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Sector focus: The man machine

Sector focus: The man machine

As a teenager who listened to Kraftwerk, I knew robots were the future. Today I know they are the present.

Take the Roomba robot vacuum cleaner, manufactured by Nasdaq-listed US company iRobot. It is now available from Amazon and reviews for even the cheapest model (currently £216.97) are often glowing. ‘This is so clever!’ wrote one reviewer, ‘I leave it to vacuum while I do other things.’

And talking of Amazon, following its 2012 acquisition of Kiva Systems, it has been expanding the use of Kiva robots in its warehouses. These smart wee beasties (or should that be e-beasties?) take shelves to human pickers, making customer delivery much more efficient.

But for Tom Riley, manager of the AXA Framlington Robotech fund, this is scratching the surface. ‘Robotics and automation are spilling out of traditional robotics sectors into new sectors,’ he said.

These include automotive, with features such as advanced emergency braking and lane departure warnings. Meanwhile, US group Intuitive Surgical has applied robotic technology to surgery through its da Vinci machine. ‘This did 750,000 procedures last year with very good outcomes,’ said Riley.

He added: ‘Due to ongoing changes, robotech has a diverse range of opportunities. So the investment universe is larger with broader exposures than most people realise.’

Robot rewards

Richard Lightbound, chief executive EMEA of Robo Global, which focuses on the robotics, automation and artificial intelligence (RAAI) theme and created the Robo Global Index, identifies 12 RAAI sub sectors. These vary from agriculture and security to 3D printing and sensing.

‘We’re almost the generation watching robotics leave the factory floor and enter the global economy,’ said Lightbound. ‘It’s a big theme already, with 3D printers and drones. What’s exciting is the scale of the opportunity.’

This opportunity led to the arrival of Riley’s fund (launched in December 2016), Pictet Robotics (in October 2015), RoboCap (January 2016) and CS Global Robotics Equity (June 2016). And the one-year performance of the three funds with a 12-month track record has been impressive.

RoboCap tops the Citywire Equity Global Themes rankings (with 40.4% one-year total returns), while Pictet Robotics is second (at 28.8%) and CS Global Robotics Equity ranks fifth (at 20.8%). Meanwhile, Lightbound said his research-driven Robo Global Index is up 50% in the year to date.

This would seem to reflect a sea change in the growth of robotech. Riley points out the growth rate for this sector has been around 5% for around 20 years, with the industry quite highly correlated to automotive capital expenditure ‘as carmakers were big buyers’.

But, in the past three or four years, the technology has improved and the range of activities that can be automated is beginning to, in Riley’s words, ‘rapidly expand’. This, he said, ‘has accelerated the growth of the industry to between 10% and 15%’.

Computer world

The question, though, is whether such outperformance can continue. Wesley Lebeau, who co-manages the CPR Invest Global Disruptive Opportunities fund, voices caution and currently sees more opportunities in healthcare and life sciences.

‘Robotics and smart factories have had very good performance in the past year or so,’ he said. ‘They have been some of the most popular themes, so we need to be a bit careful here.’

Indeed, out of 28 themes in his fund, the smart factories theme languishes at 27th, while robotics ranks 22nd. These rankings are based on a combination of two multiples: forward PE (price-to-earnings) and forward EV/Ebitda (enterprise value-to-earnings before interest, tax, depreciation and amortisation).

But 3D printing ranks third, while autonomous driving comes in at 14. In fact, Lebeau thinks we may be at an ‘inflexion point’ with autonomous driving. So, even if robotech shares do stall, I will still be able to take my hands off the steering wheel, sit back and listen to Kraftwerk’s Autobahn.  

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