headquartered in Africa or that generate the majority of their revenues in Africa.  It holds banks, breweries, miners, utilities, and more.  South Africa is where the largest number of the fund’s holdings are based. Assets under management were listed as $92 million in mid-November, its 52-week trading range is $26.60 to $34.88, and average daily volume is close to 25,000 shares per day.

iShares MSCI South Africa Index (NYSE: EZA) is an ETF that seeks to track the MSCI South Africa Index and it is one of the largest  vehicles out there since South Africa has a more established markets and is more politically stable compared with other African nations.  The fund invests in South African companies and has roughly $520 million in assets.  It trades close to 400,000 shares a day, and its 52-week range is in the low-$50s to $72.77 (flash crash low was listed as $23.00).  Its holdings include Anglo Platinum, AngloGold Ashanti, Firstrand, Gold Fields Ltd., Sasol, and Standard Bank.

Is Africa risky?  Are many other nations in the Frontiers markets risky? Absolutely.  But many of these nations have some of the biggest undisturbed deposits of natural resources.  That’s why we have highlighted these ETF and fund products rather than make individual picks.

Are You Ready For The International Water Wars?

Americans, Canadians, and many Europeans take potable water for granted.  However, Montezuma’s Revenge and many water-borne illnesses are rather common around the globe.  Building water filtration systems and desalination plants is costly. Nations are already setting limits on water resources.  Don’t ever discount the future of water.  Wars could be fought over potable water sources.  If you refer to that Nat-Geo World at Night Map, you can guess where much of the water resources are needed.

Many speculators have invested in the water industry for years.  It is no wonder that GE, 3M, and many other conglomerates have invested in the sector.  PowerShares Global Water (NYSE: PIO) and PowerShares Water Resources (NYSE: PHO) are two ETFs that compete in the world of water investing.

The PowerShares Water Resources (NYSE: PHO) seeks to track the Palisades Water index and it tends to have more of a U.S. focus.  Of course, many of these companies were hurt because they built new infrastructure ahead of housing developments that were scraped when the bubble burst.  PowerShares Water U.S. assets are close to $1 billion. It trades well over 200,000 shares per day, and its 52-week range is $14.70 to $18.68. (outside flash crash listed low of $6.99) to $18.68.

The PowerShares Global Water (NYSE: PIO) seeks to track the Palisades Global Water index, and it invests in U.S. companies and large international companies.  This is a smaller fund than the domestic water fund (PHO) from PowerShares.  Still,  it has more than $300 million in assets and trades close to 60,000 shares per day, and it has a 52-week range of $15.60 to $19.46.

J.P. Morgan Asset Management and Water Asset Management acquired Southwest Water, and that Water Asset Management is a private investment vehicle.  These are four small water mutual funds: Kinetics Water Infrastructure Advantaged Fund (KWIAX), PFW Water Fund (PFWAX), Allianz RCM Global Water Fund (AWTAX), and Calvert Global Water Fund (CFWAX).

NANO-NANO… Take Me To Your InnerSpace

The word nanotechnology, or nanotech for short, is another futurist technology. Many aspects of nanotechnology are already in use today in chemicals and other products.  This may also be one of the most controversial issues in the world of technology.  Think about atomic and molecular scale systems comprised of compounds between 1 to 100 nanometers, or one billionth of a meter.  There have been fortunes made by investors and there have been many fortunes lost.

Imagine machines so small that they could operate and move freely in your blood.  Imagine coatings that are comprised of molecules and materials small enough that they get a perfectly flat surface.  Unfortunately, you also have to consider toxicity, regulation, and the potential for a destructive use for such small products.  There is one ETF in the PowerShares Lux Nanotech (NYSE: PXN).

The PowerShares Lux Nanotech (NYSE: PXN) from Invesco seeks to track the the Lux Nanotech index.  It is comprised of some well-known companies and many companies have nanotech as a portion of their business.  The ETF has been around since the end of 2005 and has never recaptured its former highs.  It is also small at about $6 million in assets and trades under 25,000 shares a day on average.  Its 52-week range is $7.74 to $10.85.  Some of the companies in the fund include A123 Systems, Elan, 3M, GE, and Headwaters; but this ETF has some very risky and very volatile holdings as well.

Harris & Harris Group, Inc. (NASDAQ: TINY) is a nanotech venture capital fund whose website address tinytechvc.com tells what it is all about.  Its market capitalization is roughly $137 million, it trades close to 100,000 shares per day, and its 52-week range is $3.70 to $5.50.  While this is not a fund, it is close enough as the VC-company’s portfolio has more than 30 investment company holdings.  The company claimed a net asset value of $4.51 per share as of September 30, 2010, but founder Charles Harris also passed away at the end of September 2010.

