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The Single-Best Graphene Play on Earth

42 | By Michael A. Robinson

Imagine an “alternate reality” where it is possible to balance a Mack Bulldog tractor trailer on the sharpened tip of your No. 2 yellow pencil.

And imagine, also, that the tip of that same pencil is worth a small fortune.

This “reality” that I’m sketching out for you isn’t something that I grabbed from the plot of one of those cheesy Sci-Fi Channel late-night movies.

In fact, this reality actually isn’t one that I’d refer to as “alternate.”

It’s a reality – a certainty, in fact – that I’ve been studying, talking and writing about for a long time.

The time has finally come for us to make some money from this opportunity – a lot of money, in fact.

And today I’m going to show you how …

It’s a Miracle

In my talks with you, I’ve referred to them as “exotics.” And I’ve also referred to them as “miracle materials.”

Either name fits.

I’m talking about a new category of engineered substances known by industry insiders as “nanomaterials.”  They are exotic. And they are miraculous. These materials are destined to have a huge impact on everything from biotechnology to high-speed computing.

And there’s one “exotic” in particular that shifts my pulse into hyper drive every single time I even think about it. The material is very closely related to the graphite housed in the tip of your pencil.

But this radical substance is lighter than a feather and is 200 times stronger than steel.

Indeed, it’s usually referred to as the strongest manmade material on the planet.

I’m talking about graphene.

Don’t for a minute fear that I’m over-hyping graphene’s potential. Others see the same bright future that I do – which is why the two scientists who discovered it won the 2010 Nobel Prize in Physics.

Graphene is classified as a “miracle material” because its potential uses are limited only by the human imagination. You can use it to make synthetic blood or kill cancer. Or to put the power of 10,000 mainframes in the palm of your hand.

In fact, scientists are looking at ways to replace the silicon in the semiconductor’s “wafer” with graphene – a move that, if it can be made to work, will destroy the Moores Law corollary that put limits on how fast computers could be.

And graphene is obscenely strong: If you could figure out the bracing, you really could balance a tractor trailer on the tip of a graphene-equipped pencil.

But unlike your pencil – a yellow-clad commodity – graphene is destined to create billions in profits throughout the global economy.

Investors have always felt a bit left out of the party, however – for the simple reason that there hasn’t been a really good, and direct, way to invest.

Until now …

Exotic Material, Exotic Profits

The company that I’m going to tell you about today has a deep portfolio of graphene patents – in fact, no other public company has an intellectual-property portfolio as big as this one … at least not where graphene is concerned.

And those patents could be one of the catalysts that ignite returns of as much as 60%.

The company in question is the Parma, Ohio-based GrafTech International Ltd. (NYSE: GTI).

And it’s the single-best way to play graphene.

On this point, I know what I’m talking about.

I first got interested in exotic materials back in the middle-1980s, when my job led me to start analyzing the Strategic Defense Initiative, or SDI – a Reagan Administration program that you probably know better as Star Wars.

What the public doesn’t know is that advanced weapons systems such as SDI rely heavily on such exotic materials as gallium arsenide and rare-earth elements (REEs).

Since that time, the pace of materials-related innovation has intensified so much that I’ve referred to the last several decades as the “Golden Age of Materials Science.

And graphene, a form of “engineered carbon” that is only one atom thick, ranks as the single-biggest breakthrough in this Golden Era.

We’re Golden

To give you a sense of how important graphene actually is, consider the afore-mentioned story about the Noble Prize.

It usually takes decades for physicists and other scientists to be recognized for their innovations. For instance, the two scientists who shared the Nobel last year, won it for work that they conducted back in 1964 – nearly 50 years ago.

But the two scientists who won the award for graphene did so less than seven years after their discovery – a responsiveness that underscores the recognition of the critical nature of graphene.

So you can see why we’re so jazzed about this “miracle material.”

Fact is, the move by GrafTech, a 125-year-old company whose work with carbon and graphite-related technologies led them right down the path to graphene.

GrafTech is the company that helped illuminate the world.

Back in the late 1800s, you see, an early permutation of the firm began supplying carbon-arc lamps to the city of Cleveland – allowing that Ohio center of industry to become the world’s first city with electric street lights.

And the company continues to reach new technical milestones. In the past decade alone, it has won seven R&D 100 awards sponsored by R&D Magazine – which the publication annually bestows to honor the 100 Most Technologically Significant New Products & Processes of the Year.

