Splicing robotics into your portfolio

Robots are expected to revolutionize physical labour the way computers upended administrative tasks like cataloging.

Already, robots can communicate with one another, learn quickly from humans and teach themselves how to complete tasks. Ark Invest, a New York investment firm specializing in disruptive innovation, forecasts that automation will cause soaring productivity, job creation and accelerated economic growth.

Between now and the end of 2035, U.S. GDP will grow by US$11.6 trillion, or 42%, Ark estimates, with most acceleration happening after the year 2024.

Key names

So how do you get a piece of this growth? First, start by knowing key robotics names, many of which still offer good value. “I don’t think they’re necessarily being rushed into yet. I think the growth opportunity is so large that the opportunity is there,” says Sam Korus, industrial innovation analyst for Ark Invest.

He points to players like California tech company Nvidia Corp. or Fanuc Corp., a leader in deep learning. Fanuc is building factory robots that can learn a new task overnight as opposed to needing programming.

Kyle Landry, research associate specializing in automation at Lux Research in Boston, sees small businesses renting collaborative robots, as they would a payment system or espresso machine. He says some companies are already offering robotic arms as a service, noting London-based Automata Technologies and Tennessee’s Hirebotics. Both are private companies.

Landry also expects big growth for commercial aerial drones, pointing to startups like Waterloo-based Aeryon Labs, a small unmanned aerial vehicle (UAV) producer, and Sky-Futures, a London-based company that provides drone-based inspection services. “The next stage is an investment shift toward companies making software for UAV platforms, to make them fly smarter and for specific applications, whether it’s for agriculture inspection, data collection or oil and gas asset inspection,” Landry says.

Other ways to capitalize

If you’re skeptical about pure plays, consider companies and industries exposed to the productivity gains of automation. Tesla Motors, for instance, has talked about revolutionizing its production with robots, and is currently using machines from Fanuc and Kuka Robotics at its factory in Fremont , Calif.

Landry says companies using traditional “dull, dirty and dangerous” industrial and manufacturing processes will reap huge benefits, as well firms with significant logistics and manufacturing processes, such as storage, shipping, retailing and transportation. Those will see immense improvements in productivity.

Supermarket chains, for instance, could double their margins on automation, Korus adds. Panera Bread was an early mover that started touch-screen ordering by customers and Amazon is experimenting with self-checkout stores. Korus points to Ark research showing that Amazon’s gross margin, excluding its cloud services, has grown since it introduced robotics into its warehouses. Amazon acquired Kiva Systems, a warehouse robotics firm, in 2012.

Themes

You can invest in robotics through thematic investing. Ark Invest offers an Industrial Innovation ETF (NYSE:ARKQ) that buys into the automation revolution through companies involved in 3D printing, autonomous vehicles, robotics, and other technology-driven advancements. Annual fees are 0.75%.

Motif Investing, a California-based online broker, also offers thematic funds, including one called Robotic Revolution, which invests in automation, robotics, advanced manufacturing and drones. The online service charges $10 per trade for the fund.

As Motif’s website says, “Step aside, humans.”