Advanced Batteries… High on Lithium

All of those rechargeable batteries, batteries in consumer electronics and electric cars need lithium, which makes it a trend for futurists to consider.  There are two key risks here for this precious commodity: it could eventually run out or become uneconomical.  Moreover, China and Russia are major suppliers, which gives the sector an element of political instability.

Is it possible a better technology could come along?  Of course.  Still, there are many opportunities in the industry and it is probably no accident that behemoths such as General Electric have already invested in advanced batteries and have vowed to continue to do so. Lithium demand has nearly doubled in the past decade from above 15,000 metric tons in 2002 and is expected to rise to 55,000 metric tons by 2020 , according to the TRU Group.

Global X Lithium ETF (NYSE: LIT) is a very new ETF that launched in the summer and its holdings are solely in companies active in exploring and mining of lithium and producing lithium batteries.  So far it has been a big success.  The fund seeks to track the Solactive Global Lithium Index. Some key holdings are Sociedad Quimica Y Minera De Chile (above 22% of the fund), FMC Corp., Rockwood Holdings, Sanyo Electric, Ener1 and A123 Systems.  Assets under management are $91.5 million, it trades over 100,000 shares on an average day, in a range of $15.63 to $21.30.
Alternative Energy, In A Broader Sense

Investing in alternative energy may hold the promise of the future.  It has also been very painful even for futurists with a decade or longer outlook.  True futurists may seek an answer out of wind, solar, wave, geothermal, biofuels and even nuclear energy.  Not all alternative energy is technically renewable.  But the world needs alternative energy sources.  That is no longer even debated in public by most oil executives.

A problem that arises even for futurists with a ten-year outlook or longer is that the oil and gas giants of today may be the leaders of alternative energy in the future.  BP plc (NYSE: BP) has one of the worlds largest solar operations, and it is not unchallenged by other oil and gas giants.  Another caveat is that you do not need to be a futurist to see how many alternative energy and renewable energy investments are often considered nothing more than highly leveraged bets against the future price of oil.

PowerShares WilderHill Clean Energy (NYSE: PBW) is one of the go-to ETF products in alternative energy.  The fund is meant to track the performance of the WilderHill Clean Energy index.  Its largest holdings do seem to be more geared toward solar, which is most established alternative energy technology.  Some of its key components are First Solar, Broadwind Energy, IDACORP, JA Solar, and Suntech Power.  The fund has more than $550 million in assets, it trades over 300,000 shares per day, and its 52-week range is roughly $8.25 to $11.95.  The biggest issue is performance as it was worth over $25 at the 2008 peak versus close to $10.00 currently.

PowerShares Cleantech (NYSE: PZD) is the international and smaller competing version of the PowerShares Wilderhill Clean Energy ETF.  It is meant to track the price and yield performance of the Cleantech index.  Some of its top holdings are ABB, Corning, First Solar, IBERDROLA, Novozymes, Siemens, and Vestas Wind Systems.  Assets are about $150 million, it trades only about 14,000 shares a day and its 52-week range is $20.00 to $25.95.  This too suffers from poor performance as its shares were above $35.00 in the 2008 peak versus under $25 today.

An even more international focus in clean energy is the PowerShares Global Clean Energy (NYSE: PBD).  Its focus is to track the performance of the WilderHill New Energy Global Innovation index and many more companies are global.  Most of its larger constituent members are not known to most US investors.  The market cap is fairly small at about $160 million, it trades about 40,000 shares a day, and its 52-week range is $11.51 to $17.64.  It is far from alone in performance anxiety as this was above $30 at the peak and it is closer to $13.00 in November-2010.

Rare Earth… Not So Rare, But….

Any investors thinking of investing in rare earth should consider what happened in 2010 before putting on a futurist’s hat and taking a shot.   All caveats aside, nations such as the United States have to depend upon foreign sources of rare earth materials and these are critical for defense equipment  autos, clean energy, electronics and medical devices.  It is vital that these REOs and REEs have a local source and it is vital that we have our own sources.  The risks in investing in this might be like comparing biotech to DJIA components.  Futurists down the road will likely concede that many of the companies in this field were little more than Hail Mary passes with a story rather than real assets that could be monetized economically.

