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Rise of the Machines: Why It’s Time to Invest in Robots

If you can’t beat them (and you can’t), invest in them. While Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk, perhaps the poster child for the advancement of tech and the use of automation in manufacturing, recently asserted that humans are undervalued, the reality is that nothing is going to stop the robotics revolution from sweeping across the globe, displacing millions of jobs both magnificent and mundane.

While that will prove a disaster for those being displaced and even those who aren’t, as competition for the fewer remaining jobs will intensify, it also promises to be a major boon for investors of robotics stocks like Intuitive Surgical, Inc. (NASDAQ:ISRG), Cognex Corporation (NASDAQ:CGNX), and iRobot Corporation (NASDAQ:IRBT).

Smarter Robots Pushing Into New Domains: While we’ve known robots were coming for us (well, for our jobs at least, though many believe they’ll eventually set their sights on us as well) and automation in the workplace isn’t exactly new, having been around for decades, the development of advanced AI and more dexterous machinery is allowing robotic arms and metallic hands to horde in on human positions in rapidly growing numbers.

Pixabay/Public Domain

Pixabay/Public Domain

It’s estimated by McKinsey & Company that as many 800 million jobs globally could be taken over by robots within a dozen years, a staggering figure that will decimate human employment within several industries. The hardest hit industry by 2030 is expected to be transportation, in which over 50% of jobs could be lost to driverless vehicles. Over 40% of existing manufacturing jobs and 40% of construction jobs are also under threat, while 20% or more of the jobs in admin, retail, finance, and numerous other industries are expected to go the way of the robot.

According to the International Federation of Robotics, sales of robots rose by 16% in 2016, and similar annual growth is expected throughout the remainder of this decade, and there’s no reason to suspect that growth will do anything but intensify in the 2020’s.

Robotics ETF a Massive Hit: Investors are paying attention to the coming workforce takeover, as the Global X Robotics & Artificial Intelligence ETF (BOTZ) took in over $650 million in investor capital in January alone, a massive amount for a thematic ETF. That ETF surged by 40% in 2017 but is relatively flat thus far in 2018. AI-based ETFs have also proven to be among the most popular thematic ETFs as investors seek to ensure they don’t miss out on the growth surges in these industries.

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On the next page we’ll look at three stocks leading the robotics revolution.

Intuitive Surgical, Inc. (NASDAQ:ISRG)

If you’ve been lucky enough to avoid operating rooms over the past decade or so, you’re probably unaware of the rise of robotics in the sensitive area of surgery. Intuitive Surgical, Inc. (NASDAQ:ISRG), maker of the da Vinci Surgical System, is the leader in that field. The company’s flagship system, which is controlled by a technician, allows for minimally invasive operations that are capable of performing delicate tasks with a greater range of motion than is possible for a human. Intuitive’s sales jumped by 25% in the first-quarter, while global procedures grew by 15% as more and more hospitals add the invaluable device to their repertoires.

Intuitive Surgical, Inc. (NASDAQ:ISRG) was a hit among the hedge funds in our database during the fourth-quarter of 2017, as ownership among those funds rose to 39 from 30 during the quarter. Billionaire Ken Fisher‘s fund also opened a position in the stock during the first-quarter.

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Cognex Corporation (NASDAQ:CGNX)

A manufacturer of industrial sensors and 2D and 3D vision systems, Cognex Corporation (NASDAQ:CGNX) products can be used for quality control and inspection purposes by a wide-range of industries, allowing them to easily and accurately monitor any number of variables related to their production processes and the quality of their products, in ways that a human simply can’t. Cognex delivered record revenue and earnings in 2017 and its revenue growth was also strong across numerous industries and regions, with Europe again leading the way.

Cognex Corporation (NASDAQ:CGNX) was owned by 28 of the hedge funds in our database at the end of 2017, including Ted Kang‘s Kylin Management and Robert Karr’s Joho Capital, each of which had more than 20% of their 13F portfolios invested in the stock.

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iRobot Corporation (NASDAQ:IRBT)

Lastly is iRobot Corporation (NASDAQ:IRBT), the renowned maker of the Roomba. While said device, which merrily and tirelessly travels around rooms vacuuming them, might come across as gimmicky to some (and not much of a threat to people in the cleaning profession), iRobot Corporation (NASDAQ:IRBT) isn’t resting on those laurels. The company has developed several other task-specific cleaning devices, including robot mops and pool cleaning robots. It’s even working on a lawn-mowing robot. More importantly, sales of the Roomba show that it’s anything but a gimmick on the market, as they continue to grow rapidly, and the majority of the market remains untapped.

Hedge funds weren’t big fans of iRobot in the fourth-quarter, as only 11 of the funds that we track were shareholders of the stock at the end of 2017, down from 16 a quarter earlier, as fears of competition in the robot vacuum space intensify. Hedge funds appear to have timed their exits well, as shares of the company have declined by 22% so far this year. However, with huge growth potential in the robot cleaning market, there’s little reason to think iRobot won’t excel long-term even amid some stiffer competition.

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Disclosure: None