Tag - NYSEARCA:PXN

This week, we continue our look at small-cap stocks that were selected by newsletter advisors as their favorite stocks for 2008.

Although the three investment vehicles discussed today operate in very different markets — mining, China and nanotechnology — all three have one factor in common: each of these companies earns its income from a combination of equity investments, financial and management services or royalties from other companies within their respective markets.

"International Royalty Co. (AMEX: ROY), with a market cap of $359 million, is my top speculative idea for 2008," says Adrian Day, editor of The Global Analyst.

"Mining is a tough business, with high capital costs and one in which, as the old saw has it, 'Murphy works overtime.' One way to mitigate the risk while remaining exposed to upside in resource prices is through royalties. Royalties come in all shares and sizes; they can be net or gross; fixed or sliding scale; and so on,” Day says.

International Royalty Co., he observes, has put together an extensive portfolio of over 60 mining royalties, most of which are on properties not currently in production.

Its "crown jewel," accounting for half the company's net asset value, he points out, is from royalty on the world-class Voisey's Bay nickel mine in Labrador, Canada. He adds that many of its other royalties are on gold projects, including its second most important asset, the royalty on Barrick' s Pasuca mine in Chile.

"The stock sold off recently after the company raised money for a potential purchase of the royalty division of Newmont Mining; instead the division was effectively IPO'd," he says.

But this decline, he suggests, makes ROY very inexpensive for a low-risk royalty company.

"The stock is selling at just over 10 times next year's estimated cash flow, much less expensive than other royalty companies," Day says. "As metals prices continue to advance and more of the properties on which ROY holds royalties come into production, ROY will benefit tremendously, making it a solid long-term growth story as well as ripe for a rebound from oversold levels."

This week, we feature three advisers who see large potential gains from the “smallest” of ideas—nanotechnology. This broad field involves the study and manipulation of matter at an atomic level. Given that this is a new and developing field, investors in nanotech should have a long-term view.

For those willing to incur the higher risks of selecting an individual stock in the nanotech space, we turn to two emerging growth experts. First, Gregg Early, editor of The Real Nanotech Investor, considers Maxwell Technologies Inc. (Nasdaq: MXWL), a stock with a market cap of $246 million, among his favorite speculative buys.

“The company specializes in a very arcane field, even by nanotech standards. Maxwell is one of the few companies involved in developing capacitors and increasingly, ultracapacitors,” he said. “This new generation of capacitor has the potential to revolutionize motive and stationary power storage and distribution as we know it.”

According to Early, the company was recently awarded a contract by Mercedes Car Group to design and produce ultracapacitors for an advanced engineering hybrid-electric drive train program that increases fuel efficiency and reduces emissions.

“This is also a very good sign for Maxwell because its new CEO, David Schramm, hails from the auto industry,” he said. “Landing a deal with a major innovator like Mercedes is an optimistic sign of things to come.”