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Future-Proof Your Portfolio With This Robotics-Focused ETF
From Grant Wasylik: The 1989 movie “Back to the Future Part II” predicted we would have personal drones, mobile payment technology, hands-free gaming consoles, video phones and hoverboards by 2015.
Since then, we’ve undergone a revolution in robotics and automation.
We’re sure that Marty McFly and Doc Brown would be proud: Each of these predictions has come true.
But, robotics and automation started way before 1989.
Recently, the robotics industry celebrated its 50-year anniversary. We have used robots for over five decades to empower people to do things that are typically dirty, dull or dangerous.
|This week, Boston Dynamics unveiled ‘Handle.’ This 6.5-foot hybrid robot has two wheels and four legs. It can jump 4 feet vertically, travel at 9 mph and lift 100 pounds.|
You might remember just a few of the many advances in robotics over the past 50-some years …
The world’s first industrial robot went to work on a General Motors assembly line in 1961 …
The Sojourner Rover, a robot on wheels, explored Mars and snapped 550 photos over a three-month period in 1993 …
IBM’s Deep Blue supercomputer beat Gary Kasparov in a chess match in 1997. (The first time a machine beat a grand champion chess player.) …
Honda launched its humanoid robot ASIMO that stood, walked and ran like a human in 2000 …
And in 2006, a robot surgeon performed an unassisted, 50-minute surgical procedure on a 34-year-old man’s heart.
Through the gradual availability of inexpensive computing, user interfaces and sensors, it is now possible to build robot systems that were unimaginable before.
For example, check out some more recent robotics milestones (2011- ‘16):
2011: Siri is introduced as a built-in feature for the Apple iPhone. This “intelligent assistant” enables users to speak natural-language voice commands to operate their mobile device and its apps.
2012: The Nevada DMV issues its first license for a robotic, self-driven car. (A Toyota Prius with technology developed by Google.)
2013: A 3-finger robotic arm rings the Nasdaq closing bell. (The first time a non-human conducted the task.)
2015: International Federation of Robotics reports record-breaking sales of 240,000 industrial robots.
2016: 7-Eleven, Just Eat, Amazon and UPS deliver packages by drone.
We have seen tremendous progress in robot technology across manufacturing, healthcare applications, autonomous cars and unmanned aerial vehicles (UAVs).
But, we also observed technological improvements in camera systems, communication systems, displays and basic computing.
Robotic technology is currently being deployed in these expanding fields:
|Source: ROBO Global|
Recent developments in robotics, artificial intelligence and machine learning have put us on the cusp of a new automation age.
Robotics is a key transformative technology that can revolutionize manufacturing. American workers no longer aspire to low-level factory jobs, and the cost of U.S. workers has been slowly rising due to insurance and healthcare costs.
Even when workers are affordable, they are still human. That means they have limitations when it comes to adaptability, precision and reliability.
This can be problematic for companies that keep dreaming up the next generations of miniaturized, complex products.
Many of these products will only have a short life-cycle. But they will serve as the stepping stone to those “products of the future” that are coming to the present day sooner than many think.
As William Studebaker, president and CIO of ROBO Global, told me:
“The next manufacturing revolution is here and it’s being driven by robotics and automation. Robotics touches all industries and has the ability to be as transformative as the internet. It is a foundational technology being applied to all industries, all markets and all geographies. And it is happening now!
We’re in a situation right now where robotics and automation are going to be as ubiquitous as computers. Basically, we’re in the first inning of a baseball game where the team is still in the locker room putting on their cleats.
Investors need to “Future-Proof” their portfolios to position themselves for this Mega Trend.”
Chances are, most investors aren’t positioned for the rising integration and demand for robotics in various industries. For example, the ROBO Global U.S. Index has just 1.78% overlap with the S&P 500 Index and only 1.80% overlap with the MSCI World Index.
Investors miss out on mega-trends like this because they want to call them “niches.” Biotech was once a niche … the internet was once a niche … cyber security was once a niche … and so on.
Everything that’s new is considered a niche. The easy answer is to just dismiss it.
Amateur and professional investors are constantly chasing the stuff that everyone else owns. This follow-the-herd mentality results in a lot of overcrowding. That’s precisely why it doesn’t work.
The magic bullet in investing is to get there before everyone else.
