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Look beyond FAANGs for robotics exposure

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By Tim Stewart
  •  
3 minute read

Investors who want exposure to robotics and automation themes should forget about the ‘FAANG’ stocks and concentrate on stocks outside the major indices, says ROBO Global.

Speaking to InvestorDaily, ROBO Global chief executive for EMEA Richard Lightbound said the typical approach by active managers looking to build a robotics portfolio is to “throw the FAANGs in there”.

But the IT companies dominating the US stock market – Facebook, Amazon, Apple, Netflix and Google (now Alphabet) – are not necessarily focused on robotics, Mr Lightbound said.

Google, for example, may use artificial intelligence, he said – but more than 90 per cent of its revenue come from advertising.

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ROBO Global launched its Robotics and Automation Index in 2013, and the strategy has been available to Australian investors via an ETF Securities product since September 2017.

The index currently comprises 87 companies on an equal-weighted basis, of which 75 per cent are small or mid cap.

“The FAANGs actually don't pass through our screening and filtering process to actually get into this strategy,” Mr Lightbound said.

In fact, there is a less than 3 per cent overlap between the ROBO Global index and the S&P 500 Index, he said.

The only notable large-cap names in the index are US biopharmaceutical company Navidea, Japanese robotics manufacturer FANUC and German conglomerate Siemens.

While ROBO Global is a strong proponent of automated vehicles, the index does not hold Tesla.

Instead, the index holds 12 companies that supply technology (such as microchips and connectors) to companies like Tesla, said Mr Lightbound.

The index focuses on four technological themes: sensing, actuation (how machines interact with the physical world), computing and integration.

There are also eight application themes that the ROBO Global focuses on: manufacturing, 3D printing, logistics automation, agriculture, security, energy, healthcare and consumer products.

“If you're looking for exposure to autonomous vehicles, ‘industry 4.0’, or the ‘Internet of Things’ and smart homes – this is all part of it,” said Mr Lightbound.

“It's not just about factory robots anymore. It's about how robotics and automation [are] being used right across society. It's in our homes, it's in our cars, and it's in our hospitals.

“It's going to penetrate deeper and deeper over time. So it’s happening now but it's got a nice long runway. This will run for a couple of decades,” he said.

Look beyond FAANGs for robotics exposure

Investors who want exposure to robotics and automation themes should forget about the ‘FAANG’ stocks and concentrate on stocks outside the major indices, says ROBO Global.

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