Dec. 23, 2022 12:30 am ET
By
Daren Fonda
Robotics, industrial automation, and artificial intelligence may one day merge, creating a new class of workers known as “robo sapiens.” But stocks in the space have caused glitches for investors.
The arena is teeming with small software makers or early-stage growth stocks without much revenue or profit; the larger players making robotic arms, chips, and components tend to be industrial conglomerates or tech firms with artificial intelligence, or AI, as one of their businesses. That makes robotics a challenging space for investors.
The ROBO Global Robotics & Automation Index exchange-traded fund (ticker: ROBO) captures the promise and peril. Top holdings include major robotics and automation companies like CGNX (CGNX), ISRG (ISRG), 6954 (6954.Japan), and ROK ( ROK ). Nearly half the ETF’s holdings are based in the U.S., and 80% of the fund is in large and mid-cap stocks, making it one of the less risky bets in the arena.
Still, the ETF hasn’t been a relative winner. The fund, with $1 billion in assets, is up an annualized 2.8% over the past five years versus 10% for the tech-heavy Nasdaq Composite index. This year, the ETF is down 33%, slightly trailing the index.
Part of the challenge now is that tech overall is out of favor, and the market has been especially tough on companies in the more speculative areas, such as robotics. Even big players like Rockwell and Cognex, leaders in industrial automation and machine vision technologies, aren’t doing great. Rockwell and Cognex are down 26% and 38%, respectively, this year. Fanuc, a leading maker of robotic arms, is off 20%.
Some companies should benefit from robotics even if it isn’t their core business. APH (APH), for instance, is a multi-industry components supplier with exposure to robotics. “They sell components for the equipment, so you don’t have to bet on the robotic provider; it’s a bet on the ‘picks and shovels,’ ” says UBS analyst Chris Synder, who recommends the stock. Amphenol isn’t cheap at 25 times estimated 2023 earnings, expected to be up just 2.8% versus 2022, according to consensus estimates.
The trends favor robotics entering the workforce, and if tech makes a comeback in 2023, the robotics stocks and ETFs should, too. But as anyone who hires a robot knows, it will not be a smooth and glitch-free ride.
Write to Daren Fonda at daren.fonda@barrons.com |