The Market Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX) is the only current fund-oriented instrument that revolves around the REE and REO trade.  It is extremely new, its methodology is unproven, and its company constituents are often very risky companies with promises rather than operating histories.  The launch came at the end of October-2008 and it has been very actively traded.  For 2010, we are going to not discuss price ranges, performance, and more because of all the risks here.  Either way and regardless of how this performs, the rare earth theme is unlikely a theme that purchasing managers will not have to consider for the future.

Back to futurists and secular themes in general…

If you want to learn more about futurist thoughts and ideas, one source I have used for some time is the World Future Society.  This is not an investment web site.  It has offered insight for futurists and those who think beyond the next month for years and years.  It publishes The Futurist magazine, has free email newsletters, conferences, books, blogs, and links to many local chapters throughout the U.S. and around the world.

Predicting markets and sectors is a tricky game, and most forecasting models have a hard enough time getting the next week or month accurate.  Modeling for a decade or a generation is that much harder.

JON C.  OGG

The company plans to use the proceeds to make new venture capital investments in nanotechnology and microsystems, and also expects to make follow-on investments in existing portfolio companies.  Of course,  operating expenses are also listed in the use of proceeds.  The company’s shelf registration statement was effective on September 22, 2009.

Before the effects of this offering, we show the market as being right at $130 million after a 9.8% drop to $5.01 today. Its 52-week trading range is $2.65 to $6.93.

What is interesting about this company is that it has a large portfoilio of 30 companies.

JON C. OGG
OCTOBER 6, 2009

This week was actually more nanotech-related news than we have for some time even if there is still no clear direction on which way the political environment will treat nanotech in the months and years ahead.

Altair Nanotechnologies Inc. (NASDAQ: ALTI) entered into a placement agent agreement with Lazard Capital Markets LLC for the placement of up to $14 million in a direct placement of up to 11,994,469 units.  Each unit is one share of stock and one warrant to purchase 0.55 of a Common Share at an exercise price of $1.00 per share.  Earlier this week, Altair and Amperex Technology announced a pact to accelerate the commercialization of next-generation lithium-titanate batteries.

It seems that IBM (NYSE: IBM) is not waiting to see what the new regime’s treatment will be for nanotech.  It signed a partnership with the Bulgarian Government to support the creation of the first Bulgarian nanotechnology center.  Yep, Bulgaria.  The former Iron Curtain country in Eastern Europe.

A fresh letter to shareholders of Harris & Harris Company, Inc. (NASDAQ: TINY) went out on its website this week.  It said that the companies in its investment portfolio saw a 22% revenue gain in 2008 over 2007 to a level of $242 million.  H&H is a publicly traded venture capital company that invests in nanotechnology and microsystems.

Nanosphere, Inc. (NASDAQ: NSPH) is part of the Lux ETF saw a sharp rise on Friday.  Shares were up 20% at $3.60 late in the day on almost 600,000 shares.  That is almost 15-times normal trading volume.  This one develops, manufactures, and markets a molecular diagnostics platform, the Verigene System that enables genomic and protein testing on a single platform.  It looks like there were 3 very large block volume trades at 11:36 AM EST according to NASDAQ.

There is actually an ETF which tracks the nanotech sector called the PowerShares Lux Nanotech (NYSE: PXN).  This one is very thinly traded and it currently trades at $7.98 and the 52-week trading range is $5.25 to $15.00.  This ETF has been public since late-2005, and it briefly challenged the $20.00 mark in the first half of 2006.  An average daily volume is between 15,000 and 20,000 shares per day, and it has not had a single day of over 100,000 shares since November 2008.  Their full holdings in the ETF are listed here.

Lux Research noted that roughly $147 billion worth of products incorporating nanotechnology were sold globally in 2007, and the group believes that the global marketplace for nanotechnology-enabled products could reach as much as $3.1 trillion by the year 2015.

At the National Academy of Sciences in April, President Barack Obama announced the President’s Council of Advisors on Science and Technology and named Chad Mirkin of Northwestern University to the panel, and he is in the field of nanotechnology.  How nanotech and related fields will be treated on Pennsylvania Avenue in Washington D.C. in the months and years ahead is still an unknown.

JON C. OGG
MAY 22, 2009

Some of the companies we have looked at in this sector are Altair Nanotechnologies (NASDAQ:ALTI), privately held A123 Systems Inc., Active Power Inc. (NASDAQ:ACPW), Beacon Power Corporation (NASDAQ:BCON), Exide Technologies (NASDAQ:XIDE), EnerSys (NYSE:ENS), C&D Technologies Inc. (NYSE:CHP), and Axion Power International, Inc. (OTCBB:AXPW).

