Investing in Robotics? Bonanza in Convergence!
“Robotics and the increasing use of automation represent one of the most exciting investment avenues for stock buyers in the coming decades.” —The Motley Fool
“One Area of the Industrial Economy Is Doing Great: Robots” —Barron’s
Convergence is making things interesting
“The makers of robotics and automation systems understand that there is a growing need to improve the efficiency of production in several sectors of the overall economy. With the increasing penetration of information technology in manufacturing and the explosion of the Industrial Internet of Things (IIoT), the already well-established robotics sector is entering a new round of long-term growth that should propel many of the companies involved even higher.”
Manufacturers #1 or #2 in their specific market areas
There are four distinct groups worthy of consideration for these #1 and #2 candidates:
- Companies that make the core automation and robotics technology.
- Companies that make technologies and components that work with or in robotics.
- Industrial software companies, which are an integral part of the smart automation revolution and the segment in which the highest growth rates are likely to be found.
- Companies that are using robotics and smart automation to enhance their product offerings to existing customers. This is an intriguing group that can fly under the radar of many investors.
1. Yaskawa (OTC:YASKY)
Leading robotics and automation company with good exposure to China/Far East manufacturing
2. FANUC (OTC:FANUY)
Leading robotics company with good exposure to China/Far East manufacturing
3. ABB (NYSE:ABB)
Switzerland and Sweden
Major robotics, electrification products, and industrial automation company
4. Siemens (OTC:SIEGY)
Major industrial conglomerate that’s shifting its focus toward automation and smart factory solutions
5. Rockwell Automation (NYSE:ROK)
The leading U.S. industrial automation company with a fast-growing Industrial Internet of Things business
6. Cognex (NASDAQ:CGNX)
World-leading machine-vision company
7. Zebra Technologies (NASDAQ:ZBRA)
Scanners, mobile computers, and barcode readers that provide support to smart robotics/automation
8. KION Group (OTC:KIGRY)
Forklift truck manufacturer and leading warehouse automation company
9. Intuitive Surgical (NASDAQ:ISRG)
Manufacturer of the market-leading da Vinci robotic surgery system
10. iRobot (NASDAQ:IRBT)
Consumer robot company that dominates the market for robotic vacuum cleaners
Excerpts from Motley's Take on the Robotics Investment Scene
Motely Fool has put together three excellent articles about investing in robotics:
Is ABB the “Go To” Robotics Stock? Interesting take on ABB, plus great insight into automation.
Beyond these excerpts and charts see the full articles before you get out your checkbook. Motely has done a nice job of positioning these top 10 within the converging industrial automation field.
“The traditional early adopters of automation/robotics, such as the automotive and electrical and electronics manufacturing industries, are set to lead volume growth in the near future. This is important to consider, because if these two industries turn down aggressively — as they did in 2019 — then robotics automation companies can suffer falling sales.
“All told, if you are investing in the robotics industry, you must be aware of the cyclicality of the industry, its outsized connection to China, and the fact that buying into the robotics sector will almost certainly involve exposure to industrial automation at large.”
Core automation & robotics
“So what is the difference between a robot and a piece of factory automation equipment? The IFR uses the International Organization for Standardization (ISO) definition to explain that a robot is “an automatically controlled, reprogrammable, multipurpose manipulator programmable in three or more axes, which can be fixed in place or mobile in industrial automation applications.
“The robot definition makes it pretty clear that robotics is actually a subset of factory automation. For reference, automation is usually prominent in two main markets. One is factory or discrete automation (think of a bottling plant or of an assembly line of robots putting together a car), and the other is process automation, which is the automated control of raw materials (think of oil and gas refining or chemicals processing).
“So companies like FANUC, ABB, Yaskawa, and KUKA that say they are robotics companies are also factory automation companies. As you can see below, ABB is the only company to be a major player in all three markets, but Germany’s Siemens is also a major player in factory and process automation. Japan’s FANUC and KUKA (a German company now majority owned by China’s Midea) are also active in robotics and factory automation.
