10 Stocks to Buy to Profit Off Human-Like Robots
A Boston Dynamics robot has recently been making the rounds on the internet, demonstrating its impressive physical capabilities by using only its legs to pick itself off the floor and showing off flexibility by swiveling its head and chest.
These human-like robots, combined with artificial intelligence to make them smarter and more autonomous, are expected to do just about everything humans can physically do and maybe even better. You can soon expect to see them taking your order at fast food chains or shaking your next cocktail at a bar, says Taylor Krystkowiak, vice president and investment strategist at Themes ETFs.
Medicine and healthcare, hospitality, transportation, logistics, and agriculture are sectors with the greatest potential in robotics applications, Krystkowiak said, adding that many jobs will be threatened and industries disrupted.
We’re beginning to see the early stages of that trend pick up pace: In 2022, 34% of job tasks were completed by machines versus 66% by humans, according to the World Economic Forum’s “The Future of Jobs Report 2023“. By 2027, that ratio is expected to increase to 43% of tasks completed by machines and 57% by humans.
“On the one hand, yes, it’s scary to envision a world in which almost no job is safe from automation or from robotics. But the important thing to keep in mind is that through this kind of creative destruction process, while jobs will certainly be lost in some areas, there also will be jobs that will be gained.”
Despite those concerns, investors are looking for ways to bet on the growth of robotics. And according to the International Federation of Robotics, they don’t have to look very far. The US is home to the most suppliers that manufacture service robots and is well-positioned to cater to the rapidly growing global demand for robotics. The annual installation of industrial robots is expected to grow by about 30%, from 553,000 installations in 2022 to 718,000 in 2026.
Below is a graph demonstrating past and forecast growth of annual installation of robotics across sectors.
World Robotics 2023, International Federation of Robotics.
Themes ETF launched its version of a robotics-focused ETF called Themes Robotics and Automation ETF (BOTT) on Monday. It aims to provide investors with exposure to the robotics sector.
Like the various sectors required for developing AI, such as large language model training and quantum computing, robotics has its set of divisions that need to come together to produce it. This provides three major areas for investing opportunities, Krystkowiak noted. The first is factory automation equipment. Examples include companies that make robots that assemble vehicles. The second area is semiconductor chips, essential to powering and allowing robots to sense or detect their surroundings. The third area is industrial machine parts; these companies build the physical pieces assembled to create the robot.
However, betting on new technology is highly risky because there’s a lot of speculation involved in the stock-picking process. Disruptive technology is forward-looking; in other words, you have to guess who will be a winner, beat competitors, or even survive the shift. One way around guesswork is by looking for companies that have already demonstrated success within the sector.
This is where following a strict rules-based methodology comes into practice, Krystkowiak said.
“We look at the entire investable universe in those categories that we discussed in semiconductors, in factory automation and equipment, and industrial parts and support equipment. And then we screen those companies for those that have had a positive total return for the past 12 months,” Krystkowiak said. “So basically, a profitability overlay to find those companies that are not only in the space but are performing productively.”
The companies must also be the largest in market cap relative to their competitors, he said. This screening process is especially important now in a high-interest-rate environment where debt is more expensive.
Below are the top 10 holdings from the BOTT ETF.
Lincoln Electric Holdings (LECO)
Toyota Industries (6201 JP)
Esab Corp (ESAB)
Nordson Corp (NDSN)
Fortive Corp (FTV)
Intel Corp (INTC)
Konecranes Oyj (KCR FH)
Microchip Technology (MCHP)
Silicon Motion Technology (SIMO)
Semtech Corp (SMTC )
