Harris & Harris Grows Big on Small Technologies

Jan.11.11 | About: Harris&Harris Group (TINY)

Monday we initiated coverage of Harris & Harris (NASDAQ:TINY), a publicly traded investment fund with a portfolio of emerging technology investments in semiconductors, healthcare, energy and advanced materials.

The full report is linked below but here are the highlights:

  • Harris & Harris Group is a specialized investment firm that has built an impressive portfolio of private company equities in emerging growth areas, including personalized medicine, high-speed semiconductors, LEDs, next-generation memory technologies, clean fuels, clean water, advanced materials and quantum computing.
  • The firm has exploited core expertise in nanotechnology to effectively ride the expansion of nanotechnology applications into industries like semiconductors, electronics, transportation, healthcare, energy and even entertainment. In fact, nanotechnology has undergone a “quiet explosion” of activity in the last decade with most metrics (patents, commercial R&D centers, industrial uses) increasing tenfold in the last decade. Large portions of industry have come to rely on nanotechnology as a fundamental enabler for advanced new products.
  • The portfolio of over 30 companies is full of exciting emerging companies—standout names include Solazyme (bioenergy), BridgeLux (LEDs), Laser Light Engines (digital projectors) and Mersana (cancer therapy.) These companies are creating quite a stir.
  • Recently the capital markets have offered Harris & Harris an additional opportunity to provide short and medium term financing to better leverage their large cash position. This allows Harris & Harris to offset some operating expenses by increasing the returns on their cash.
  • Both the technology M&A market and the IPO space have been showing sustained health and are offering more opportunities for H&H to realize liquidity events in their portfolio at valuations in excess of current carrying values.
  • In evaluating how much H&H is worth, we can look at the historical price-to-NAV ratio and the potential for increases in NAV over time. In the past several years the P/NAV has ranged from as high as 8.82x to as low as .57x. On an annual basis the averages have been between 1x and 4.9x. We’d say the long-term average is 2x and the current P/NAV is 1x. We estimate that current NAV understates the portfolio value by 50%, which would imply a fully valued share price of $12 for TINY.

The full report is available via this link: Harris & Harris: Survive to Thrive (pdf).

Disclosure: Harris & Harris is a corporate research client of Research 2.0 and some Research 2.0 employees own positions in the stock at the time of this writing (positions that were owned prior to engaging with Harris & Harris.)