Turnkey Tech Investing: April 2023 Market Brief | ETF Trends

By Bill Studebaker, CIO & president, ROBO Global 

Utter the dreaded words “credit crunch” and everyone is immediately haunted by the ghosts of 2008. Danger seems to be lurking around every corner. But is it a fact that a credit crunch must be cataclysmic? At least at this point, that doesn’t seem to be the case. While it’s certainly premature to brush off the potential impacts of credit tightening, it appears as though the most worrisome tail risks simply aren’t playing out to create a worst-case scenario — at least not yet. 

Thankfully, deposit flight has ebbed and consumer confidence remains relatively buoyant. Yet investors continue to be quite bearish and many macroeconomic headwinds remain intact. But if the Beige Book1 is any indication, the delta of change doesn’t appear to be anything close to cataclysmic. What’s more, Bank of America, Goldman Sachs, and M&T Bankall posted relatively strong performance in Q1, showing that the consequences of the current credit tightening may be more localized and, hopefully, limited in scope. 

Having said that, we did see the markets digest all this news with a healthy dose of profit taking as evidenced by the pullback in our indices. The Robo Global Artificial Intelligence ETF (THNQ) declined -6.47%, and the ROBO Global Robotics and Automation Index ETF (ROBO) dropped -2.43%, while the ROBO Global Healthcare Technology and Innovation ETF (HTEC) advanced slightly by +1.35%.2 

It feels as though investors have a negative view of the big picture, but are we levitating here as everyone gets fooled because they love their names but hate the market? With earnings just having commenced, much of the story remains to be told. At some point, we believe it will become clear that we have safely climbed the Wall of Worry. Is it possible that we have finally reached that point? For months, we’ve been waiting (and waiting) for a hard dose of reality to wake us up. Could it be that we are back to a bull market? With half of S&P 500 constituents having reported (and US earnings serving as a barometer for the global economy, particularly when Fed action leads central banks globally), the earnings per share (EPS) beat rate is now at 79%. 

If our own holdings are any indication, good news may be in store: 

  • Rockwell Automation, the top supplier of factory automation control systems, reported a large beat and raise. Q1 EPS of $3.01 was 17% ahead of consensus on better sales and margins. It’s interesting to note that, historically, organic sales growth of 27%is the kind of number ROK typically only posts when coming out of a recession. ROK raised their FY23 EPS guidance to $11.50-12.20 from $10.70-11.50 with an organic sales growth range of 13-17% from +11-15%.3 Management commentary was bullish, with margins now expected to consistently exceed 30% and, most importantly, some excitement around the large number of new manufacturing facilities launching in the US.
  • Intuitive Surgical reported worldwide robotics surgical procedure growth for the first quarter that beat the average analyst estimate. The numbers across the board were impressive. Worldwide procedure growth was up +26% vs. +19% y/y, against an estimate of +15% (Bloomberg Consensus). Revenue popped to $1.7B, +14% y/y, against an estimate of $1.6B. Instruments and accessories revenue reached $985.6M, +22% y/y, against an estimate of $913.2M. Systems revenue declined slightly to $427.4M, -0.2% y/y, but was up compared to the estimate of $405.9M. Services revenue hit $283.2M, +14% y/y, exceeding the estimate of $273.4M. From an installed-base perspective, surgical system placements jumped to 312, +0.3% y/y, against an estimate of 281; and the Da Vinci Surgical System installed base came in almost right on target at 7,779 systems, +12% y/y, against an estimate of 7,786.4 

That said, there are noteworthy exceptions of stocks taking down numbers:  

  • Cloudfare disappointed thanks to the combination of a highly elevated valuation and slowing growth which management attributed to lengthening sales cycles amid macro uncertainty. The punishment came swiftly on Friday with a post-earnings decline of -20%4, swiftly undoing the impressive gains of the past few months. The catch: Cloudflare continues to grow at a healthy pace, and despite its outlook for the year coming in far below expectations, the valuation remains surprisingly high.
  • Illumina delivered a surprisingly mixed bag, reporting a Q1 EPS of $0.08 to exceed consensus by $0.06 and delivering a positive return on equity of 2.26%. On the flip side, the company reported a negative net margin of 100.92%5, pointing to expenses that far exceed current revenue. Whether those expenses turn out to be the “necessary evil” that supports future growth remains to be seen. 

As we slide deeper into Q2, we anticipate more upside—especially as companies in every sector continue to pursue the benefits of robotics, automation, and AI. Even as investors struggle to decide if now is the time to run with the bulls, companies around the globe continue to deliver the technologies that are transforming businesses, industries, and supply chains everywhere. The most lucrative time to invest is often at the turning of the tide. The “credit crunch” is just one factor stressing the markets. But whatever decisions lie ahead from the Fed, wherever inflation takes us, and whenever the market definitively changes course, we believe the companies delivering mission-critical innovation are leading the way toward a smarter tomorrow.  

ROBO Top Ten Holdings, HTEC Top Ten Holdings, THNQ Top Ten Holdings 

For more news, information, and analysis, visit the Disruptive Technology Channel.


1 Commonly known as the Beige Book, this report is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources.

2 Source: ROBO Global®, S&P CapitalIQ, For standardized performance data current to the most recent month end, please visit www.roboglobaletfs.com.

3 Source: Rockwell Automation

4 Source: Intuitive Surgical

5 Source: Cloudflare

6 Source: Illumina

Fund holdings and standard performance can be found in the ETF links provided in the third paragraph. The performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost.  Current performance may be lower or higher than the performance data quoted. Holdings are subject to change. Indices are unmanaged and do not include the effect of fees. One cannot invest directly in an index.

This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the fund or any security in particular. Please consult your financial advisor for further information.

Carefully consider the Funds’ investment objectives, risk factors, charges and expenses before investing. This and additional information can be found on the Funds’ full or summary prospectuses, which may be obtained at www.roboglobaletfs.com. Read the prospectus carefully before investing.

Narrowly focused investments and investments in smaller companies typically exhibit higher volatility. There is no guarantee the funds will achieve their stated objective. ROBO, HTEC, and THNQ are non-diversified.

The risks associated with investments in Robotics and Automation Companies, Artificial Intelligence (AI) Companies, and Medical Technology Companies include, but are not limited to, small or limited markets for such securities, changes in business cycles, world economic growth, technological progress, rapid obsolescence, and government regulation. Rapid change to technologies that affect a company’s products could have a material adverse effect on such company’s operating results.

Robotics and Automation and AI Companies may rely on a combination of patents, copyrights, trademarks and trade secret laws to establish and protect their proprietary rights in their products and technologies. There can be no assurance that the steps taken by these companies to protect their proprietary rights will be adequate to prevent the misappropriation of their technology or that competitors will not independently develop technologies that are substantially equivalent or superior to such companies’ technology.

Robotics and Automation Companies, especially smaller, start-up companies, tend to be more volatile than securities of companies that do not rely heavily on technology. AI Companies typically engage in significant amounts of spending on research and development, and there is no guarantee that the products or services produced by these companies will be successful.

Exchange Traded Concepts, LLC serves as the investment advisor of the funds. The Funds are distributed by SEI Investments Distribution Co. (SIDCO), which is not affiliated with Exchange Traded Concepts, LLC or any of its affiliates. Check the background of SIDCO on FINRA’s BrokerCheck.