In this article we present the list of 10 Robotics Stocks That Will Own the Future.
Ambarella, Inc. (NASDAQ:AMBA), Teradyne, Inc. (NASDAQ:TER), and Emerson Electric Co. (NYSE:EMR) are a few of the robotic stocks that are poised to own the future as a wave of automation sweeps across most industries.
As labor shortages and increased labor costs continue to challenge companies’ bottom lines, they’re increasingly looking for ways to reduce costs, not to mention costly downtime. Worldwide spending on automation was expected to double between 2020 and 2025, and that’s likely just the tip of the iceberg. Various reports have the industry pegged to grow at close to a 10% CAGR through 2029, topping $400 billion in value by that time.
Automation not only reduces costs, but also improves productivity and quality control. McKinsey predicts that automation could boost global productivity by 0.8 to 1.4 percentage points annually, and that automation could effectively replace nearly half of the world’s salaried positions, which pay out $16 trillion in wages annually.
The automation sector serves a wide range of industries, a figure which is expected to grow as technologies improve and enhanced sensors and processes become capable of automating tasks that would’ve previously proved challenging.
The automotive industry accounts for about 29% of discrete automation demand, with heavy manufacturing and electronics accounting for similar market share. On the process automation side of the coin, the metals and mining industry has major demand for automation solutions, while the healthcare, pulp and paper, oil and gas, and chemicals sectors are becoming increasingly reliant on automation as well.
Despite its long-term growth potential, robotics stocks have not fared well in 2022, underperforming even the otherwise lousy broader market. After gaining more than 40% from the end of 2019 through the end of 2021, the Global X Robo Global Robotics & Automation ETF has lost 35% of its value this year, falling back near 2018 levels.
Given the economic downturn and the significant upfront costs involved in launching automated solutions, investors are fearful that cash-strapped companies will hold off on making investments in automation. This creates the perfect opportunity for forward-looking investors to buy into a promising industry at rock-bottom prices.
In this article, we’ll analyze ten robotics stocks that could make for compelling investments given their standing among some of the leading hedge funds in the world.
Our Methodology
The following robotics stocks are ranked based on hedge fund sentiment. We follow a select group of hedge funds because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q2 2022 reporting period.
10 Robotics Stocks That Will Own the Future
10. ABB Ltd (NYSE:ABB)
Number of Hedge Fund Shareholders: 17
Ambarella, Inc. (NASDAQ:AMBA), Teradyne, Inc. (NASDAQ:TER), and Emerson Electric Co. (NYSE:EMR) are a few of the stocks that the smart money is betting on to lead the robotics revolution. The smart money also likes ABB Ltd (NYSE:ABB), which provides automation and electrification-based tools, which figures to be an area of long-term growth.
ABB’s Q2 revenue slumped by 2% to $7.25 billion, but that was due to an 8 percentage point hit the company took from the stronger U.S. dollar, as it does business all over the world. Orders were up 20% when discounting the F/X effects, to $8.81 billion, including growing by 33% in the Americas. ABB pays out a quarterly dividend, with its shares currently yielding 2.18%.
Hedge fund ownership of ABB Ltd (NYSE:ABB) has more than doubled since the end of 2020 and has held firm over the past two quarters even as the stock had started to run up against resistance. D E Shaw initiated a position of 1.88 million shares during Q2, while Ken Fisher’s Fisher Asset Management owns just over 20 million shares of the firm.
Artisan Partners chalked up ABB Ltd (NYSE:ABB)’s recent share price slide as being due to broader negative sentiment surrounding industrial companies, as revealed in the fund’s Q2 2022 investor letter:
“ABB Ltd (NYSE:ABB) is a Swiss-based industrial conglomerate that manufactures electronic products and equipment. There is no new significant fundamental news on the company. We believe the share price decline relates to negative sentiment associated with industrial companies.”
9. Omnicell, Inc. (NASDAQ:OMCL)
Number of Hedge Fund Shareholders: 18
Omnicell, Inc. (NASDAQ:OMCL) supplies analytics software and automation capabilities to the healthcare space. The company’s inventory management and automation systems can be used by health facilities to store, package, order, and issue medication, while its medication dispensing systems can be used by pharmacies and nurses to automate their workflow processes and reduce human error and waste.
