May 4, 2012 > The Robot Report: Picking Robotics Stocks Is Complicated
The Robot Report: Picking Robotics Stocks Is Complicated
By Frank Tobe, Editor and Publisher
"Pure play" is an investment term that refers to a company which is exclusively focused on a particular product or service. An investor buys stock in pure play companies in order to obtain a market share in the industry as well as in the company. Robotics, to many, are just a tool to accomplish business tasks in an efficient way. To me, making robots to achieve those goals is an industry in itself and deserving of consideration for investment because of good prospects for the future. Hence the need to find pure play companies in the industry.
For example, iRobot (IRBT:US) and KUKA (KU2:GR) are pure plays while Boeing (BA:US) and John Deere (DE:US) are not; yet all four companies are involved with robotics. In the case of Boeing and John Deere, robotics is not their primary business and represents just a tiny fraction of their operating profits. Boeing designs and manufactures UAV's for defense agencies and John Deere produces a line of AGV's including a new robotic lawn mower, and also provides autonomous navigation modules for tractors; but neither is truly a robotics company.
Consequently, if you believe that the robotics industry is ready for you to invest in, you wouldn't purchase either Boeing or John Deere - they aren't representative of the industry and their stocks move to the beat of a different drummer than robotics. Instead, you would pick from a list of pure play robotic stocks (if such a list existed).
Emerging non-industrial robotics is a global industry stemming from entrepreneurial and university spin-off activities in the US, Europe, Korea, Japan and more recently, Taiwan and China. There is no center, although America is leading the pack at present. Conversely, industrial robotics clusters are located in Germany, Korea and Japan. America, which started the industry, is no longer its leader.
The non-industrial portion of the robotics industry is new and is where all the venture attention is focused. There are hundreds of start-up companies which are not yet publicly traded... Kiva Systems (which was just acquired for $775 million) being a prime example. [Rhetorical question: since Amazon acquired Kiva Systems, does Amazon (AMZN:US) become a publicly traded robotics stock?]
Last year an analyst provided a list of 10 robotic stocks. Only four were realistic picks to watch and one was an outright mistake. This year Robotics Business Review produced a list of 19 public stocks but included eight which were certainly not pure plays: ABB (ABBN:VX), Boeing (BA:US), John Deere (DE:US), Epson (6724:JP), Honda (7267:JP), Microsoft (MSFT:US), Panasonic (6752:JP) and Toyota (7203:JP). Each (except ABB which gets 21%) has a 5% or lower involvement in robotics; two don't manufacture robots at all; most are users of robots; and none of them are pure plays. Thus, compiling a list of pure play stocks and picking favorites is complex and rigorous. ABB is a perfect example of the complexity: they are one of the top global robot manufacturers yet their revenue from robotics represents just 21% of their overall business because ABB also builds power and control systems (generators, turbines, etc.).
For three and a half years I have tracked and compiled a global and growing list of publicly-traded stocks involved in the robotics industry, stocks which are listed on reputable exchanges require regular, audited financial disclosure. I've separated them into three groups: industrial, service (which includes defense and space, medical and everything else non-industrial) and ancillary (which covers integrators, consulting firms, component suppliers, vision systems and software providers). I've individually weighted each stock by its closeness to being a pure robotic play based on their financial records and websites and have built the top 100 into an index which I call Robo-Stox(tm). Each month I've produced a chart of the Robo-Stox(tm) index showing month-to-month and year-to-date changes and each year I've created a chart showing how the stocks performed over the years since their 2007 highs.
Globally, there are slightly more than 250 publicly-traded robot manufacturers with varying levels of other business activities within the company. Visit http://www.everything-robotic.com/2012/04/picking-robotics-stocks-is-complicated.html to whet your appetite with information about robotic stocks in Healthcare; Defense, Security and Space; Industrial and Co-robot.