“The U.S. is a smaller market for robotics than Asia and even Europe. So it makes sense that more leading robotics and factory automation companies traded on U.S. markets are European (KUKA, ABB, Siemens, and Schneider) and Japanese (Yaskawa, FANUC, and Mitsubishi). The only significant U.S.-based factory automation companies are Rockwell and Emerson Electric. Emerson tried to create a U.S. automation champion in 2018 by launching a takeover bid of Rockwell that ultimately failed.
“Look out for cyclicality in all these businesses. It’s reasonable to expect faster growth from the robotics sector, but factory automation, in general, will oscillate in line with the economy. And capital spending in process automation is somewhat guided by trends in commodity prices.
ABB is an interesting company, but it has a significant amount of restructuring ahead of it. Siemens is an attractive investment that tends to pay a healthy dividend, but its industrial automation operations only make up a portion of a much larger and diversified organization. Rockwell is probably the best way for U.S. investors to get long-term direct exposure to industrial automation. As the Emerson Electric takeover bid demonstrates, Rockwell is a strategically attractive company for others looking to get exposure to the U.S. industrial automation market.”
Industrial software companies and IIoT
“Before we go any further, it would help to provide a bit more explanation of what the Industrial Internet of Things is and how it relates to this sector. The IIoT is simply the process whereby web-enabled sensors are used to create data and information that will help companies better manage physical assets. An example could be the use of sensors on a gas turbine in order to predict when it will need servicing.
“Arguably the most exciting growth area among the four sectors, the growing penetration of IIoT software tools and digitization is changing how manufacturing companies manage their devices. Naturally, this is highly relevant to robotics, because as processes become automated, more and more data can be captured and utilized.
“As such, manufacturers are even more eager to robotize production, because IIoT and industrial software applications are enhancing the value of an investment in robots and automation. In a nutshell, manufacturing is probably the best way to play the IIoT revolution.
“Indeed, all leading automation companies have their own industrial software solutions or partnerships with other leading companies. For example, Siemens and Rockwell Automation dominate the market for programmable logic controllers (PLCs), and Siemens has its own product lifecycle management (PLM) software, while ABB partners with Dassault Systemes (OTC:DASTY) and Rockwell with PTC (NASDAQ:PTC). (PLM is software used to design products and physical assets and then manage them as they are used.)
Under-the-radar robotics stocks
“There is a growing subset of companies using smart automation and robotics in order to enhance or develop new solutions for customers. Investors will probably know about companies like domestic appliance maker iRobot (NASDAQ:IRBT) or even Intuitive Surgical (NASDAQ:ISRG) and its groundbreaking da Vinci robotic surgical system. In fact, Intuitive’s growth has been so impressive that medical device company Medtronic (NYSE:MDT) is muscling in on the market and intends to compete directly with Intuitive.
“Another area in which robots are adding significant value is in warehouse automation — a high-growth area given the huge expansion of e-commerce and the increased need for e-fulfillment. Honeywell’s (NYSE:HON) purchase of material handling company Intelligrated has been a huge success, and as noted previously, Cognex believes it can grow its logistics-based revenue at a 50% rate in the near future.
“Honeywell’s Intelligrated is a solution provider (materials handling, sorters, and conveyors) to Amazon.com (NASDAQ:AMZN) and its growing investment in warehouse automation. In fact, Amazon’s investment in robotics extends to buying a robotic technology company — Kiva Systems (now called Amazon Robotics) — for $775 million in 2012 in order to use its technology in house. Moreover, in 2019, Amazon bought Canvas Technology, a robotics start-up building autonomous carts for warehouses.
“Two other stocks that benefit from automation in the warehouse are Germany’s KION Group (OTC:KIGRY), a manufacturer of forklifts and warehouse equipment and owner of Intelligrated’s rival warehouse robotics company Dematic. Another interesting company in the sector is Zebra Technologies (NASDAQ:ZBRA). The company makes mobile computers, scanners, and barcode printers, which will be needed to support companies investing in robotic automation in logistics. While robots will perform repetitive tasks, there will still be a need for humans to work alongside robots in smart automation centers.”
Thanks Motley for helping our readership to navigate. Much appreciated.