The Robot Report - A Guide to Robotics Investing
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- Category: Business/Financial News
- Published on Tuesday, 08 May 2012 19:33
- Written by Frank Tobe
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"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 8 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™. Each month I've produced a chart of the Robo-Stox™
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. Here are some
interesting robotic stocks to whet your appetite:
Healthcare Applications:
●Intuitive Surgical (ISRG:US) and its da Vinci Robotic Surgical System are
being installed at major hospital operating centers worldwide. Its stock has
risen over $200 in the last 12 months! Intuitive Surgical has more than 870
U.S. and foreign patents as well as more than 990 pending.
●Mako Surgical (MAKO:US) has an interactive robotic arm orthopedic system
for knee implants.
●Accuray (ARAY:US) and its CyberKnife Robotic Radiosurgery System is an
up-and-coming robotic radiation treatment system.
●Swisslog (SLOG:SW) makes warehouse automation devices as well as
hospital logistics and drug management solutions using mobile robots.
●Mazor Robotics (MZOR:IL), an Israeli company, provides state-of-the-art
robotic surgical guidance systems.
Defense, Security and Space Applications*:
●AeroVironment (AVAV:US) is a provider of unmanned aircraft, systems and
services and 85% of their revenue comes from UAS (unmanned aerial
systems) sales. They regularly get DoD orders for their Raven and Wasp
small unmanned aircraft systems and just got three orders totaling $28.4
million for production of their Puma drone.
●iRobot (IRBT:US), a 100% pure play robotics company, just had a 33% drop
in their stock price because of reduced government contracts. They have
recently restructured to add healthcare to their lineup of products, consumer
products are doing fine, and the company is fishing for additional consumer
robotic products.
●QinetiQ (QQ/:LN) is iRobot's direct competitor in the defense robotics
marketplace despite their being a British company and not a pure play stock.
* Many of the major providers in Defense, Security and Space do have robotics subsidiaries but are conglomerates where only a very small portion of their revenue is derived from robotics, hence they are not listed here. Examples of this type of company include: Northrup Grumman, Rockwell Automation, General Dynamics, Boeing, Teledyne, Textron and Canadian MacDonald Dettwiler.
Industrial and Co-robot Applications:
●Adept Technology (ADEP:US) is one of the very few industrial robot
manufacturers based in the U.S. Most of it's revenue from robotics comes
from manufacturing, food processing, automotive and warehousing
applications. With their recent acquisition of Mobile Robotics, and after
strengthening and modularizing their mobile acquisition,the company began
to enter the service robotics sector.
●Two privately held companies, Universal Robotics, a Danish company and
c-Link Systems, from the US, along with two publicly-traded companies
KUKA (KU2:GR) and ABB (ABBN:VX), have released lightweight,
economical, safe, robotic arms for light industrial and SME work.
●KUKA (KU2:GR) has been getting a lot of press for their increasing
involvement in China, too. All these companies (KUKA, ABB, FANUC,
Adept, Yaskawa Electric (Motoman)) hope to do well in China as China
automates its automotive and other industries. But KUKA and the other
non-Chinese companies may have problems further down the road when
China's in-country technology machine takes over.
●ABB (ABBN:VX) has for many years been active in China and, until
Foxconn announced that they would be manufacturing their own robots, ABB
was rumored to be the leading contender to get the job. ABB stock comes
with the caveat that robotics represents only 21% of their corporate revenue.
●Yaskawa Electric (Motoman) (6506:JP) is similar to ABB in that the
company is well respected as a robot manufacturer yet robotics represents
only 30% of revenues. They recently announced building plans for a robot
factory in China.
●FANUC (6954:JP) recently completed construction of an additional factory
in Japan to handle sales to China.
●Foxconn, is an example of how the industry may shift to China and cut out
foreign competitors. Hon Hai Precision (2317:TW), a holding company for
Foxconn and a buyer of 10,000 industrial robots from a variety of vendors, is
one of China's largest manufacturers, employing over 1 million workers in
China alone. Foxconn is planning to make and install their own robots with
an ambitious plan to install 1 million robots within 3 years! And then they'll
begin selling robots to others!
