These robotics and automation stocks could climb up to 68% in the next year

Investors looking for the best stock-market performance have been well-served for many years by focusing on companies using new technology to increase their sales quickly and steadily. The performance of the S&P 500 index has borne this out.

Below is a screen of 24 stocks held among five exchange-traded funds that focus on companies involved with robotics and automation — booming technology for companies involved in many industries around the world.

For robotics and automation, here are five ETFs that take different approaches to playing innovation:

  • The ARK Autonomous Technology & Robotics ETF
    ARKQ
    is actively managed and holds 46 stocks of companies involved with automation, robotics, autonomous vehicles, energy storage, 3-D printing and space exploration. It is highly concentrated; Tesla Inc.
    TSLA,
    its largest holding, is 11.9% of the portfolio.

  • The Global X Robotics & Artificial Intelligence ETF
    BOTZ
    holds just 36 stocks. It tracks a global index of companies listed in developed markets. The companies are expected to benefit from the increased utilization of robotics and artificial intelligence. The largest holding is Intuitive Surgical Inc.
    ISRG,
    at 8.8% of the portfolio.

  • The Robo Global Robotics & Automation Index ETF
    ROBO
    tracks a global index of companies involved in robotics, automation and AI and is rebalanced quarterly. The fund follows a tiered weighting strategy; the largest holding — Intuitive Surgical — is 1.8% of the portfolio of 84 stocks. It is the oldest of the five ETFs listed here, established in October 2013.

  • The iShares Robotics and Artificial Intelligence Multisector ETF
    IRBO
    tracks an equal-weighed global index of companies involved with robotics and AI. It holds 120 stocks. The index is reconstituted annually and rebalanced twice a year.

  • The First Trust Nasdaq Artificial Intelligence & Robotics ETF
    ROBT
    tracks the Nasdaq CTA Artificial Intelligence and Robotics Index, which ranks companies so that the portfolio is 60% weighted to “engagers,” 25% “enablers” and 15% “enhancers.” It holds 108 stocks.

Here’s some more information about the ETFs:

ETF

Established

Assets ($mil)

Stocks held

Concentration in five largest holdings

Expense ratio

ARK Autonomous Technology & Robotics ETF
ARKQ
9/30/2014

$2,761

46

38%

0.75%

Global X Robotics & Artificial Intelligence ETF
BOTZ
9/12/2016

$2,650

36

42%

0.68%

Robo Global Robotics & Automation Index ETF

10/21/2013

$1,857

84

10%

0.95%

iShares Robotics and Artificial Intelligence Multisector ETF
IRBO
6/26/2018

$440

120

6%

0.47%

First Trust Nasdaq Artificial Intelligence & Robotics ETF
ROBT
2/21/2018

$262

108

13%

0.65%

Sources: ETF managers, FactSet

Here’s a summary of total returns for the ETFs against the SPDR S&P 500 ETF Trust
SPY
and the Invesco QQQ Trust
QQQ,
which tracks the Nasdaq-100 Index
NDX
:

ETF

2021

2020

Three years

Five years

Seven years

ARK Autonomous Technology & Robotics ETF
ARKQ
10%

107%

135%

320%

N/A

Global X Robotics & Artificial Intelligence ETF
BOTZ
11%

52%

64%

N/A

N/A

Robo Global Robotics & Automation Index ETF
ROBO
11%

45%

59%

153%

151%

iShares Robotics and Artificial Intelligence Multisector ETF
IRBO
12%

49%

79%

N/A

N/A

First Trust Nasdaq Artificial Intelligence & Robotics ETF
ROBT
12%

46%

73%

N/A

N/A

SPDR S&P 500 ETF Trust
SPY
22%

18%

64%

128%

157%

Invesco QQQ Trust
QQQ
21%

49%

108%

240%

305%

Source: FactSet

All five of the automation and robotics ETFs have trailed the broad market this year. During 2020, ARKQ was a stellar performer in part because of its big bet on Tesla, which skyrocketed 743% for the year. ROBO has outperformed SPY for five years but underperformed QQQ for all periods.

A stock screen from five automation and robotics ETFs

The five ETFs together hold 251 stocks across 21 countries. Only two stocks — Intuitive Surgical and Nvidia — are held by all five. Only BOTZ doesn’t own stocks in companies based in China.

China may be a special area of risk for years to come. There’s no way of knowing how much change will be brought about by China’s regulatory crackdown affecting tech-related industries. Meanwhile, U.S. regulators’ actions as well as the conflict between U.S. and Chinese regulators over the availability of audit reports may affect investors holding shares of Chinese companies listed in the U.S.

Yet, as you will see, three Chinese tech giants held by some of these ETFs are highly regarded by Wall Street analysts.

For this screen, it is important to understand that in Wall Street parlance, there are two types of stock analyst. A buy-side analyst works for a money manager. A sell-side analyst works for a brokerage firm. They have different perspectives, and it might be best to rely on both, if possible. So the following screen starts by limiting the list to the 81 stocks held by at least two of the five ETFs described above.

