I’m adding two new Pioneers below. Both are suppliers of nanotech-based products to industry.

This isn’t the sexy sector of nanotech, but it’s where the applications will see the marketplace quickly. Although first to market isn’t always best to market, these companies have innovative products in sectors that are keen to pay for anything that can help make them more profitable and efficient.

About a month and a half ago, I wrote a piece entitled Indulge Me. It was about a little insulation coating maker called Industrial Nanotech (NSDQ: INTK, http://www.industrial-nanotech.com/).

Since then, Brazilian petro-chemical giant Petrobras has doubled its order for Industrial’s coatings. And its deal with a decent-sized Malaysian distributor hooked into the Asian oil and gas business is an encouraging long-term move, considering the gas and oil fields, refineries and pipelines that will be receiving more-intensive development in coming years. So I’m adding Industrial Nanotech to the Pioneers.

This is a quite literally a penny stock. Although I don’t expect this one ever to turn into a household name, it’s likely a company such as BASF, DuPont or Sherwin Williams will buy it out. And if it continues to book deals and add smart strategic partners, it could be a fun ride.

On the downside, the stock is only trading at 20 cents. We’re so close to nonexistence already; it’s complete demise should barely accelerate your heartbeat. This is a speculation—even for the Pioneers Portfolio—and should be treated as such. Buy Industrial Nanotech below 20 cents a share; don’t chase it.

The second company was brought to my attention by an RNI subscriber. I’ve done some due diligence since then and watched the stock trade for a while, and now I’m adding it to my Pioneers.

CVD Equipment Corp (AMEX: CVV, http://www.cvdequipment.com/) designs, develops, manufactures, markets, installs and services chemical vapor deposition and gas control equipment for use in manufacturing semiconductors, solar cells, carbon nanotubes, nanowires and equipment for surface mounting of components onto printed circuit boards.

Obviously, the former attributes of the company are pretty standard fare in the semiconductor fabrication (semi fab) sector. Even Pioneer Spire Corp shares some of the same ground as CVD. But, similar to Spire, the semi sector isn’t the real draw for this small company.

Here, it’s carbon nanotubes and nanowires. CVD is pretty good at this manufacturing, and the fact that it can build them and has the deposition technology for semi fab is a very good advantage.

Semi fab companies in general aren’t exactly a dynamic growth market; they’ve become more of a commodity business. But these new nanotech/disruptive-tech niches are becoming very competitive and popular.

Another plus, as it is for Spire, is that CVD is also involved in the growing solar field. Between you and me, solar is a bit overrated and underperforming as an alternative technology. Efficiency rates—converting solar energy received into electricity/heat output—are still far-more inefficient for photovoltaic panels than they are for internal combustion engines. But companies and governments are spending money in the sector, which is helping it grow and develop much more quickly than it has in decades.

CVD is in that sector, which is another potential growth kicker. These are the types of products where you can still garner relatively high margins from clients. And being at the very beginning of the supply chain means you have more potential entry points when the company becomes interested in broadening its supply chain.

CVD Equipment Corp is a new Pioneer and a buy below 6.   Portfolio Precepts

I follow four precepts in screening companies. They are as follows:

  • It’s What You Do With Size That Matters There’s an old Texas saying: It’s not the size of the dog in the fight, it’s the size of the fight in the dog. Size has a point of diminishing returns. Intellect and agility are always prized attributes in the race to the top of the food chain.
  • Show Me The Money A big firm has to be looking for a way to make the economies of scale work. Ideas being tweaked in R&D year after year without management committed to rolling out a product are worse than worthless.
  • Friends In High Places Being well-connected can be an enormous benefit if you’re big or little. The national defense industry is always looking for the Next Big Thing and usually has the money to throw at anything reasonably attractive. It’s always encouraging to see little guys working with the big guns for a piece of the subcontractor crumbs--it’s the best way to make it big or get bought out.
  • Wake Up, Sleepy Dreamer Companies have to pick a spot and do battle—with a plan. Cool ideas with 50 different applications mean a company is looking for handouts for a buyout of the idea, not any specific product. Until a company has the guts to develop a clear strategy on how it plans to exploit a market, its investment value is limited at best.