Ancillary businesses to the robotics industry:
●Trimble (NASDAQ:TRMB) provides advanced positioning product solutions
and component parts as does Hemisphere GPS (TSE:HEM Toronto Stock
Exchange) in Canada, particularly for the ag industry. Trimble's recent
acquisition of Gatewing, a Belgium provider of a 4-1/2 pound unmanned
aircraft and software specialized for surveying and mapping, provides a
complementary subsidiary for Trimble. "We’re looking at the acquisition of
Gatewing as the start of a center of excellence that will broaden into a product
line, rather than a single product.”
●FARO Technologies (NASDAQ:FARO) provides 3D measurement and
inspection arms and scanners.
●Cognex (NASDAQ:CGNX) is a provider of machine vision products
primarily used in robotic applications.
●Allied Motion Technologies (AMOT:US) makes the servos that are
incorporated in the da Vinci surgical and other robotic systems.
Recently I've come across a couple of dubious stocks that I have questions about and
think need watching: QUAN and ALF. Neither is traded on an exchange which
requires financial reporting, and from what I can tell by the information on the
Internet, they both appear to be set up so that if you buy their stock, they get the
money - in effect, they are the seller. That is not the usual way we think of stock
trading but it appears to be the way they are both operating.
Artificial Life Source Holding, PLC, (ALF:GR) on the Frankfurt Stock Exchange,
has parlayed a set of human-robot communication software routines which were
developed by their CEO into a niche company with polished marketing materials.
Their robotic products consist of the original software and a $10,500 teddy bear that
talks, has facial expressions and arm movements. In videos, the little bears are used
to teach elementary language and spelling to children. The CEO says he has an order
for 10,000 robots. That's a $105 million transaction but he also said he hasn't yet
finalized the product, the production methods, the engineering, the software or the
choice of vendor(s). Yet the company has a publicly-traded stock. Interestingly, the
market value of the company is given as the sum of the shares sold times the current
price of the stock.
Further investigation has shown that for ALF, the Frankfurt Stock Exchange has the
following disclaimer:
The shares of this company are neither admitted to trading on the Regulated Market
nor included in trading on the Regulated Market. They are included in trading in the
Open Market (Regulated Unofficial Market) of FWB Frankfurter Wertpapierbörse
(the Frankfurt Stock Exchange). Investors must be aware of the fact that the Open
Market (Regulated Unofficial Market) on the Frankfurt Stock Exchange is not
subject to the high Europe-wide transparency standards and strict provisions for
investor protection on EU-regulated markets.
Quantum International Corp, (QUAN:US) in the Pink Sheets, an exchange which
doesn't require any financial disclosure or regular reporting to be listed, appears to be
promoting itself to investors as a venture company specializing in robotics. Their
website is full of information about why robotics are a good investment but their
suggestion seems to be that you invest with them and they will act as a venture
capitalist on your behalf.
Their new CEO recently moved from being the CEO of an energy company which
shut down. That company's stock was renamed from First Titan Corp. to Quantum
International Corp. Thus both the old stock and its CEO appear to be trying their
luck in robotics just as they did in the development of oil and gas exploration.
About The Author: Frank Tobe is the owner and publisher of The Robot Report. After selling his business and retiring from 25+ years as consultant to the DNC and major presidential, senatorial, congressional, mayoral campaigns and initiatives all across the U.S., Canada and internationally, he has energetically pursued a new career in researching and investing in robotics.
“Early in 2008, in a personal effort to learn about the robotics industry and the future of robotics, with an eye toward selectively investing in publicly-traded and privately owned robotics businesses, I began an intensive research project that took me to Japan, Korea, Germany and all over the Internet. My eyesight has suffered but not my mind. I love what I’m doing and finding out and, in an effort to share my research, I set up this website, The Robot Report, to track the business of robotics. Early in 2009 I set up the Everything-Robotic blog to supplement The Robot Report with periodic in-depth personal insights.”
For more information, see www.therobotreport.com