January 2022 has been a troublesome begin to the 12 months offering, in our opinion, buyers one other actual alternative to earn a living. The market has been hit by rising inflation and low cost fee expectations and, in consequence, a rotation from development to worth/cyclicals. As a present or potential ROBO Index investor, we wish to inform you about how ROBO is positioned, in addition to stress the chance round automation and robotics going into 2022 and past.
The present drop in share worth could also be unsettling for buyers. That’s comprehensible. The sudden tech rout has despatched inventory valuations tumbling to their lowest stage for the reason that first few months of the pandemic. Including salt to the wound, this shift arrived simply as optimistic key earnings for a number of the key ROBO constituents started. But when we take a deep breath and step again, we will see that a lot of the froth has already subsided for a lot of market segments. Headline multiples have contracted to extra affordable ranges, and expectations have been meaningfully (and appropriately) curtailed.
Importantly, the query stays: Will robotics, automation, and AI proceed to develop in 1, 3, and 5 years? We imagine the reply is unequivocally YES, which is why buyers want to remain invested on this theme. Downturns are by no means fairly, however we proceed to imagine that robotics, automation, AI, and healthcare applied sciences signify one of the highly effective funding alternatives of our era. The pandemic proved that time, creating an pressing name to automate which accelerated the adoption of present applied sciences and elevated demand for extra analysis and growth.
Given the wholesome reset in valuations, we wish to illustrate why we imagine this presents an amazing shopping for alternative for our buyers:
- ROBO is a battle-tested portfolio with an 8+ 12 months historical past of efficiently navigating markets by deciding on best-of-breed firms that exhibit dominant market share and technological management, in addition to sustaining international diversification with no concentrated bets—the highest 10 positions signify lower than a 20% weight, and we rebalance quarterly to clean out volatility and preserve that important diversification.
- ROBO is presently buying and selling on 27x ahead EARNINGS, simply 10% above its long-term 24.6x historic common, with 10 names with EV/Gross sales <1x, making it a way more balanced portfolio from a valuation standpoint. Moreover, about 10% of the portfolio trades at a 52-week low whereas 40% are 10% from their 52-week low.
- Roughly 40% of the ROBO portfolio captures publicity to cyclical/worth areas in Manufacturing, Industrial, & Logistic Automation, which we imagine are within the early days of a multi-year restoration.
- Virtually 60% of our firms in ROBO are web money optimistic vs 17% of the S&P 500. As well as, 94% of index members in ROBO are worthwhile primarily based on ahead earnings, and that may be a testomony to the businesses that undergo our rigorous choice with our proprietary screening.
- All knowledge represents as of 1/27/2022 from ROBO World Analysis
- An organization that’s web money optimistic = an organization that holds no debt, or debt on the steadiness sheet is lower than money.