New ETF is Captivating… But Should You Buy It?
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On September 12, 2013, something unique happened on the Nasdaq exchange . . .
For the first time in stock market history, a human being didn’t ring the Closing Bell.
Instead, duties were handed over to a robot.
It wasn’t a gimmick.
The occasion marked the launch of the first robotics-based stock index – the Robo-Stox Global Robotics & Automation Index.
It’s easy to see why.
The industry is trending higher . . . big time!
And an area once reserved for Silicon Valley venture capitalists and industry specialists is now opening up to retail investors, too…
But should you buy it? Well, that’s an entirely different question . . .
Rise of the Robots
As technology advances, robots are increasing their presence in our lives and global commerce. Demand from industry, manufacturing, defense, healthcare and mobile technology is surging.
Even companies you wouldn’t necessarily associate with robotics are getting involved. For example . . .
~ Facebook (FB): The company is reportedly in talks to buy drone company, Titan Aerospace, for $60 million.
Now, at first glance, you might think, “What the heck does Mark Zuckerberg want with drones?”
Well, these are no ordinary drones.
Titan’s Solara drones are autonomous, solar-powered machines that can hover 65,000 feet above the Earth for five years.
That fits with Zuckerberg’s larger vision. He’s the force behind Internet.org – a philanthropic initiative to bring internet access to Africa and other developing areas of the world.
Facebook’s strategy is similar to Google’s (GOOG) Project Loon, which uses weather balloons to provide internet access to remote areas.
Speaking of Google, it’s hyper-active in the robotics market, too . . .
~ Google: Last year, the company scooped up eight robotics firms in a six-month period, including one of the industry leaders in Boston Dynamics.
~ Apple (AAPL): The company is spending $11.2 billion to design robotic technology for its manufacturing plants.
~ Amazon (AMZN): The online retailer is also trying to “roboticize” its warehouse processes by spending $775 million for Kiva Systems – a firm that focuses on warehouse automation. Amazon is also looking to bring robotics into its shipping service with Prime Air, which will use drones to deliver goods to customers.
All told, the robotics market is expected to be valued at $37 billion by 2018, according to Research and Markets.
And with both industrial and consumer demand rising, robotics has suddenly gone from a niche area into the mainstream.
Hence the creation of the Robo-Stox Global Robotics & Automation Index ETF (ROBO) – the first fund dedicated to trading robotics and automation companies.
The $100-Million Milestone
When ROBO launched in October 2013, some so-called “experts” said it would never succeed.
I mean, who wants to invest in robots, anyway?
As it turns out, many people.
The fund just hit a milestone, officially topping $100 million in assets ($102.3 million, to be exact).
Not bad for less than five months’ work.
As Robo-Stox CEO, Rob Wilson, states, “The robotics and automation sector has reached a tipping point, with robots simultaneously becoming more sophisticated and less expensive to integrate. Our exchange-traded fund gives investors an opportunity to benefit from the continued expansion of producers and suppliers within this dynamic and growing industry.”
Safety in Numbers
With some heavyweight U.S. and foreign holdings in the 78-stock portfolio, it’s hardly full of risky, unknown companies, either. We’re talking about thriving firms like AeroVironment (AVAV), iRobot (IRBT) and Intuitive Surgical (ISRG).
iRobot also has excellent buyout potential. With the popular Roomba and Scooba lines, the company sold 10 million robots in the last fiscal year, and has drawn buyout interest from Google and Dyson.
So ROBO provides an easier, safer and more diverse way to invest.
Robo-Stox Co-Founder, Frank Tobe, tells ETF Database, “The ROBO ETF is not a high-risk investment, because it’s well balanced and a great deal of fundamental research goes into stock selection.”
More specifically, he says 40% of the portfolio is allocated to “bellwether stocks” – “firms that reflect the overall performance of the robotics and automation space.” The other 60% is allocated to “non-bellwether stocks” – companies “that aren’t as purely related to robotics and automation, but still are likely to grow revenue over the long term.”
Two more pluses…
- International Exposure: ROBO offers excellent foreign diversification, with 57.3% of the portfolio containing international companies.
- Small-Cap Strength: Almost one-third of ROBO’s funds are allocated to explosive small-cap and micro-cap robotics companies.
Although global economic events are hard to predict, robotics will continue to grow.
Tobe sees demand accelerating in several fields – “automobiles and manufacturing, military/defense, search and rescue, healthcare and agriculture. Some very innovative robots in these sectors are presently in the research and development phase… There’s a great deal of enthusiasm around robots in the medical profession. These robots assist doctors with surgical procedures and augment the skills of surgeons.”
Robo-Stox is not only a reliable yardstick to measure the fast-growing robotics industry, it also gives investors an effective, safer way to capitalize.
Your eyes in the Pipeline,