January 2022 has been a tricky begin to the yr offering, in our opinion, buyers one other actual alternative to generate profits. The market has been hit by rising inflation and low cost fee expectations and, consequently, a rotation from development to worth/cyclicals. As a present or potential ROBO Index investor, we need 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 value could also be unsettling for buyers. That’s comprehensible. The sudden tech rout has despatched inventory valuations tumbling to their lowest degree because the first few months of the pandemic. Including salt to the wound, this shift arrived simply as constructive key earnings for a number of the key ROBO constituents started. But when we take a deep breath and step again, we are able to see that a lot of the froth has already subsided for a lot of market segments. Headline multiples have contracted to extra cheap 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 consider 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 consider that robotics, automation, AI, and healthcare applied sciences signify some of the highly effective funding alternatives of our technology. The pandemic proved that time, creating an pressing name to automate which accelerated the adoption of current applied sciences and elevated demand for extra analysis and improvement.
Given the wholesome reset in valuations, we want to illustrate why we consider this presents a fantastic shopping for alternative for our buyers:
- ROBO is a battle-tested portfolio with an 8+ yr historical past of efficiently navigating markets by deciding on best-of-breed corporations 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 at present 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 consider are within the early days of a multi-year restoration.
- Virtually 60% of our corporations in ROBO are internet money constructive vs 17% of the S&P 500. As well as, 94% of index members in ROBO are worthwhile based mostly on ahead earnings, and that could 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 internet money constructive = an organization that holds no debt, or debt on the steadiness sheet is lower than money.