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Deep Dive: These robotics and automation stocks could climb up to 68% in the next year

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Investors looking for the best stock-market performance have been well-served for many years by focusing on companies using new technology to increase their sales quickly and steadily. The performance of the S&P 500 index has borne this out.

Below is a screen of 24 stocks held among five exchange-traded funds that focus on companies involved with robotics and automation — booming technology for companies involved in many industries around the world.

For robotics and automation, here are five ETFs that take different approaches to playing innovation:

  • The ARK Autonomous Technology & Robotics ETF
    ARKQ,
    +0.91%

    is actively managed and holds 46 stocks of companies involved with automation, robotics, autonomous vehicles, energy storage, 3-D printing and space exploration. It is highly concentrated; Tesla Inc.
    TSLA,
    +0.24%
    ,
    its largest holding, is 11.9% of the portfolio.
  • The Global X Robotics & Artificial Intelligence ETF
    BOTZ,
    +1.39%

    holds just 36 stocks. It tracks a global index of companies listed in developed markets. The companies are expected to benefit from the increased utilization of robotics and artificial intelligence. The largest holding is Intuitive Surgical Inc.
    ISRG,
    +0.58%
    ,
    at 8.8% of the portfolio.
  • The Robo Global Robotics & Automation Index ETF
    ROBO,
    +1.04%

    tracks a global index of companies involved in robotics, automation and AI and is rebalanced quarterly. The fund follows a tiered weighting strategy; the largest holding — Intuitive Surgical — is 1.8% of the portfolio of 84 stocks. It is the oldest of the five ETFs listed here, established in October 2013.
  • The iShares Robotics and Artificial Intelligence Multisector ETF
    IRBO,
    +1.24%

    tracks an equal-weighed global index of companies involved with robotics and AI. It holds 120 stocks. The index is reconstituted annually and rebalanced twice a year.
  • The First Trust Nasdaq Artificial Intelligence & Robotics ETF
    ROBT,
    +1.11%

    tracks the Nasdaq CTA Artificial Intelligence and Robotics Index, which ranks companies so that the portfolio is 60% weighted to “engagers,” 25% “enablers” and 15% “enhancers.” It holds 108 stocks.

Here’s some more information about the ETFs:

ETF Established Assets ($mil) Stocks held Concentration in five largest holdings Expense ratio
ARK Autonomous Technology & Robotics ETF
ARKQ,
+0.91%
9/30/2014 $2,761 46 38% 0.75%
Global X Robotics & Artificial Intelligence ETF
BOTZ,
+1.39%
9/12/2016 $2,650 36 42% 0.68%
Robo Global Robotics & Automation Index ETF 10/21/2013 $1,857 84 10% 0.95%
iShares Robotics and Artificial Intelligence Multisector ETF
IRBO,
+1.24%
6/26/2018 $440 120 6% 0.47%
First Trust Nasdaq Artificial Intelligence & Robotics ETF
ROBT,
+1.11%
2/21/2018 $262 108 13% 0.65%
Sources: ETF managers, FactSet

Here’s a summary of total returns for the ETFs against the SPDR S&P 500 ETF Trust
SPY,
+0.17%

and the Invesco QQQ Trust
QQQ,
+0.56%
,
which tracks the Nasdaq-100 Index
NDX,
+0.58%

:

ETF 2021 2020 Three years Five years Seven years
ARK Autonomous Technology & Robotics ETF
ARKQ,
+0.91%
10% 107% 135% 320% N/A
Global X Robotics & Artificial Intelligence ETF
BOTZ,
+1.39%
11% 52% 64% N/A N/A
Robo Global Robotics & Automation Index ETF
ROBO,
+1.04%
11% 45% 59% 153% 151%
iShares Robotics and Artificial Intelligence Multisector ETF
IRBO,
+1.24%
12% 49% 79% N/A N/A
First Trust Nasdaq Artificial Intelligence & Robotics ETF
ROBT,
+1.11%
12% 46% 73% N/A N/A
SPDR S&P 500 ETF Trust
SPY,
+0.17%
22% 18% 64% 128% 157%
Invesco QQQ Trust
QQQ,
+0.56%
21% 49% 108% 240% 305%
Source: FactSet

All five of the automation and robotics ETFs have trailed the broad market this year. During 2020, ARKQ was a stellar performer in part because of its big bet on Tesla, which skyrocketed 743% for the year. ROBO has outperformed SPY for five years but underperformed QQQ for all periods.

A stock screen from five automation and robotics ETFs

The five ETFs together hold 251 stocks across 21 countries. Only two stocks — Intuitive Surgical and Nvidia — are held by all five. Only BOTZ doesn’t own stocks in companies based in China.

China may be a special area of risk for years to come. There’s no way of knowing how much change will be brought about by China’s regulatory crackdown affecting tech-related industries. Meanwhile, U.S. regulators’ actions as well as the conflict between U.S. and Chinese regulators over the availability of audit reports may affect investors holding shares of Chinese companies listed in the U.S.

Yet, as you will see, three Chinese tech giants held by some of these ETFs are highly regarded by Wall Street analysts.

For this screen, it is important to understand that in Wall Street parlance, there are two types of stock analyst. A buy-side analyst works for a money manager. A sell-side analyst works for a brokerage firm. They have different perspectives, and it might be best to rely on both, if possible. So the following screen starts by limiting the list to the 81 stocks held by at least two of the five ETFs described above.

Among those stocks, 70 are rated by at least five sell-side analysts polled by FactSet. Narrowing the list further, 24 of the 70 have at least 75% “buy” or equivalent ratings. Here they are, sorted by the 12-month upside potential implied by the consensus price targets.

Of course, consensus price targets (and recommendations) can change, and a 12-month target period is short for a long-term trend:

Company Country Share”buy” ratings Closing price – Aug. 31 Cons. price target Implied 12-month upside potential Industry Held by
Baidu Inc. ADR Class A
BIDU,
+4.09%
China 85% 157.02 264.08 68% Internet Software/Services ARKQ IRBO ROBT
Alibaba Group Holding Ltd. ADR
BABA,
+4.38%
China 91% 166.99 274.63 64% Internet Retail ARKQ ROBT
TuSimple Holdings Inc. Class A
TSP,
+6.18%
U.S. 85% 41.86 61.56 47% Motor Vehicles ARKQ BOTZ
Magna International Inc.
MG,
-0.76%
Canada 80% 99.63 134.24 35% Auto Parts: OEM ARKQ ROBT
Samsung Electronics Co. Ltd.
005930,
+0.13%
South Korea 91% 76700.00 102454.55 34% Telecommunications Equipment IRBO ROBT
Delta Electronics Inc.
2308,
+0.55%
Taiwan 77% 270.50 348.38 29% Electronic Equipment/Instruments ROBO ROBT
PTC Inc.
PTC,
+2.24%
U.S. 76% 131.66 165.23 25% Software ROBO IRBO ROBT
Naver Corp.
035420,
+1.37%
South Korea 96% 439000.00 543480.00 24% Software IRBO ROBT
Nidec Corp.
6594,
+0.55%
Japan 88% 12620.00 15205.26 20% Electrical Products IRBO ROBT
Amazon.com Inc.
AMZN,
+1.21%
U.S. 98% 3470.79 4151.14 20% Internet Retail IRBO ROBT
Siemens AG
SIE,
-1.66%
Germany 77% 140.84 165.95 18% Industrial Conglomerates ROBO ROBT
Pegasystems Inc.
PEGA,
+1.18%
U.S. 92% 137.63 162.00 18% Information Technology Services IRBO ROBT
JD.com Inc. ADR Class A
JD,
+3.39%
China 94% 78.56 92.26 17% Internet Retail ARKQ ROBT
Cargotec Oyj Class B
CGCBV,
+1.83%
Finland 78% 47.00 55.10 17% Transportation BOTZ ROBO ROBT
Microchip Technology Inc.
MCHP,
-1.09%
U.S. 76% 157.36 179.14 14% Semiconductors ROBO IRBO
Teledyne Technologies Inc.
TDY,
-1.24%
U.S. 75% 463.38 522.57 13% Aerospace & Defense ARKQ ROBO 
ATS Automation Tooling Systems Inc.
ATA,
+1.93%
Canada 100% 45.62 50.30 10% Industrial Machinery BOTZ ROBO IRBO ROBT
Alphabet Inc. Class A
GOOGL,
+0.62%
U.S. 96% 2893.95 3185.44 10% Internet Software/Services ARKQ IRBO ROBT
Microsoft Corp.
MSFT,
+0.83%
U.S. 92% 301.88 327.43 8% Software IRBO ROBT
Aveva Group PLC
AVV,
+0.89%
United Kingdom 86% 41.36 44.15 7% Software IRBO ROBT
ServiceNow Inc.
NOW,
+0.95%
U.S. 88% 643.64 665.96 3% Information Technology Services ROBO ROBT
Keyence Corp.
6861,
+1.45%
Japan 83% 66130.00 67632.50 2% Electronic Equipment/Instruments BOTZ ROBO ROBT
Synopsys Inc.
SNPS,
+0.64%
U.S. 87% 332.24 339.69 2% Software ARKQ ROBT
Nvidia Corp.
NVDA,
+0.82%
U.S. 83% 223.85 226.31 1% Semiconductors ARKQ BOTZ ROBO IRBO ROBT
Source: FactSet

The prices and price targets are in local currencies where the shares are listed. The three Chinese companies on the list — Baidu Inc.
BIDU,
+4.09%
,
Alibaba Group Holding Inc.
BABA,
+4.38%

and JD.com Inc.
JD,
+3.39%

— area all listed on U.S. exchanges as American Depositary Receipts.

You can click on the tickers for more about each company.

Despite being held by all five robotics and automation ETFs, Intuitive Surgical didn’t make the list because only eight of the 19 sell-side analysts polled by FactSet rate the shares a buy or the equivalent. The stock closed at $1,053.56 on Aug. 30, having risen 29% for 2021, and was trading ahead of the consensus price target of $1,032.71.

This list is merely a starting point for further research about companies involved with the long-term industrial shift to robotics and automation. If you see any investments of potential interest, you should form your own opinion about a fund’s strategy, or a company’s strategy, and whether or not it is likely to remain competitive over the next decade.

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