Robots have come a long way from when they mainly performed repetitive tasks on the factory floor. They’ve become sophisticated and affordable enough that you now can find them in the skies and on battlefields, in hospitals and homes and deep beneath the ocean surface. And increasingly, they can be found at the heart of companies that offer attractive stock opportunities.
To help you select those with the most promising futures, Bottom Line/Personal interviewed top money manager and robotics stock specialist Rob Wilson…
Many of the companies that are focused on robotics have the same kind of potential that Internet and biotech companies offered investors a decade or two ago. But the robotics industry also can be just as volatile as those earlier newcomers.
Small and medium-sized companies in the industry have vast potential for growth, but that is heavily dependent on their ability to stay technologically ahead of the competition…and on their ability to navigate shifting legal, business and consumer trends.
For example, there is tremendous demand for aerial drones from law enforcement, firefighters and the agriculture and real estate industries. But such drones currently are illegal in the US. The Federal Aviation Administration (FAA) still is trying to figure out how to update regulations that ban drones unless they are for personal use and are kept below 400 feet.
Three strategies to help you profit…
Make sure that any robotics company you invest in is already profitable and one of the leaders in its niche. Too many companies have yet to prove that their products will be successful and profitable. Also, today’s leading robotics companies have patents that give them a clear advantage.
Focus on “pure plays,” those companies where robotics is the only or primary business, rather than giants such as Google, which is working on a self-driving car, and Amazon, which plans to offer same-day shipping services for online purchases by using aerial drones. Pure plays have the potential to grow quickly, and they may become takeover targets for larger companies willing to pay a premium for their stocks.
Limit these stocks to the aggressive portion of your portfolio. Prepare to hold them for the next decade because even winners are likely to have many ups and downs.
Robots are showing the greatest potential in a few industries…
Health care. As pressure rises to make health care more affordable and ensure better outcomes, the market for medical robotics products and services is expected to reach $13.6 billion in 2018. Example: Surgery in which doctors use robotic arms can be more accurate, less invasive and easier to recover from than surgery using traditional methods. Attractive stock…
Intuitive Surgical (ISRG) has a near-monopoly on robotic-assisted laparoscopic surgery with its da Vinci surgical system. And now it is aggressively expanding into urological, gynecological and cardiothoracic surgical procedures. Although the company has faced some recalls and lawsuits over surgical complications, it can overcome those challenges. Recent share price: $471.89.
Defense and aerospace. The military is rapidly expanding its use of drones and other unmanned systems. Over the next five years, the US Department of Defense will spend $23.8 billion on robotics for functions ranging from real-time reconnaissance and surveillance to bomb disposal. Meanwhile, consumers are using drones for activities such as taking aerial wedding photos…and real estate agents use them to take overhead pictures of homes for sale despite FAA prohibitions. Attractive stocks…
AeroVironment (AVAV) specializes in flying security cameras for public safety. It has the greatest potential to cross over from military to commercial use and be used by police departments after the FAA loosens restrictions. Recent share price: $31.76.
iRobot (IRBT) is best known for Roomba robotic vacuum cleaners, but it also is a leading provider of unmanned ground vehicles for the US military and law enforcement. And its mobile remote-presence robot is used by companies and also in hospitals for video consultations among doctors, nurses and patients. Recent share price: $34.59.
Energy. Most major oil discoveries in the next decade will come from deep-water drilling. To tap that new supply, energy companies need remotely operated vehicles (ROVs) with surveillance systems and robotic arms capable of working two miles beneath the ocean surface. The market for underwater drones is expected to grow by 20% annually through 2019. Attractive stock…
Oceaneering International (OII) provides more than one-third of the world’s high-tech submersible ROVs and engineering services to 60% of all floating rigs. Recent share price: $68.30.
Hardware/software. Companies that provide essential technology, equipment and ancillary services to robotics manufacturers will benefit from the overall growth of the industry regardless of which companies emerge as market leaders. Attractive stocks…
Cognex Corp. (CGNX) is the world’s leading provider of vision sensors and software/hardware systems that capture and analyze visual information allowing computers to “see.” Its factory automation products help detect defects, monitor production lines, guide assembly robots, and track and sort millions of items involved in the making of products ranging from cell phones to baby powder. Recent share price: $43.01.
Nuance Communications (NUAN) is the speech-recognition software firm that helped develop the iPhone virtual assistant Siri. Aldebaran Robotics is using Nuance technologies to enable humanoid robots to have natural-sounding conversations with people in 19 languages. Recent share price: $16.86.
Some of the most profitable industrial robotics companies and markets are outside the US. Japan uses more than one-quarter of a million industrial robots, more than any other country, in activities ranging from food packaging to warehouse distribution operations, as a way to counter high labor costs and a shrinking workforce. Japanese robotics companies are well-positioned to move into China. Attractive Japanese stocks…
Fanuc (FANUY) is one of the largest suppliers of automated factory robots in the world, with operations in 22 countries. Recent share price: $28.91.
Keyence Corp . (KYCCF) makes products for factory automation systems, including sensors, lasers and measuring systems, as well as safety products. Recent share price: $434.50.