Omnicell is predicting $1.4 billion in revenue this year at the midpoint of its guidance range, which would represent a 17% increase year-over-year. Given the company’s $1.25 billion backlog at the end of 2021, that guidance may even be slightly conservative. Given its strong customer retention rate (99%), Omnicell is poised to eventually transition from a product cycle company into one that thrives on higher-margin recurring services revenue.
Hedge fund ownership of Omnicell, Inc. (NASDAQ:OMCL) hit an all-time high at the end of Q1 before slumping by 31% in Q2. Anita Falicia and James Hillary’s Resolute Capital Asset Partners built a new stake in OMCL during Q1, but then unloaded it during Q2.
The Carillon Scout Small Cap Fund likes Omnicell, Inc. (NASDAQ:OMCL)’s suite of healthcare-based automation tools, as revealed in the fund’s Q1 2022 investor letter:
“Omnicell (NASDAQ:OMCL) provides an integrated suite of clinical infrastructure and workflow automation solutions for healthcare facilities. Cloud services have been a focus of the company and have shown good growth, automating many manual processes.”
8. Textron Inc. (NYSE:TXT)
Number of Hedge Fund Shareholders: 24
Industrial conglomerate Textron Inc. (NYSE:TXT) develops a wide range of products across various industries, building everything from golf carts, snowmobiles, and baggage tractors, to aerospace technologies and services, and advanced robotic land vehicles. Among the latter list is the firefighting robot Thermite and the M5 RIPSAW combat vehicle.
Textron Inc. (NYSE:TXT)’s revenue was flat year-over-year in Q2, with the company pulling in $3.2 billion in sales. EPS was up 23% year-over-year to $1.00. Aviation, Industrial, and Finance were the company’s best performing segments during the quarter, growing revenue by between 9.7% and 16.7%. Supply chain issues are expected to impact the company’s ability to make delivers this year, pushing some projected sales into 2023.
There was an all-time high in hedge fund ownership of Textron Inc. (NYSE:TXT) at the end of 2021, but the number of money managers long the stock has fallen by 29% in 2022. Gregg Moskowitz’s Interval Partners and Anand Parekh’s Alyeska Investment Management were two of the funds that sold off their TXT stakes during Q2.
7. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Shareholders: 25
UiPath Inc. (NYSE:PATH) supplies end-to-end automation platforms that allow customers to build complex automation processes through the UiPath Studio platform, and utilize machine learning models to further enhance their workflow productivity. The company also develops software robots that can work in tandem with custom-built automated processes to monitor tasks.
UiPath Inc. (NYSE:PATH) shares are down 69% this year despite the company posting solid Q2 results. It pulled in $242 million in sales during the quarter, nearly 10% about the company’s guidance, while its adjusted operating loss of $11.2 million was significantly better than the $55 million to $60 million loss the company was anticipating. The company’s annualized renewal run rate also surpassed $1 billion during the quarter for the first time.
Hedge funds showed strong interest in UiPath Inc. (NYSE:PATH) following its Q2 2021 IPO, but ownership of the stock tanked during the following quarter and has languished ever since. Cathie Wood’s ARK Investment Management has remained the company’s biggest bull since its IPO, owning 37.6 million PATH shares on June 30.
6. Rockwell Automation, Inc. (NYSE:ROK)
Number of Hedge Fund Shareholders: 28
Rockwell Automation, Inc. (NYSE:ROK) sells automation-based systems, software, and components across a range of industries, including energy, automotive, and food production. Supply chain issues impacted Rockwell’s ability to fulfill orders during its latest fiscal quarter, which has left the company with a record backlog. Yet despite the missed orders, the company still grew sales by double digits during its fiscal Q3. Rockwell also pays out a dividend, with shares currently yielding 1.93%.
Rockwell Automation, Inc. (NYSE:ROK) is yet another robotics stock that has fallen out of favor with top money managers in recent quarters, as there were 45% fewer funds long ROK on June 30 as there were two years earlier. Billionaire investing icons Israel Englander and Louis Bacon were some of the money managers who unloaded their stakes in the company during Q2.
