By Philip van Doorn
Wall Street loves these stocks owned by at least two of five ETFs focused on this long-term shift
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:
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 :
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. (K3SD.SG), Alibaba Group Holding Inc. (9988.HK) 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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-Philip van Doorn
(END) Dow Jones Newswires
September 04, 2021 10:02 ET (14:02 GMT)
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