One easy way to attain diversified exposure to global companies engaged in the business of robotics-related or automation-related industries is the ROBO Global Robotics & Automation Index ETF (ROBO).
The team at ROBO Global is credited with as the first group to define the robotics universe. Before their team did it, no one else had.
Related story: Remember that 2013 milestone we listed earlier, with a robotic arm ringing the Nasdaq’s closing bell? This was done to celebrate ROBO’s launch!
The team that created — and makes modifications to — the leading benchmark for robotics has an all-star line-up. Aside from the management team at ROBO Global, the following experts are advisers to the index committee:
|Source: ROBO Global|
The full committee took the better part of a year to scrub data and put together the ROBO Global U.S. Index. The index launched about four years ago. Its debut was untimely with a 3D printing sell-off, collapse in oil prices and negative currency headwinds. So, performance was lackluster in the early going.
However, despite all those events, the index has generated a positive return.
And recently, it’s caught solid momentum.
Last year, the ROBO Global U.S. Index returned +18.78%, while the S&P 500 Index returned +11.96%.
And this year, through almost two months, ROBO is up +10.09% vs. the SPY’s (SPDR S&P 500 ETF) +5.91%.
The index — and corresponding ETF — provides access to robotics and automation companies through 13 sub-sectors that fall under either technology or applications.
Technology captures companies that enable robots to sense, process, actuate, compute and integrate.
And applications highlight companies that incorporate multiple robotic and automation technologies into their product or manufacturing process to improve efficiency.
This results in holdings from manufacturing, 3D printing, logistics automation, agriculture, security surveillance, energy, healthcare and consumer products.
According to ROBO Global’s index methodology:
The index is made up of “bellwether” (40%) and “non-bellwether” (60%) companies. Bellwether companies (BWs) are well-established leading players, whose core business is directly related to robotics & automation. Non-bellwether companies (NBWs) have a distinct portion of their business and revenue in robotics & automation and have the potential to grow through innovation and/or market adoption of their products and/or services.
Within BW and NBW each constituent is equally weighted. The 40/60 weighting results in each BW having roughly twice the weight of each NBW.
At each quarterly rebalance the Index constituents are reweighted and any additions or deletions are made as determined by the Advisory Index Committee at ROBO Global.
Here are ROBO’s top 10 holdings:
|Source: ROBO Global ETFs, ROBO Holdings 2/24/17|
The growth curve for robotics and automation looks to be massive:
In closing, Studebaker articulated:
“ROBO Global is steadfast in our belief that were in the early days of a disruptive and transformational change brought about by robotics. We’d encourage investors to do their own due diligence on this industry and begin to position themselves for the expected growth.”
ROBO Global has mindfully created this globally diversified exposure for the average investor. It’s clear that the ROBO ETF is the best risk-averse way to play the robotics trend.
To learn more about the ROBO Global Robotics & Automation Index ETF (ROBO), click here. And to learn more about the ROBO Global U.S. Index, click here.
The ROBO Global Robotics & Automation Index ETF (NASDAQ:ROBO) was unchanged in premarket trading Wednesday. Year-to-date, ROBO has gained 9.49%, versus a 6.59% rise in the benchmark S&P 500 index during the same period.
ROBO currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #24 of 54 ETFs in the Technology Equities ETFs category.
This article is brought to you courtesy of Uncommon Wisdom Daily.
About the Author: Grant Wasylik
Grant Wasylik is an analyst and editor for Uncommon Wisdom Daily — a division of Weiss Research.
Before joining the investment newsletter business, Grant worked as a portfolio manager, lead research analyst and head trader for a billion-dollar wealth management firm for 10 years. He also spent a few years working in a specialized risk-trading department at Charles Schwab — where he was the first-ever, external hire into this elite department. In his first stint in the securities business (after passing Series 7, 64 and 24 exams), Grant ran a margin department and supervised a trade desk for a discount brokerage firm.
Prior to coming to Uncommon Wisdom Daily, Grant was co-editor and chief analyst of The Palm Beach Letter for two years. This monthly publication — with over 70,000 subscribers — focused on safe, income-oriented investments.
Due to his vast investment experience, Grant has a deep contact list comprised of 300-plus mutual fund, ETF, index, hedge fund and other top-notch financial professionals. In addition, he receives special invitations to — and attends — several of the world’s top investment conferences each year.
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