Robotics and artificial intelligence is beginning to make up many facets of everyday life, and the ongoing growth and advancements in the segment has helped a robotics ETF gain a lot of momentum.
ETF Trends publisher Tom Lydon spoke with Bill Studebaker, President and CIO of RoboGlobal, at the 2017 Morningstar ETF Conference in Chicago September 6-8 to talk about the growing interest for robotics and artificial intelligence.
The ROBO Global Robotics & Automation Index ETF (NASDAQ: ROBO), the first exchange traded fund dedicated to robotics investing, has gathered $1.3 billion in assets under management, with over $1 billion of that new money coming in this year alone.
“We’ve identified an opportunity, four years ago, that we had high conviction, and now as we kind of transitioned into today, we couldn’t be more convinced,” Studebaker said. “What we’re seeing here is that there’s an undeniable inflection point. The performance capabilities, the cost curve is allowing really an explosion robotic applications that only years ago were kind of perceived as science fiction.”
The improving technologies has translated to a phenomenal growth opportunity in a relatively new segment of the market.
“We’re seeing a pretty paramount shift in their business models. Interestingly, in the last quarter, we’ve had over 80% of companies beat the consensus estimates and so you’re really seeing this manifest itself in the company’s business models,” Studebaker said, referring to the underlying index for the ROBO ETF.
The field of robotics and artificial intelligence is a wide encompassing industry that touches upon many facets of life, which also means that there are many areas for further growth.
“If you look at home automation, right? Look at the advances we’ve seen in Alexa and smart A.I. devices. You look at the, you know, vacuum cleaners, right, with iRobot. Every part of our society has become automated, but at increasingly different rates. So it’s pretty hard to predict which one are going to tack off and when, but with the exception of industrial manufacturing, we’re really at the very beginning stage of penetration, so we think this will go on for years if not decades,” Studebaker said.
The robotics ETF provides exposure to global companies engaged in the business of robotics-related or automation-related industries. The underlying index starts off with a global database of 1,000 companies, classifies components based on a proprietary classification system with 13 subsectors, looks for a minimum threshold for percentage of robotics and automation revenue, and selects those best positioned as market and growth leaders.
ROBO’s portfolio includes a 60% tilt toward non-bellwether robotics with growing revenue contributions and a 40% tilt toward bellwether robotics companies that are well-established in the space.
The robotics ETF’s portfolio may also provide exposure to companies with sustainable growth opportunities, as the underlying ROBO Global Robotics & Automation Index has exhibited attractive sales growth, EBITDA growth and earnings-per-share growth.
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