Considering Investing in Robotics Stocks in 2014? Part 2: Here Are 3 More Key Things You Should Know.

Robotics and robotics stocks are hot topics. Get the lay of the land before diving head-first into this arena, which is filled with many eclectic players around the globe.

Jan 15, 2014 at 4:54PM

Robots -- once the sole domain of futuristic cartoons, films, and literature -- are exploding onto the scene. You know when tech behemoths such as Google and are snatching up robotics companies, innovative new uses will soon follow – and, importantly for investors, demand will likely ramp up.

In Part 1, we covered some robotics market basics. I also listed five pure-play robotics companies trading on major U.S. exchanges and highlighted iRobot, best known for its Roomba vacuuming bot, and Intuitive Surgical, the leading maker of systems used for robotic-assisted, minimally invasive surgery. 

First, a recap of the basics, and then we'll get to a new batch of robotics companies: select non-pure plays trading on a major U.S. exchange, and some foreign companies that trade over-the-counter in the United States. 

The robotics market

  • Categories: industrial, professional service (including defense, which is sometimes broken out), and consumer.
  • Market size: $13.1 billion hardware only ($8.5 billion industrial, $3.4 billion professional service, $1.2 billion consumer). The industrial number jumps to $26 billion when software and engineering systems costs are tacked on.
  • Projected growth: 6% annually through 2016 for industrial robots, faster growth for professional service (non-defense portion) and consumer robots.

(Source for stats: International Federation of Robotics.)

1. How many non-pure-play robotics companies trade on major U.S. exchanges?
There are many non-pure-plays, with the approximate percentage of their revenue generated from robotics varying widely. Three that generate a fair chunk of their revenue from robotics are AeroVironment (NASDAQ:AVAV)Accuray, and ABB (NYSE:ABB). (Big defense companies such as Boeing, Northrop Grumman, and Lockheed Martin have robotics divisions; however, they're a very small part of their overall businesses.)

Let's start with the biggie -- Switzerland-based ABB, which has a $60.7 billion market cap. This company provides power and automation technologies for utility and industrial customers worldwide. ABB is considered among the world's largest makers of industrial robots and is heavily focused on the auto industry, with major, long-term customers including Ford and BMW. 

Robotics is a unit within its discrete automation and motion division, and since ABB reports financial results down to only the division level, it's not possible to tell what portion of its business comes from robotics. This division has been performing well. It generated revenue of $9.4 billion in 2012, or 22% of total revenue, up 6.8% from the year before, while its operational EBITDA margin (that's earnings before interest, taxes, depreciation, and amortization) was 18.4%, down slightly from 2011's 18.9%. It appears that robotics is doing well, as ABB stated in its 2012 annual report that the unit's revenue "continued to grow at a double-digit rate." 

Investors interested in a large-cap company with exposure to industrial robotics, as well as some other attractive niches, such as construction of electricity grids -- ABB is the largest player here -- might want to further explore this company. 

AeroVironment, which has a market cap of $675 million, is involved in two businesses: making unmanned aerial vehicles, or "drones," for the military, and manufacturing and installing charging systems for electric vehicles. 

The company is slightly unprofitable on a trailing-12-month basis, with a profit margin of -1.8%. Analysts expect AeroVironment to be profitable in 2015, as the company sports a forward P/E of 52.7. 

Many are bullish on AeroVironment, and I agree that both businesses have potential. That said, I think investors new to robotics would be better served looking to commercial and/or consumer robotics plays at this time, as defense plays are subject to considerable uncertainty because they rely heavily on government spending.  Those more comfortable with the topic of robotics, however, might further explore AeroVironment. Certainly, Amazon's plans, announced late last year, to use drones for lightweight, short deliveries could heat up the drone space in the near future.

While AeroVironment has outflown our industrial robotics player over the one-year period, the five-year period is a different story. 

ABB Total Return Price Chart

Data by YCharts

ABB Total Return Price Chart

Data by YCharts

Over the 10-year period, ABB has considerably outperformed the market, returning 438% vs. the market's 101%. ABB is quite cyclical and was walloped during the Great Recession; however, its stock price is now very close to the all-time high it reached in 2008. AeroVironment hasn't yet traded for 10 years, as it went public in 2007. 

2. How many publicly traded foreign robotics companies are there?
There are many foreign players. In fact, Japan is robot-central when it comes to industrial robot makers. 

Several of the major players that trade over-the-counter in the U.S. are KUKA Robotics (German; robotics is one of two divisions, with a focus on the auto industry; provides industrial and service robots); Yaskawa Electric (Japanese; robotics is one of three divisions; focuses on service robots primarily for the auto and electrical equipment industries); and Fanuc Robotics (Japanese; manufactures industrial machinery and robots). 

Look for coverage of select OTC stocks in the future. 

3. My overload function is going off. Is there a simpler way to invest in robotics?
For the exchange-traded-fund fans among you, there's the relatively new Robo-Stox Global Robotics & Automation ETF (NASDAQ:ROBO). This ETF, which began trading in October, had 77 holdings when it launched. 

As with all mutual funds and ETFs, the main benefit is also the main drawback: diversification. An ETF with a large number of holdings is likely never going to hit one out of the ballpark and return, say, 85%, as iRobot did in 2013. However, it's also likely not going to be a considerable loser, either, as long-term winner Intuitive Surgical was in 2013. 

This ETF's return since inception is 8.3% vs. the S&P 500's total return of 5.3%, as of Jan. 14.

Don't miss out on 2014's top stock
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Fool contributor Beth McKenna has no position in any stocks mentioned. The Motley Fool recommends AeroVironment,, BMW, Ford, Google, Intuitive Surgical, and iRobot and owns shares of, Ford, Google, Intuitive Surgical, Lockheed Martin, and Northrop Grumman. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers