>>> 5 ways to invest in the robot revolution
By Jeff Reeves
Apr 5, 2017 http://www.marketwatch.com/story/5-ways-to-invest-in-the-robot-revolution-2017-04-04?siteid=bigcharts&dist=bigcharts
Think Rockwell, Cognex, Middleby, Siemens and the ROBO ETF
Donald Trump voters have found comfort in his promises about more U.S. manufacturing jobs and threats to get tough on trade.
But 87% of U.S. manufacturing jobs lost between 2000 and 2010 were from factories becoming more efficient through automation, according to a recent study by two Ball State University professors. That leaves just 13% lost to overseas competition.
Some analysts have predicted that protectionist policies under the Trump administration may actually increase job losses. After all, when domestic companies are forced to manufacture more in America but automation can keep costs down, the net result is more capital investment but fewer employees.
Time will tell how the American economy evolves amid this seemingly endless march toward automation. But one thing is certain: Investors who are in on the ground floor of the robot revolution will be well-served no matter what the fate of manufacturing jobs in the Rust Belt.
If you’re looking to profit from the continued growth in global automation, here are five potential investments to consider:
Rockwell Automation Corp. ROK, -0.70% is a $20 billion company that specializes in smart manufacturing systems that span a range of goods, including automobiles, textiles and packaged foods. Shares are up about 25% since Election Day, but it’s not just politics lifting this stock; Rockwell has posted five consecutive earnings beats, including a strong showing in January where the company raised its full-year 2017 guidance. The stock continues to touch new 52-week highs regularly despite recent market turmoil, and both its direct focus on automation technologies and its considerable scale will serve it well as corporations increasingly look to robots as a way to contain costs in the coming years.
Cognex Corp. CGNX, +1.02% is a lesser-known mid-cap that specializes in “machine vision” technologies. This is a fancy way of saying Cognex helps companies do things like scan barcodes to sort goods automatically or inspect goods for defects or to reduce waste. Cognex has an even more impressive string of earnings beats than Rockwell, meeting or exceeding expectations for at least the past 16 quarters. What’s more, it’s set to grow revenue 19% this year and 13% next year alongside 12% and 18% growth in earnings, respectively.
It’s a smaller play than Rockwell, so it comes with a bit more volatility, but when you consider shares have soared 115% in the past 12 months, it increasingly looks like the big moves are going to be to the upside in Cognex.
When thinking of automation, many people imagine a robot arm welding a car door or zapping a chipset into a smartphone. But don’t overlook the increasing role that automation plays in both processed and prepared foods. That’s where midcap industrial stock Middleby Corp. MIDD, -1.81% comes in. Earnings have topped expectations for the last five quarters, driven by success in its commercial foodservice operations that make up about half of sales at present. However, Middleby’s food-processing business grew at a nice 15% clip last year and is increasingly important to investors at roughly 15% of total sales. The 2015 acquisition of automated “high speed slicing” company Marel to bolster this group is proof Middleby expects it to keep growing, too.
If you don’t want a pure play on industrial automation, this company is an interesting alternative since it has a solid and growing commercial foodservice equipment division to offer diversification and stability.
Another diversified play on the robot revolution is German conglomerate Siemens AG SIEGY, -0.04% SIE, -0.67% SIE, -0.21% Siemens has its fingers in many pies, from energy and power transmission to health care, but is also a leader in automation solutions. While there are many different elements that power this stock, it’s important to note the Digital Factory division is the most profitable with a margin range of 14% to 20% forecast in the latest Siemens annual report.
With a $120 billion market capitalization, 2.8% dividend and truly global customer base, Siemens offers a nice lower-risk alternative for those looking to dabble in automation.
The ROBO Global Robotics & Automation Index ETF ROBO, +0.03% is a modest-sized fund with some $420 million in assets as of this writing. And while the expense ratio is a bit steep at 0.95%, or $95 annually on $10,000 invested, it’s hard to argue this fund doesn’t fit the bill for those looking to play automation trends without picking individual stocks. Best of all, unlike many kinky ETFs out there that are top-heavy in just a handful of name, the ROBO fund is truly diversified and doesn’t place more than about 2% of its holdings in any single stock.
With shares up about 30% in the last 12 months and 12% year-to-date in 2017, this automation-focused ETF has a history of outperformance, and will enjoy a bright future if current trends continue.