Among those stocks, 70 are rated by at least five sell-side analysts polled by FactSet. Narrowing the list further, 24 of the 70 have at least 75% “buy” or equivalent ratings. Here they are, sorted by the 12-month upside potential implied by the consensus price targets.

Of course, consensus price targets (and recommendations) can change, and a 12-month target period is short for a long-term trend:

Company

Country

Share”buy” ratings

Closing price – Aug. 31

Cons. price target

Implied 12-month upside potential

Industry

Held by

Baidu Inc. ADR Class A
BIDU
China

85%

157.02

264.08

68%

Internet Software/Services

ARKQ IRBO ROBT

Alibaba Group Holding Ltd. ADR
BABA
China

91%

166.99

274.63

64%

Internet Retail

ARKQ ROBT

TuSimple Holdings Inc. Class A
TSP
U.S.

85%

41.86

61.56

47%

Motor Vehicles

ARKQ BOTZ

Magna International Inc.
CA:MG
Canada

80%

99.63

134.24

35%

Auto Parts: OEM

ARKQ ROBT

Samsung Electronics Co. Ltd.
KR:005930
South Korea

91%

76700.00

102454.55

34%

Telecommunications Equipment

IRBO ROBT

Delta Electronics Inc.
TW:2308
Taiwan

77%

270.50

348.38

29%

Electronic Equipment/Instruments

ROBO ROBT

PTC Inc.
PTC
U.S.

76%

131.66

165.23

25%

Software

ROBO IRBO ROBT

Naver Corp.
KR:035420
South Korea

96%

439000.00

543480.00

24%

Software

IRBO ROBT

Nidec Corp.
JP:6594
Japan

88%

12620.00

15205.26

20%

Electrical Products

IRBO ROBT

Amazon.com Inc.
AMZN
U.S.

98%

3470.79

4151.14

20%

Internet Retail

IRBO ROBT

Siemens AG
XE:SIE
Germany

77%

140.84

165.95

18%

Industrial Conglomerates

ROBO ROBT

Pegasystems Inc.
PEGA
U.S.

92%

137.63

162.00

18%

Information Technology Services

IRBO ROBT

JD.com Inc. ADR Class A
JD
China

94%

78.56

92.26

17%

Internet Retail

ARKQ ROBT

Cargotec Oyj Class B
FI:CGCBV
Finland

78%

47.00

55.10

17%

Transportation

BOTZ ROBO ROBT

Microchip Technology Inc.
MCHP
U.S.

76%

157.36

179.14

14%

Semiconductors

ROBO IRBO

Teledyne Technologies Inc.
TDY
U.S.

75%

463.38

522.57

13%

Aerospace & Defense

ARKQ ROBO 

ATS Automation Tooling Systems Inc.
CA:ATA
Canada

100%

45.62

50.30

10%

Industrial Machinery

BOTZ ROBO IRBO ROBT

Alphabet Inc. Class A
GOOGL
U.S.

96%

2893.95

3185.44

10%

Internet Software/Services

ARKQ IRBO ROBT

Microsoft Corp.
MSFT
U.S.

92%

301.88

327.43

8%

Software

IRBO ROBT

Aveva Group PLC
UK:AVV
United Kingdom

86%

41.36

44.15

7%

Software

IRBO ROBT

ServiceNow Inc.
NOW
U.S.

88%

643.64

665.96

3%

Information Technology Services

ROBO ROBT

Keyence Corp.
JP:6861
Japan

83%

66130.00

67632.50

2%

Electronic Equipment/Instruments

BOTZ ROBO ROBT

Synopsys Inc.
SNPS
U.S.

87%

332.24

339.69

2%

Software

ARKQ ROBT

Nvidia Corp.
NVDA
U.S.

83%

223.85

226.31

1%

Semiconductors

ARKQ BOTZ ROBO IRBO ROBT

Source: FactSet

The prices and price targets are in local currencies where the shares are listed. The three Chinese companies on the list — Baidu Inc.
BIDU,
Alibaba Group Holding Inc.
BABA
and JD.com Inc.
JD
— area all listed on U.S. exchanges as American Depositary Receipts.

You can click on the tickers for more about each company.

Despite being held by all five robotics and automation ETFs, Intuitive Surgical didn’t make the list because only eight of the 19 sell-side analysts polled by FactSet rate the shares a buy or the equivalent. The stock closed at $1,053.56 on Aug. 30, having risen 29% for 2021, and was trading ahead of the consensus price target of $1,032.71.

This list is merely a starting point for further research about companies involved with the long-term industrial shift to robotics and automation. If you see any investments of potential interest, you should form your own opinion about a fund’s strategy, or a company’s strategy, and whether or not it is likely to remain competitive over the next decade.

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Harry Byrne

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