The robot revolution is nearly upon us. Whether these artificial beings of superior speed, strength, and intelligence choose to harvest our body heat as a power source or merely enslave all mankind in the cyborg factories of the future, that remains to be determined.
Make no mistake about it though: The machines are coming, and there is very little the human race can do to stop their eventual dominion over us. Unconvinced? Just last week we received the latest sign of the coming robotic judgment day. Last week introduced to the market the first ever ETF designed to invest specifically in robotics and automation-related companies, the Robo-Stox Global Robotics and Automation Index ETF (ROBO -1.19%).
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Robo-Stox Global Robotics and Automation Index ETF exposes investors to this burgeoning space in the broadest way possible with a diverse group of small-, mid-, and large-cap industrial, energy, technology, and health care companies. Since there are very few pure play companies in this space, however, the index accomplished this by investing in two distinct groupings: bellwether companies and non-bellwether companies.
Consisting of 18 companies viewed as having a significant portion of their businesses involved in robotics or automation, these bellwether companies received the highest initial weighting in the index at 2.22% each. The bellwether potion of the index includes many of the obvious names in this space. Investor favorite 3D Systems (DDD -4.59%) is featured as a 3-D printing company changing the way industrial companies automate the manufacturing process. Former market darling Intuitive Surgical (ISRG -1.93%) also makes an appearance -- a company that has recently come under greater investor scrutiny due to the declining sales of its da Vinci robotic surgical system for oncological, cardiac, gynecological, and other complex surgical procedures.
The non-bellwether portion of the index, on the other hand, includes many names you would not typically associate with robotics. Coming in at an initial weighting of 1.02% each, these 59 companies are much more globally diverse than the America-centric bellwethers and include the Japanese industrial equipment manufacturer Toshiba Machine, the Norwegian defense contractor Kongsberg Gruppen, and the American farm machinery maker Deere & Co. (DE -0.87%). If we were to play a game of "One of these things is not like the other," Deere would certainly stick out like a sore green thumb. Upon further examination though, Deere's inclusion is not as strange as it seems. Although it is not available today, Deere is developing the technology for driverless tractors that will be controlled by a combination of on-board computers and satellite signals.
Dead or alive, you're coming with me
Pure and near-pure-play robotics stocks are not without their volatility. Although investors of 3D Systems have enjoyed their year with the stock setting a new all-time high this week, not everybody was so lucky. Intuitive Surgical investors, for example, are having a particularly rough 2013 with shares down about 20% on worries that the Affordable Care Act is causing hospital administrators to hold off on major purchases, the company's da Vinci surgical robot included.
This is exactly where an ETF like ROBO can really shine. By spreading the risk among these 18 bellwether and 59 non-bellwether global companies, investors are able to get exposure to this high-risk, high-reward robotics space without being scared off by wild share price movements.
This ETF comes at a price though. While you can find ETFs that track the S&P 500 with an expense ratio below 0.1%, or more specialty/niche ETFs hovering around 0.5%, the Robo-Stox Global Robotics and Automation Index ETF clocks in at a whopping 0.95%. Being the only ETF of its kind, though, this fund's management must feel they are able to demand a premium price for their product. And until other fund managers create their own robotics ETFs, ROBO's management could be correct in their thinking for now.
I, for one, welcome our new robot overlords
With the robots on the way, we can only hope that they will be forgiving and benevolent rulers, rather than vengeful and barbaric. It's a long shot, I know, but what other options are available to us? Maybe by investing in the Robo-Stox Global Robotics and Automation Index ETF today, we can attempt to placate our robot masters in the future... while making a healthy profit in the process.
