How to invest in graphene

It’s been lauded as a futuristic miracle material, but what is graphene and how could it fit into your investment portfolio?

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How to invest in graphene

What is graphene and why invest?

Physicists at the University of Manchester were the first to isolate graphene in 2004, and their research won them the Nobel Prize in physics. Graphene is a derivative of carbon, designed to be flexible and stretchable but unbreakable. It is made up of a layer of bonded carbon atoms, making it the thinnest substance ever, and almost transparent. But it is also 200 times stronger than steel and an excellent conductor of heat and electricity.

Because of these properties, graphene has many possible applications across different sectors from technology, medicine, energy and transport. It can be used in smartphone touch screens, computers, batteries, energy storage, electric cars, wearable technology, water purification, medical implants, lightweight aircraft or wind turbines.

Is graphene over-hyped?

The scientists who extracted what they call the world’s first 2D material claim it will change our lives because of its myriad of potential uses. But it’s still very early days for the ‘magic’ material. The question for investors is whether the graphene story is just a lot of hype, or whether it can convert ideas into solid investment returns over the long term.

Because graphene is an emerging technology, it’s hard to know whether you are investing in the real deal. Unscrupulous investment schemes have been trying to cash in on the excitement by misleading investors. Back in 2013 UK financial regulator, the Financial Conduct Authority (FCA), warned retail investors it had uncovered a suspected boiler room scheme, selling what it claimed were graphene-related investments. ‘There is a strong possibility of fraud with graphene because it is unregulated and it is difficult to confirm that you have bought the genuine product’, the regulator said.

As the interest around graphene builds, there could be more opportunities for these sorts of scams to catch out novice investors. So, apart from obviously not buying into graphene through a cold caller, what can investors do to access this interesting story?      

Investing in graphene stocks – what you need to know

At this stage, there are not many publicly listed firms dedicated to the development of graphene. Among the handful that have had their initial public offering (IPO) in the last few years are: 

  • Graphene NanoChem
  • Haydale Graphene Industries
  • Applied Graphene Materials
  • Directa Plus
  • Versarien
  • Graphene 3D Lab

As with any young company operating in a nascent sector, investors considering buying these shares should proceed with caution, as they could be risky and volatile. Their share price performance has been very mixed, as you might expect, and potential investors should question whether such a business’s product pipeline and forecast revenues justify its valuation, given graphene is at such an early stage.

Another, safer, option would be to buy blue chip companies, who are doing their own research into graphene, for indirect exposure. Many big companies in sectors like technology, aerospace and pharmaceuticals have begun taking out patents for products using graphene, suggesting it could be a major focus of research and development spending in the future.

Big companies looking into graphene potential

It might make more sense to buy shares in the established listed companies that are researching graphene’s commercial applications. That way, if they can’t make money from it for many years, at least you still have a robust, quality company in your portfolio that generates profits from other business areas. Companies that are known, or rumoured, to be putting money into graphene include: Lockheed Martin, Tesla Motors, Nokia, Samsung, Airbus, Apple, and Qinetiq.

Another route would be to buy a fund which has exposure to some of these names. Many of the best performing tech funds will hold Apple, and some will also hold Samsung. You could also buy an Asia fund, such as Schroder Asia Pacific, which counts Samsung as its number one holding, or a wider emerging market fund, like JP Morgan Emerging Markets, to get exposure to the stock. For Airbus, you could hold Invesco Perpetual Global Equity Income, and for Tesla you could hold Baillie Gifford American, which has 6.5% in the electric car maker.

Graphene seems to have amazing potential but, as with any technology at an early stage in its development, investing in it will come with a specific set of risks. Investors would be wise not to bet the whole farm on graphene at this stage, but having a modest, carefully selected exposure to this potentially transformative material might one day transform your  portfolio.  

Looking to diversify your investment portfolio this year and explore new opportunities? Read our recommendations on where to invest in 2018.

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