How to Invest in Robots and Robotics Stocks – Nanalyze

The hype surrounding the robotics industry continues to grow as we see more and more interest from retail investors in robots and robotics stocks. Robots are already changing the global labor marketand, as time goes by, will have a direct effect on our livelihoods. Besides the fact that we are happy to see household helperstaking over our apartment and Granny being able to walk easily again, our main question is how can we get a piece of the action as retail investors? Maybe if we make some money by investing in robot stockswell have something to live on when all the jobs are gone to the fourth industrial revolution. Basically there are 4 ways to invest in robots and robotics for retail investors:

ETFs

Weve already covered the Robo Global Robotics & Automation Index ETF (NASDAQ:ROBO)in a previous article, which is a well-diversified listed fund holding 85 companies, the largest company weight being below 2%. This also means not all holdings are pure play robotics stocks the pure play part (so-called bellwether stocks) is about 40% of the fund, and has approximately double the weight of non-bellwether stocks.The fund has a 3-year track record and boasts a rolling1-year performance of +34% (vs. Nasdaq return of +24%) and a return of +27% since it was created (vs. Nasdaq +48% return). Here a look at their not-so-impressive performance so far (ROBO in blue, Nasdaq in red):

Robo Global charges you about 1% a year (95 bps) for managing the ETFso its not cheap. In terms of exposure, ROBO is exposed 45% to the US and 25% to Japan, and mainly invests in Industrials with 51.8% weight in Machinery, Equipment and Components.

A direct competitor to ROBO launched on Nasdaq in September 2016: the Global X Robotics & Artificial Intelligence Thematic ETF (NASDAQ:BOTZ). With 28 holdings, BOTZ is more concentrated than ROBO, and the largest constituent weight is 8.45%. BOTZ constituents overlap significantly with ROBO, with only four stocks not held by ROBO. Since inceptionBOTZ has returned +13.2% and charges a management fee of 68 bps.BOTZ has a different country breakdown where Japan takes first place with 48% exposure and the U.S. is second with 25%. Again, we see a heavy concentration inIndustrials at +70%.

iShares, the ETF platform of the worlds largest asset manager, Blackrock also launched a robotics themed ETF in September 2016. The iShares Automation & Robotics UCITS ETF (LSE:RBOT) is another diversified fund with 92 holdings and a more balanced geographical exposure (US is 34%, Japan is 27%) than the other two. RBOT is heavily investing in Information Technology (69.6%) with companies like STMicroelectronics, NVidia and Microsemi Corp. Return is +16% since inception, and more of this return is made available to the investor with the lowest expense ratio of the three at 40 bps. The ETF is currentlyregistered to be sold in Western Europe, but not in the US.

The three above ETFs all offer a different take on the global robotics opportunity in terms of concentration, geographical focus and industry weights.

Mutual Fund

If you dont necessarily want to stick to listed ETFs, the CS (Lux) Global Robotics Equity Fund is a mutual fund offering from Credit Suisse for retail investors sold in Western Europe and Singapore. Launched in June 2016, the fund description claims they are only investing in companies which have at least 50% of their exposure attributable to robotics, automation or AI, which is good news for pure-play investors. The composition does lack most of the large conglomerates weve seen in the other ETFs with largest holdings being Intuitive Surgical, Thermo Fisher Scientific and Tecan Group (though the latter two aremedical/biotech companies).Its country composition is US-heavy with 50%+, and investments are balanced almost 1/3rd each between activities in productivity improvement, performing dangerous tasks and improving quality of life. Performance since inception is+12%similar to the above mentioned ETFs.On the other hand, it has been discussed and proven that in over 80% ofcases, active managers cannot consistently outperform the market, especially in the equities space. Would you pay the 160 bps management fee of the fund for that? Fcuk no.

Stock Picking

As all of these funds hold a large number of stocks, it is inevitable that with certain holdings, exposure to robotics is derivative at best. If youre looking for pure-play investments, you can still pick stocks yourself. While were constantly hunting for new investment opportunities in the field to share with you, here are the robotics stocksweve covered so far:

One thing to note here is that you could make an argument for autonomous cars and drones being included in robotics but were keeping these two themes separate from this article.

Motifs

Stock picking can get you closer to pure exposure, but it is also a risky endeavor to put all your eggs in one basket you can see the cycles of volatility on the performance of the above robot stocks. There is an in-between solution for investors offered by Motif Investing. Motif allows retail clients to customize a basket of US stocks (these are called motifs) and trade this basketat $9.95 a trade (its like your own mini-ETF). We set up our own motifwith the below stocks that are all U.S. bellweather robotics stocks found in the ROBO ETF:

Motif Investing also serves as a mechanism to track certain investing themes, like robotics. So far, our Nanalyze Robot Stocks motif has returned a respectable +37.1% over the past year as seen below:

So there you have 4 ways to invest in robots and robotics stocks. The above vehicles and the number of recent launches show the increasing demand for this kind of investment is being recognized by the industry. All the successful startup funding rounds and the appetite of retail investorsmake us hopeful to see additional IPOs and product launches coming our way as well. Stay tuned.

You can open a Motif Investing account for free with no deposit required so you can create your own baskets of stocks and also take a look at our many Nanalyze "motifs" which cover various disruptive technology investing themes.

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How to Invest in Robots and Robotics Stocks - Nanalyze