The Harding Loevner Global Equity Fund is bullish on Rockwell Automation, Inc. (NYSE:ROK) given the pace of reshoring initiatives in the U.S., which has companies exploring ways to recreate their overseas cost savings through automation. The fund discussed its thoughts on Rockwell’s growth opportunity in its Q1 2022 investor letter:
“Rockwell Automation (NYSE:ROK) is one such provider, which we purchased during the market correction this quarter. The company—still based in Milwaukee, where it developed its first product, a device to control the speed of electric motors, 120 years ago—has a particular focus on North America. Rockwell’s sales growth had stalled during the US capex recession following the recovery from the Global Financial Crisis. The company sold sensors, actuators, valves, and control software, but lacked the ability to weave all these offerings together to provide a single control point for clients wanting to automate an existing plant or build a fully automated new one. Its 2018 minority investment in PTC Inc (NASDAQ:PTC), a Boston-based industrial software firm with a strong capability in augmented reality and visualization tools, marked a turning point in Rockwell’s fortunes. Through this partnership, Rockwell was able to develop software that integrated data from individual business segments, stitching it together on its “FactoryTalk” platform, to give managers a real-time digital picture of their operations. The company is now a chief enabler and beneficiary of reshoring initiatives as a wave of manufacturers scarred by pandemic supply chain disruptions look to automation to help them recreate some of the cost savings that had driven their offshoring in the first place. After hardly growing for seven years, the company saw orders increase 40% in the first quarter over the same period last year and predicted organic sales growth of between 14% and 17%.”
Ambarella, Inc. (NASDAQ:AMBA), Teradyne, Inc. (NASDAQ:TER), and Emerson Electric Co. (NYSE:EMR) are some of the top robotics stocks that the smart money is buying. See why by clicking the link below.
5. Ambarella, Inc. (NASDAQ:AMBA)
Number of Hedge Fund Shareholders: 28
After gaining 121% last year, Ambarella, Inc. (NASDAQ:AMBA) shares have given back all of those gains and more in 2022, falling by 69%. The fabless semiconductor design company, which makes computer vision processors that outfit cameras with advanced analytical capabilities, has seen its growth stall this year.
Sales growth slowed to just 2% in Q2, down from 29% a year earlier, though some of that was certainly due to supply chain issues rather than lack of demand. Things are expected to get even worse before they get better, as the company’s sales are expected to decline year-over-year in Q3; not a good look for a growth company, regardless of extenuating circumstances.
Hedge fund ownership of Ambarella, Inc. (NASDAQ:AMBA) has dipped by 30% over the past two quarters after peaking at the end of 2021. On the other hand, Steve Cohen’s Point72 Asset Management is more bullish than ever, growing its AMBA position by 1,102% during Q2 to 655,043 shares valued at $42.9 million.
The Carillon Scout Small Cap Fund noted that supply chain issues have impeded the strong demand for Ambarella, Inc. (NASDAQ:AMBA)’s products, as revealed in the fund’s Q1 2022 investor letter:
“Ambarella (NASDAQ:AMBA) supplies video processing and computer vision chips used in the security and automotive markets. The company continues to face supply headwinds from its foundry partner despite robust market demand for Ambarella’s products.”
4. Teradyne, Inc. (NASDAQ:TER)
Number of Hedge Fund Shareholders: 31
Teradyne, Inc. (NASDAQ:TER) develops automation equipment for the industrial sector, serving aerospace, semiconductor, and automotive companies, among others. Teradyne shares are down by 51% this year and the company’s Q3 and Q4 guidance came in well below expectations. However, the company should be poised to benefit from increased 3nm test demand next year given Apple Inc. (NASDAQ:AAPL)’s reported plans to shift some of the production from its iPhone 14 into the Pro model next year.
Teradyne, Inc. (NASDAQ:TER) is yet another robotics stock that hedge funds have been selling off in recent quarters, as there’s been a 35% decline in the number of money managers long TER. Josh Resnick’s Jericho Capital Asset Management and Mika Toikka’s AlphaCrest Capital Management sold off their Teradyne holdings during Q2.
The Carillon Scout Mid Cap Fund discussed Teradyne, Inc. (NASDAQ:TER)’s slumping revenue guidance in its Q1 2022 investor letter:
“Semiconductor test equipment and industrial robot producer Teradyne (NASDAQ:TER) fell after offering lower than expected revenue guidance due to fewer orders from its largest customer. Semiconductor equipment companies as a group underperformed as investors feared a general slowdown in semiconductor demand if the global economy slows.”