The firm’s products are used in metal production, electronics, chemicals, aerospace and transportation. In short, GrafTech’s influence reaches far beyond its core market – working with companies that use carbon-technologies to make steel.

Because graphene is derived from graphite, GrafTech set itself up several years ago to pursue this novel new field. A review of the patents granted in this field shows that GrafTech ranks 12th in the world with 21 patents. 

The 2011 study by the U.K. Intellectual Property Office – based on U.S. patents – found that GrafTech’s reach was much larger than the firm’s size. All the other top patent holders were either major nonprofit research institutions or mega-cap companies.

For example, the report lists the global giants Samsung Electronics Co. Ltd. (OTC: SSNLF) as No. 1 with roughly 60 patents and International Business Machines Corp. (NYSE: IBM) as No. 9 with about 20.

(Don’t misunderstand: While I like both Samsung and IBM, they’re both so big that we’d never get a direct benefit from their investments in graphene. We’re much better off investing in a smaller venture with more-direct investments – like GrafTech.)

And other heavyweights are moving in. Last June, Apple Inc. (NasdaqGS: AAPL) filed a patent application for a graphene-based heat sink for circuit boards and lithium-ion batteries in smartphones and tablets.

What we wanted to find was a company whose graphene technologies could touch lots of clients covering several industries.

And GrafTech is doing just that …

Cashing In

Building on its strength in industrial materials, GrafTech is now targeting key growth markets. For instance, it expects the light-emitting-diode (LED) lighting sector to grow 23% over the next five years. It’s also forecasting 19% growth for its electronic-thermal-management materials in smartphones over the same period.

With a market cap of $1.5 billion, GrafTech trades at about $11.50 a share.

When the company announced its third-quarter results, it reported that sales fell about 5% to $303 million on a year-over-year basis. It also said it lost $8 million – compared with a third-quarter profit of $30 million a year ago.

But there was also some very good news for investors.

First, GrafTech wrote off $18 million in “rationalization” expenses. In other words, it recognized the tough markets it’s dealing with in some of its more-mature businesses, and cut costs to “rationalize” those divisions – corporate-geek speak for making sure a sluggish division isn’t bigger than it needs to be. So it’s reorganizing those businesses, and is taking “charges” to pay for those moves.

Without those and other related “one-timer” charges, GrafTech would have made $6 million in the period.

And second, GrafTech announced a new turnaround plan aimed at wringing out $75 million in operating costs a year, including $35 million in 2014. It also plans to streamline its inventory system to generate $100 million in new cash flow and will reduce its workforce by 20%.

For 2012, the company reported earnings per share of 84 cents. If it hits all its milestones over the next two years, GrafTech could have 2015 earnings of roughly $1.00 a share.

If the stock just trades at a Price/Earnings (P/E) ratio of 18.5 – the average valuation of the Standard & Poors 500 Index – GrafTech shares could sell for about $18.50, about 60% higher than where they are right now.

Even Wall Street is starting to wise up – though in its typically slow and conservative manner.

Jeffries & Co. recently boosted its target price on GrafTech shares to $13 -a 13% gain from here. (It’s important to remember that Wall Street “targets” are typically only 12 months out – which don’t account for growth beyond that time frame.)

GrafTech is the epitome of a “special situation.” It’s kind of a “stealth tech” play. And it’s a mid-cap firm has just launched a restructuring that we believe holds lots of near-term promise.

Longer-term, look for a big payoff from the company’s investments in graphene.

It’s the world’s greatest “miracle material.”

And you want a piece of this action.

Happy New Year to you all.

Thanks for letting me serve you in 2013 …

[Editors Note: If you found the Strategic Tech Investor to be worth your while during 2013, Michael would really like to hear from you. Were positioning products for the New Year, and we want to keep bringing you this guide to high-tech wealth free of charge, of course. Every comment helps.]

42 Responses to The Single-Best Graphene Play on Earth

  1. Laura P. Schulman says:

    Thanks for this recommendation. I would like to see more recommendations on Graphene, since it looks to be a key tech material going forward, in the same way semiconductors ruled in the ’80’s. Since we are very early in the R&D sector with Graphene-powered products, I’d like to see everything from producers to R&D innovators to end-users who have applied for patents. Possible?

