Investing in Industrial Robots for Retail Investors
The emergence of artificial intelligence, improved battery technology, and better materials mean that now robots are being put to use in everything from fast food service to teaching yoga. While all that makes for some tantalizing nightly news spots, investors are starting to think about how lucrative this space might be. Areas like robotic surgery have shown tremendous returns up until now, but some of the biggest opportunities lie with industrial robots. Here’s a look at what that growth looks like according to robot stock index creator ROBO Global:
In the past 6 years, use of industrial robots has nearly tripled with a great deal of that growth coming from Asia. This past week we saw Rethink Robotics take in another $18 million round of funding. Foxconn announced that they went all out and replaced every single one of their 60,000 underpaid suicidal workers with an expensive robot that won’t ask for a raise or suddenly stop working. And our “List of 20 Publicly Traded Robotics Companies” article is currently one of our most popular articles. Investors are waking up to the fact that robots represent a very lucrative investing opportunity.
We previously looked at the Robo Global Robotics & Automation Index ETF (NASDAQ:ROBO). Over the past year, the ROBO ETF returned about +21% beating the NASDAQ return of +10% over the same time frame:
We’re not seeing NVIDIA-like returns but still, almost double the return of NASDAQ for an ETF is a respectable accomplishment. If you recall, what we did with that ETF was to take out all the U.S. traded constituents and created our own ETF or motif as it’s called. As it turns out, our Nanalyze Robot Stocks motif returned +28.5% over the same time frame:
If you’re wondering how we created that motif, we simply took all the U.S. traded stocks from the ROBO ETF that have meaningful exposures to robotics and created a mini ETF with them using the Motif Investing platform. You can create your own brokerage account with Motif Investing (no deposit required) and create any mini-ETF you can dream up.
So our mini-ETF contains all the U.S. traded stocks but we want to see if we can invest only in industrial robots. We then took all the pure-play stocks in the ROBO ETF and just listed out the ones related to industrial applications. Here’s that list:
|Company Name||Country||Cap (USD Billons)||1-Year Return||Ticker||Description|
|Hiwin||Taiwan||1.3||27%||2049||Motion control products|
|Lincoln Electric Holdings||USA||5.2||58%||LECO||Robotic cutting and welding|
|Nabtesco||Japan||3||23%||6268||Joints for industrial robots|
|ABB Ltd.||USA||48||32%||ABB||Process automation and robots|
|Rockwell Automation||USA||18||48%||ROK||Industrial automation software|
|Fanuc Corporation||Japan||35||9%||FANUY||Robot components|
|Krones AG||Germany||3||-10%||KRN||Factory automation robots|
|KUKA||Germany||3.8||16%||KU2||Factory automation robots|
|Yushin Precision Equipment||Japan||0.5||39%||6482||Take-out robots|
|Cognex||USA||5.7||122%||CGNX||Bionic eyes for robots|
|Keyence||Japan||44||43%||KYCCF||Industrial automation products|
|OMRON||Japan||8||21%||OMRNY||Industrial automation products|
In looking at the above list, we’re not surprised to see that Japan dominates with the greatest number of companies working on industrial robots. Here’s a look at just how dense robot usage is among various countries:
For the average retail investor wanting to get exposure to industrial robotics, you can do one of three things:
- Buy the ROBO ETF or the Stoxx ETF (which we’ll cover in a coming article)
- Create your own motif like we did with the Nanalyze Robot Stock motif
- Just buy some or all of the eight publicly traded industrial robotics companies in the above list
- 4 Japanese companies trading as ADRs with reasonable liquidity
- 4 U.S. companies trading on major U.S. exchanges
The ETF is a good option except that all the “non bellweather” stocks aren’t exactly pure plays on robotics and you’re getting charged almost 100 bps. More sophisticated retail investors could use a firm like Interactive Brokers and go buy any one of these industrial robot stocks on the international exchanges they trade on but the transaction fees can be expensive.
It’s easy enough to buy some or all of the U.S. companies (CGNX/ABB/ROK/LECO). If you want to buy any of the Japanese ADRs (FANUY,KYCCF,OMRNY,YASKY), there appears to be enough liquidity but you need to be aware that these issues trade on the pink sheet market and there are risks associated with that (like huge bid/ask spreads).
We wrote before about Cognex and how they make bionic eyes for robots. In future articles, we’ll take a closer look at the remaining companies above, in particular Lincoln Electric (NASDAQ:LECO), ABB (NYSE:ABB) and Rockwell Automation (NYSE:ROK) to see just how much exposure to industrial robots these companies will provide retail investors. Why are we so interested in industrial robots? Because according to Boston Consulting Group, this is the area of robotics we can expect to see the biggest potential market arise in the coming years:
As retail investors, we want exposure to the biggest piece of the robotic pie – industrial robots. If you’re going to buy any of the stocks mentioned in the article, make sure to use dollar cost averaging and accumulate your position over time to avoid trying to time the market. If you think here are some industrial robot stocks we missed, drop us a note in the comments section below.