3. AMETEK, Inc. (NYSE:AME)
Number of Hedge Fund Shareholders: 40
AMETEK, Inc. (NYSE:AME) supplies automation tools and analytical instrumentation to companies in the industrial, medical, and aerospace industries, among others. The company delivered strong Q2 results, pulling in $1.51 billion in revenue and $1.38 in adjusted EPS, both of which handily topped estimates. The company subsequently raised its full-year earnings guidance, citing strong organic growth and broad-based demand. It expects earnings to grow by 13% to 14% year-over-year in 2022.
Hedge fund ownership of AMETEK, Inc. (NYSE:AME) ticked up during Q2 and has risen by 29% since March 2021. Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management, and Ken Griffin’s Citadel Investment Group all own more than 1 million shares of AME as of June 30.
The ClearBridge Mid Cap Strategy likes AMETEK, Inc. (NYSE:AME)’s long-term prospects, but decided to sell off its holding last year to reinvest in a more promising alternative, as revealed in the fund’s Q3 2021 investor letter:
“We sold AMETEK, in the industrials sector, and used the proceeds to add RBC Bearings, which manufactures precision engineered bearings and components for highly technical machines, such as aircrafts, submarines and power transmission systems. AMETEK is a company we have held for many years, and we continued to like their long-term prospects, but believe better upside was available in RBC Bearings due to a temporary stock price dislocation created by an equity offering for a highly accretive acquisition.”
2. Emerson Electric Co. (NYSE:EMR)
Number of Hedge Fund Shareholders: 48
Emerson Electric Co. (NYSE:EMR) has two main segments, one devoted to automation, the other being a supplier of heating and ventilation systems, as well as related parts, to the home building industry. However, the company is reportedly in discussions with Blackstone Inc. (NYSE:BX) to sell at least some of the latter business to the investment management company, which would make Emerson more of an automation pure play.
Emerson Electric Co. (NYSE:EMR) grew adjusted earnings by 21% to $1.29 per share in Q2, while net sales were up by 8% to $4.8 billion. Trailing three-month underlying orders grew by 13%, including by 17% in its automation business. The company raised its full-year outlook following the results. Emerson Electric is also one of the rare dividend kings in this space, having raised its dividend for 65 consecutive years. EMR shares currently yield 2.63%.
There’s been a net influx of hedge funds into Emerson Electric Co. (NYSE:EMR) over each of the past three quarters, with overall ownership of the company rising by 17% during that time. Paul Tudor Jones’ Tudor Investment Corp and Jinghua Yan’s TwinBeech Capital initiated new positions in EMR during the second quarter.
1. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Hedge Fund Shareholders: 57
Intuitive Surgical, Inc. (NASDAQ:ISRG), creator of the da Vinci robotic surgery assistant, tops the list. The company’s robots assist surgeons in performing delicate and precise procedures, and the results from its usage are tremendous, with better patient outcomes and reduced recovery times.
Intuitive Surgical has been growing at a fast pace for the past two decades and has an extended runway ahead of it, as just 3% of surgeries currently use robotic assistance. Furthermore, the company continues to expand its device’s capabilities with new hardware components and functionality, which should continue to expand its addressable market.
Intuitive Surgical, Inc. (NASDAQ:ISRG) remains the most popular robotics stock among hedge funds despite a 12% dip in the number of money managers long ISRG during Q2. Prior to that, ownership of Intuitive Surgical had risen for five straight quarters. Ken Fisher’s Fisher Asset Management owns 4.6 million ISRG shares as of June 30, valued at over $923 million at that time.
The Baron Health Care Fund noted some of the reasons why Intuitive Surgical, Inc. (NASDAQ:ISRG) shares declined this year, but likes the company’s long-term outlook, as detailed in the fund’s Q2 2022 investor letter:
“Intuitive Surgical, Inc. markets the da Vinci Surgical System, a robotic system used for minimally invasive surgical procedures. The stock declined along with other premium valuation, high-growth names due to investor concerns around inflation and rising interest rates. The potential for a more challenging sales environment for Intuitive’s hospital customer base also played a role. We continue to believe Intuitive has a long runway to expand the number of procedures performed using its robotic system.”
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Disclosure: None. 10 Robotics Stocks That Will Own the Future is originally published at Insider Monkey.
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