    Happy, healthy and prosperous New Year,

    Laura

  2. Dwayne Dalton says:

    I just started rec’ving in early dec 2013. Living in Canada I have to do some cross over to TSE but looking and watching with interest.

  3. Kay Beams says:

    I want to continue receiving the Strategic Tech Investor because I found it to have very useful information.

  4. Connie McVey says:

    Hi, Michael. Happy New Year to you and your family. I love GTI. I found it several months ago in a special report from another advisory service. I am so happy to have found your Money Map service. I have high hopes for you. I must tell you that my most fervent financial wish this year is for little guys like us to have the ability to enter the crowdfunding arena. The sites need to be vetted that we would be sending money to and we need your insight to pick winners. Please, please do this for us unsophisticated investors! And I hope it will become part of a regularly priced newsletter. If it is priced at $400 and up, the people who very much need the help will not be able to afford it.
    Looking forward to seeing you on Varney with my coffee in the morning,
    Connie

  5. Aaron says:

    Thanks, Very worthwhile to get some professional opinions here. I have been following this topic for a while. Any specific investment thoughts on MEMS?

  6. Harry Gray says:

    Graphene and ‘rare earth’ elements came on the ‘stage’ some time ago. I’ve not been able to capitalize on any of this technology. Conservative investor.

  7. Edward Levitch says:

    Great! Fantastic research and information! …..Please advise in a few words what should an 89 year, novice investor,with very limited funds, bye to become a philanthropist.

  8. William Frederick Nash says:

    Is anybody producing graphene in commercial quantities? what are the problems? Are they technical or are they financial? Do we know what, say, a cubic meter of the material wd cost?

  9. Bob Krone says:

    Gettin’ richer is a “no-brainer” when following Michael A. Robinson’s Strategic Tech Investor (“STI”) advice. STI is well worth the subscription price!

    One could make tons of “easy” money from a hospital room or nursing home bed using an Amazon Kindle Fire HDX.

    Fear not; the best is yet to come! Ignore the politicians and political whores. Let the big profits happen!

  10. Linda says:

    Truly appreciate how you are able to break things down and speak a language that is easy to understand. Tech investing has now become exciting to me. Something I never expected to happen. Thanks for making GREAT recommendations. Please keep them coming!

    Linda – Airway Heights, WA.

  11. Lewis Fulkerson says:

    I have been following the advancement in Graphene for some time. I get a weekly email discussing the different labs around the world that are working with Graphene. Since I own a computer business (worked on them since 1968) I’m keenly interested in the applications toward computers and other electronic devices. I well aware of the “Moore’s Law” and the limitations it describes in the working of electronics, and the way one has to kind of give the computer more to work with (ie: RAM) in order to make it faster. The uses for Graphene in electrical conductivity and even in the storage of data is staggering, and would cause the computer industry to advance by even more than the proverbial “Leaps and Bounds”, but would actually almost put it into hyperdrive! Timing is critical, but I firmly believe the investment opportunity in the Graphene industry causes all other past advancement to almost pale into insignificance! I’ve been working on computers 45 years, and despite the dramatic changes, Graphene becoming “normal material” would put us ahead of Star Trek!

  12. Corry McDermott says:

    Sir
    You are the first GOOD S.O.B. that has given me substance for my money. Every other S.O.B. including True Wealth, Retirement Millionaair and many other piecse of the Stanberry & Co..
    They only want to sell me something else before givinf me advice that I have paid for. I live in BELIZE one of the most fabulous places on this Planet called Ambergris Caye where I have lived and help this Island over the past 42 years to develop from 600 lovable persons to now over 18,000 inhabitants of the same kind nature. That’s why so many people come back 4 or 6 mos. later than 2 or 3 years because they really miss this type of natural resource that I call San Pedranos which they hane nominated as one of them that I really cherish .
    I am cancelling all my subscriptions involved with Stanberry & Co. and if you keep opening up your heart and mind instead of trying to fleece people out of giving those in their 80’s proper direction for what they in all good innocence paid for I will be happy to pay you for your financial direction.
    I am 82 years young and am going for 140 for I am on my 4th book called Scams and scandals in Paradise and have 7 more to write.
    Please Michael, give people worth for what they innocently pay you for and and you will I’m sure have a very suuccessful future.
    God bless and have a great 2014 and many , many years forward. if for any reason you might want to visit Paradise check my web Belize Gold Coast Properties.com
    Corry McDermott , a Hell of an Irishman

  13. roos says:

    thanks for the very interesting recommendation , please keep me informed .
    best wisches for a brilliant new year !