Certainly the interest in hybrid electric cars has generated publicity about battery and fuel cell development. The financial stimulus package before Congress includes $2 billion in grants for advanced battery development. For the transportation sector, advanced batteries need to be lighter and last longer. Current lithium-ion technology, though state-of-the-art, is hampered by the rising cost of the raw material and the relatively short life span of Li-ion batteries. Altair Nanotechnologies (NASDAQ:ALTI) and privately-held A123 Systems Inc. are both working on improving Li-ion performance.

By focusing on batteries for transportation applications, the stimulus package ignores a potentially more important use for advanced batteries: storage for electricity generated by wind and solar power plants.

If solar-generated power created during daylight hours could be stored and put on the grid during non-daylight hours, the impact of large solar installations would essentially double. Similarly, if wind-generated power could be stored for use when the wind isn’t blowing its popularity would soar.

Such batteries would need to be very large and able to respond to requests quickly to meet peak generation demand. Much of the development of this type of battery has been in the uninterruptible power supply space. For example, Active Power Inc. (NASDAQ:ACPW) uses a flywheel technology to build systems that provide up to 3600 kVA as a bridge to firing up a stand-alone generator in the event of a power failure. The flywheel technology can be scaled up to 2000 kW of storage, but that’s at least an order of magnitude too small to be useful in wind/solar storage project. Beacon Power Corporation (NASDAQ:BCON) is also a pure-play flywheel company, but its technology is still very much in the development phase.

To reach the scale needed for big wind and solar projects, the old stand-by lead-acid battery probably offers the most potential. The basic technology is more than 100 years old, but it has the advantage of being less expensive and scalable. Companies such as Exide Technologies (NASDAQ:XIDE), EnerSys (NYSE:ENS), C&D Technologies Inc. (NYSE:CHP), and Axion Power International, Inc. (OTCBB:AXPW) are all working on improving lead-acid technology and scalability. Axion has patented lead-carbon technology that significantly decreases the amount of lead needed in a battery and is currently working on a couple of utility-scale demonstration projects.

The $2 billion in the US economic stimulus package is a huge amount by the standards of the battery industry. The interesting thing to watch here will be how the Department of Energy divvies up the money. The battery companies, with a couple of exceptions, are very small with very low share prices. They employ few people, and won’t employ many more even with new federal money.

By virtue of its authority to make grants, the DOE could decide which companies win and which companies lose. That has never proven to be the best way to develop a market. It does, however, have the advantage of making things happen quickly.

Remember the ethanol boom following the government’s requirement for increased ethanol content in gasoline? Fortunes were made off this.  Ethanol promised to be so big that even Bill Gates jumped into the ring very early via an investment in a company no one ever heard of before he got in.  But the winners are not always winners in the end.  Think of where ethanol stocks are now. That kind of market distortion could happen with advanced battery technology as well.

The good news about the sector is that there are very large companies who have their eyes on the arena.  The world’s largest conglomerate has its hands tied right now, but it has shown some interest recently in battery technology.  We all need power.  Whether we all need ethanol is something we don’t care to debate, because we are firmly entrenched in our own thoughts there.

Paul Ausick
February 13, 2009

But nanotechnology also has many critics, particularly those who are concerned that nano-bots or nano particles could be used against people.  In a report published in advance from NATURE NANOTECHNOLOGY, the new fear is that nanotechnology’s carbon nanotubes injected into mice showed similarities to asbestos.

The pilot study in a small number of mice shows that long multiwalled carbon nanotubes introduced into the abdominal cavity can cause asbestos-like pathogenic behavior. The results suggest the need for further research and caution before introducing nanotube products into the market.

Mesothelioma is a death sentence.  If nanotech generates even the same fears, this technology may be crushed before even the simple applications can get off the ground  It sounds like they need a nano-drug now, one to fight nanothelioma.

The nanotech ETF, the PowerShares Lux Nanotech (AMEX: PXN) was down 2% at $14.51, although it was on thin volume when the market itself was soft.

Jon C. Ogg
May 20, 2008

Airgap (May 2007) – Using a "self assembly" nanotechnology IBM has created a vacuum between the miles of wire inside a Power Architecture microprocessor reducing unwanted capacitance and improving both performance and power efficiency.

Based on all the promises of nanotech and what is still very limited use, we’ll have to see how this really unfolds before calling this a nanotech victory.  You can read the full release from the company here.

Jon C. Ogg
May 3, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.