Earlier this week, I wrote about robotics as a market segment that is worth paying attention to. The great thing about stocks that are involved in robotics, automation and artificial intelligence is that while individual companies tend to be specialized in specific industry groups, the adoption of these technologies is spreading throughout the economy, which means that there is opportunity to be had in practically any sector of the market you like to work with. Today I’m going to introduce you to three stocks in three different industry groups that are on the leading edge of development in technologies that are expected to proliferate throughout the world on an accelerated basis.
iRobot Corporation (IRBT)
Current Price: $65.75
Our first stock is probably the most recognizable to the layman, since their signature product, the Roomba vacuum robot, is on prominent display in stores like Best Buy all over the country. They are also the smallest company in today’s highlight, with a market cap of about $1.8 billion. They make the list because in most respects, advancements in robotics technology and applications remain incredibly expensive and most generally directed to business or industrial operations; for the most part, they have yet to extend far enough to be within the reach of consumers. IRBT is the exception, since their products are specifically geared and designed for household use.
The Roomba is the product that most people will recognize, but it certainly isn’t alone in IRBT’s bag of tricks. They also have a line of mopping robots called the Braava for hard-surface floors as well as a pool cleaning robot called the Mirra. The company dedicates a significant amount of its resources to research and development of technologies that include home mapping and navigation, human-robot interactions and smart home integration. They’ve been in business for more than 25 years and have sold more than 20 million robots and counting, so they’ve been around this block for a long time and are the absolute leader in consumer robotics.
IRBT is a company that operates with an extremely solid financial foundation. They have zero debt, good cash flow and liquid assets that give them good flexibility to adapt to market changes and take advantage of opportunities as they arise. Over the last year, the stock is mostly flat, but it had risen to a high above $107 per share in late July. Since that point, the stock has declined by more than 38%. That could be the kind of opportunity to take advantage of, especially if you like looking at value-oriented stocks. The stock does currently appear to be consolidating somewhere between $63 and $70 per share, and the longer the stock holds above $60, the more likely it is to rebound higher at some point down the road.
Intuitive Surgical, Inc. (ISRG)
Current Price: $414.69
ISRG is the largest company in this list, as well as the most expensive; at a price tag above $400 per share, this is a stock that would require a significant capital commitment. Unless you’re a medical professional, however, you probably haven’t of this company until now. Their expertise in the surgical arena makes their entry in the world of robotics, the da Vinci surgical system, one of the most compelling high-tech stories in the marketplace today.
The da Vinci system translates a surgeon’s hand movements, performed on instrument controls at a console, into corresponding micro-movements of surgical instruments inside a patient through small incisions. Unique in the medical field, ISRG has a practical monopoly and as such can charge a high premium to hospitals for their product. The system has been used in a variety of settings, including head and neck and even urologic surgeries.
Like IRBT, ISRG operates with no debt and very healthy cash flow; as of their last quarter the company had more than $1.9 billion in cash on its books. The stock’s price performance for the last year is a reflection of their fundamental strength, as it has increased nearly 63% since April of 2017. The stock’s all-time high came in late January of this year at about $450 per share, putting the stock’s current price about 8% below that point. That drop coincides with the correction of the broader market that began around the same time; if the market manages to resume its long-term upward trend, it isn’t unreasonable to suggest this stock should pick up momentum and begin driving to new highs as well.
National Oilwell Varco, Inc. (NOV)
Current Price: $40.94
NOV is a pretty well-established name in the Energy industry, and the truth is that of these three robotics-related companies, the most diversified. Robotics is just one piece of the portfolio of equipment and services the company offers to support oil drilling and production. Their expertise extends to both onshore and offshore operations. Robotics, however, are a critical theme throughout their rig system, with robotic arms that take the place of a floorhand in dangerous environments and installed in multiple configurations, and collumn racking systems for offshore drilling rigs and platforms.
NOV is the company behind one of the biggest robotic innovations for the energy industry, a machine called the Iron Roughneck. This machine automates the task of connecting drill pipes as they’re shoved through miles of ocean water and oil-bearing rock. This is a repetitive and dangerous task, and the Iron Roughneck makes the process more efficient for the company and safer for rig workers.
Like any company in the energy industry, NOV is a stock that is sensitive to fluctuations in oil prices, and that means that a big drop in oil prices would likely effect NOV negatively, as oil drillers would be forced to start shutting down their rigs. Currently, however, most analysts expect oil to at least maintain the levels it is at for the time being, as geopolitical concerns in the Middle East, along with lower inventory levels continue to put upward pressure on prices. Another area in which NOV differs from the other two companies in this list in its use of debt, but keep in mind that few companies in the Energy sector operate without debt. NOV’s debt is manageable, and their balance sheet indicates they have more than adequate liquid assets to service their debt in the event that operating earnings cannot. Their price performance for the last year has underperformed the broad market, with an increase of only about 8.5%; but since September of 2017, the stock has rallied more than 33% from a trend low at around $30 to their current level. The stock has really been picking up steam in the last week, driving from around $35 to today’s close at nearly $41 per share.
For each of the companies in today’s list, robotics play a major, and in many ways defining role in the success of their respective businesses. Paying attention to these stocks can offer you a potentially attractive way to profit from growth in robotics moving forward while also being able to work with, and benefit from the economic cycles that are unique to each respective industry group these companies operate in.