Robots aren’t Taking over the World Yet. But this Robot Stock is a Smart Play on the Growth in Robotics.
Before I introduce my favorite robot stock, let me first tell you about one of my favorite television series growing up, “The Jetsons.”
The storyline was to imagine what life would be like a century later, in 2062.
Here we are a bit more than half a century later, and many of the gadgets in the show still seem fanciful—consider the Jetson space car folding neatly into a briefcase, or the pill you could take for dinner.
On the other hand, the Jetsons’ robot maid “Rosie” highlights an area where we seem to be well ahead of the game.
Take Boston-based iRobot’s “Ava,” a 5-foot-plus robot with an iPad tablet for a brain and Xbox motion sensors to help it navigate around a kitchen or living room.
iRobot (IRBT) is a volatile stock but the company has already sold millions of disc-shaped Roomba vacuum cleaners, and has robots that will clean your pool or cut your lawn.
The military is a key player in the growth of robotics and its bomb disposal robots have protected soldiers in Iraq.
The robot market for the health sector also looks promising. iRobot recently expanded a partnership with InTouch Health, a small company that enables doctors at computer screens to remotely treat stroke victims and other patients.
And if you’ve seen an Amazon distribution warehouse of late, you’ve seen thousands of robots moving around like ants filling orders and managing inventory.
A Japanese Robot Stock
Another player in this market is ABB Ltd (ABB), which is a familiar European multinational that manufactures electrification, industrial automation, and robotics and motion products worldwide.
But you may not be aware of Fanuc (FANUY), a Japanese blue-chip stock with zero debt, a sterling reputation, and a storied past.
Headquartered in the shadow of Mount Fuji, Fanuc is the world’s leading manufacturer of computerized numerical control (CNC) devices that are used in machine tools and also serve as the “brains” of industrial robots.
Fanuc, whose name is an acronym for Fuji Automatic Numerical Control, has been a world leader in robotics since the early 1970s. It was founded as a wholly owned subsidiary of Fujitsu in 1955 after that electronics giant decided to enter the factory automation business.
Today Fanuc is as global as it gets with more than 240 joint ventures and offices in over 46 countries with a commanding 65% share of the world market. Use of industrial robots has allowed companies like Panasonic to run factories that produce 2 million plasma television sets a month with just 25 people. Finally, Fanuc offers investors a pristine balance sheet with zero debt and more than $7 billion in cash.
Much of the company’s sales are channeled through GE Fanuc, a 50-50 automated machinery joint venture with General Electric Company (GE).
Fanuc does most of its manufacturing in Japan. Fanuc is building a new factory near Tokyo to double its domestic output capacity of machine tools to produce parts of smartphones.
As for Fanuc’s stock, it’s having a rough year, down 18%, with most of the losses coming since February; but with Japanese stocks finally bouncing back after years of backsliding, it shouldn’t stay down long. Its conservative management and penchant for maintaining high margins and quality products makes it a fine core holding.
In short, Fanuc is a high quality play on what seems to be an unstoppable trend. My Cabot Explorer advisory will continue following this Japanese robot stock with keen interest.
To learn more about Cabot Explorer, which boasts an average return of 230% on its 12 stock recommendations as of this writing, click here.
Do you own any plays on the robotics industry? Tell us about them in the comments below.
*This post has been updated from an original version, published in 2019.