  14. daisy galvanek says:

    I am 66 and I look at all the stocks newsletters and I want to invest but dont know where to start. Can you help? My family tells me that I read all the stock stuff but I am never going to make any money. I want to prove them wrong and also make a little money. Can you help? Thanks, Daisy

  15. Chuck Wertalik says:

    I was – honestly – wondering when sump’n big would happen with this stuff. I’m glad it’s YOU who are bringing it to light, Michael!

  16. CHUCK PIERCE says:

    i have researched graphene and found it to be very exciting. however this is the first real investment opportunity i have heard of. my understanding is Canada has the greatest amount of graphite in the world. i remain unclear as to how long before the material comes fully to market. any thoughts on that? Michael, are you adding to your portfolio now? i love Tech Investor

  17. Brian Lambert says:

    Hello,

    I am a novice who wishes to invest in Graphene, rare earth metals, particularly Berrylium, but as
    I am in England meet with problems when I try to open an account with TDAmertrade or a Canadian online broker. I subscribe to several publoiations but always seem to read about
    chances that I have missed.
    Can you help please.

  18. Kaz Pawlik says:

    Many great comments. I believe, Graphene is making already new ways in the world of information technology. Most explosive implementation in variety of technological systems is needed.
    Kaz Pawlik

  19. Horacio Terzaghi says:

    Absolutely right Mr. Robinson. The thing is when and wich company has the pole position to start it.
    I am following this topic very colse.
    Thank you Mr. Robinson

  20. Bruce Meehl says:

    I would like to see more recommendations on Graphene, since it looks like a key tech material going forward. …would like to continue to receive.

  21. Jerry Townsend says:

    Yes, I like your recommendations often. Your referring to graphene, etc., is super interesting to me. I have aleready invested some in this market. Bring it on. Also, the Bitcoin hooplah is interesting and it does make one wonder what the future does hold for us. Like your newletters very much.

  22. Stewart Lasher says:

    Sounds like just the ticket for the struggling computer industry. You got me hooked! Please keep the information and advice coming.

  23. Eric Scholar says:

    When I first learned of the existence of graphene about 9 months ago I was very excited by its potential. Since then, I have tried to learn a bit more about who truly has the inside track on developing the real “killer” applications, The sources who write about it seem stuck in the rut of citing how many patents various companies have without regard to what these patents might control. I would love to get in on the ground floor of this miracle but feel that I need more real information before I throw my limited resources at the dart board. Do you have any more info on GTI beyond its history as manufacturer of carbon electrodes, i.e. its progress toward development of graphene beyond stacked sheets?

    • Charles Campbell says:

      Ditto, except that I first learned of the existence of graphene last night, and don’t even know what stacked sheets are. I’m searching for info on how close is this to implementation, in products. If that’s 10 years off, I may not be around long enough to see an investment in graphene take off.

  24. Ian says:

    Hi one and all, this is the story it seems to change our lives on every front that it is possible to think of.
    There will not be an industry that will not be enhanced, if nothing else all our lives will be enhanced, in every direction you can think of, really this is The game in town from now on
    Regards
    Ian

  25. Alan says:

    Have been rec’ving info on Graphene for about a year from two sources and I have yet to see any info on the cost of this “Miracle Material”. What’s up with that ??

  26. Jon says:

    I really value the Strategic Tech Investor newsletter. I have consistently made money on recommendations featured in this newsletter and would definitely like to see it continue in the same format in 2014. Michael has uncanny insight and is a superb gauge of a company’s growth prospects using a variety of proven indicators.

    Keep up the good work and best wishes for a great 2014!!

  27. Nanak Mehta says:

    Hi,

    I enjoy reading your articles from which I learn something new most of the time. But I remain confused about specific recommendations. Have not been able to initiate any trade(s) therefore have not been able to make any money. Please clarify.

  28. tom chorba says:

    On your advice, I purchased 2.5 Bitcoins during December. My cost: $1730.
    As of today, it appears they are starting to accelerate in value as they are now worth over $2300. Exciting just thinking of the possibilities if this concept really takes off!

    So when you recommended GTI, I placed a small order on-line this afternoon which will be transacted tomorrow when the market opens.

    Keep the newsletters coming!

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