Deal Making In Robotics Makes Me Bullish On These 3 Stocks

| June 16, 2017

After Google just sold off its robotics division to Boston Dynamics and then reading about what just happened at the Consumer Electronics show, Growth Stock Advisor editor, Tony Daltorio, has become bullish on robotics. Here are some of his favorite plays on the growing evolution of the robotics business. 

As editor of Investors Alley Growth Stock Advisor, it’s my job to keep you informed of the latest trends in technology and other fast-growing sectors.

So last week my attention was drawn to the annual Consumer Electronics Show (CES) Asia that took place in Shanghai.

What caught my eye is that the star of the show was personal robotics.

There was a wide range of robots on display, from toys to personal care givers and servant droids that made it look like a scene from the latest Star Wars movie.

In Asia, it looks like public robots in the form of greeters at hotels and waiters that will bring your food order are not far off.

IBMJust one example was the Sanbot service robot from Qihan Technologies. The three-foot tall robot may someday assist customers in a retail store or end up in a home as a personal carer. Assisted by IBM (NYSE: IBM), the Sanbot responds to both voice commands and touch.

Softbank Taking over Google’s Dream

The Asian emphasis on robots made the major deal in robotics announced last week unsurprising.

Japan’s Softbank (OTC: SFTBY) is taking over the once very promising robotic dreams of Google’s parent, Alphabet (Nasdaq: GOOG).

One of the pillars the Japanese government is basing its economic rebound plans is on robotics.

Softbank is purchasing robotics company Boston Dynamics from Alphabet. Boston Dynamics’ line-up of robots includes the almost scary bipedal robot Atlas, the jumping Sand Flea robot, and almost animal-like robots Big Dog, Spot, and Wildcat.

In addition, Softbank is also buying the Japanese bipedal robotics firm Schaft. This company won an advanced robotics challenge in 2013 by DARPA for robots able to perform rescue tasks.

Alphabet decided it could not make money from robotics and has been trying to sell Boston Dynamics for over a year. The change in thinking happened soon after Andy Rubin, creator of the Android operating system, left Google in 2014.

So it finally sold its robotics dream to Softbank for about $100 million. Alphabet had purchased Boston Dynamics in 2013 as part of a robotics buying spree by the company consisting of eight robotics firms. While no firm figures are available, it is believed Google spent from $50 million to $100 million on these acquisitions.

‘Smart’ Move by Softbank

The founder of Softbank, Masayoshi Son, said “Smart robotics are going to be a key driver of the next stage of the information revolution, and Marc [Raibert] and his team at Boston Dynamics are the clear technology leaders in advanced robots.”

I agree with Son-san. The sale by Alphabet was surprising to me – Boston Dynamics is probably the most advanced robotics firm in the world. Some of the tasks its robots can do include: opening doors, picking-up objects, descending stairs, jumping three feet into the air, and walking and running on two ‘legs’.

Now its group of geniuses is working for Softbank and it could use the help.

In 2012, Softbank bought French robotics company Aldebaran Robotics SA. Two years later, the humanoid robot Pepper was unveiled with great fanfare.

But Pepper’s problems with understanding natural language showed it had a need for a more advanced artificial intelligence package. Its problems led to underwhelming demand for Pepper robots in Japan.

I would not be surprised if Softbank and Boston Dynamics have some commercial robots ready for sale by the end of the decade.

Investing in Robotics

I believe that robotics is one of the great growth sectors in the years ahead. A report from Bank of America Merrill Lynch forecast that the robotics industry will grow from being worth only $10.7 billion in 2014 to $83 billion by 2020.

How can you as an investor put money to work there?

Robo Global Robotics & Automation ETFFor a broad play, there are two robotics-related ETFs. These are the Robo Global Robotics & Automation ETF (Nasdaq: ROBO) and the Global X Robotics & Artificial Intelligence ETF (Nasdaq: BOTZ).

Based strictly on their portfolio, my preference would be leaning toward BOTZ.

Of course, you can buy individual stocks that are players in the field, such as Softbank. But that is not a pure play with its telecom businesses and its $100 billion Vision Fund that have seen investors from Saudi Arabia to Apple (Nasdaq: AAPL) invest into it.

Global X Robotics & Artificial Intelligence ETFMore of a purer robotics play is iRobot (Nasdaq: IRBT), which has soared 155% over the past year. It is the world’s leading consumer robot company.

For those you that read my latest issue of Growth Stock Advisor, you read my in-depth analysis of the trend toward robotics and where I revealed my top recommendation in the robotics sector.

It does not involve any of the actual robot makers, but instead focuses on a crucial component/factor that robots of all types need in order to work for or alongside (cobots) us humans.

The company I discussed has a global footprint and currently has 30% of this crucial market. In the first quarter of 2017, this company’s revenues grew 42% and gross profit margins were about 80%.

In the May and June issues of Growth Stock Advisor, I covered two stocks leading the way in technological changes sweeping industry, commerce, and even our daily lives.

General ElectricThe first company is a leader in the concept of the Internet of Things. These are all of the devices (not just computers!) that are internet enabled allowing for a network affect, the most promising of which is in the industrial sector with companies like General Electric (NYSE: GE) at the forefront, though GE’s not my first recommendation. Rather it’s a company that’s seen its share price climb 41% in the past year and with more to come.

The second is a leader in a field known as co-robotics, where humans and robots work side by side in manufacturing and industry.

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Category: ETFs, Stocks

About the Author ()

Tony is a seasoned veteran of nearly all aspects of investing. From running his own advisory services to developing education materials to working with investors directly to help them achieve their long-term financial goals. Tony styles his investment strategy after on of the all-time best investors, Sir John Templeton, in that he always looks for growth, but at a reasonable price. Tony is the editor of Growth Stock Advisor.

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