We’ve spent the past week reacting to the market correction.
On Wednesday, I showed you three “Fat Finger Market Tools” you can use to protect your current investment portfolio. They’re three strategies you can use to turn anything – bloodbath or rally – into money in the bank.
I want you to keep that list in hand because the market has yet to settle down – we’re going to keep seeing a lot of turbulence for at least a couple of more weeks.
Then on Friday, we went over five Strategic Tech Investor Game Changers – three “rules” we’ll be using to find our next round of winning technology, legal cannabis, and cryptocurrency plays.
Today I start keeping that promise…
When Research Pays Off
I love getting my hands dirty.
By that, I mean I love doing research – digging into data, reports, legislation… and turning up investment ideas for you.
That’s why I’ve spent part of the past few weeks going over President Trump’s tax overhaul.
We’ve already seen how Trump’s tax cuts are fattening the wallets of average Americans in the form of hefty raises and big bonus checks.
But really, as good as that is, it’s only a surface reading of the new tax laws.
I’ve already shown you how the tax overhaul is going to encourage tech companies to bring hundreds of billions in overseas profits back home. And how that’s going to be huge for tech giants like Apple Inc. (Nasdaq: AAPL) – and investors who’ll be seeing rising stock buybacks and dividends coming their way.
I’ve dug even deeper than that, though, and discovered new tax rules that are going to encourage companies to spend a lot more money on equipment.
I know… yawn.
But this is big.
You see, the new rules embedded in the tax-reform package provide manufacturers an incentive to buy machinery and boost productivity in a tight labor market where unemployment remains near 4%.
No really, it’s a bigger move than it sounds.
In the past, firms could only write off a portion of their equipment cost in a single year. The revised tax code allows companies to immediately deduct the entire cost of equipment purchases from their taxable income.
Already, forecasters have ripped up their previous statements and are now saying that planned capital spending on manufacturing equipment in the United States will rise as much as 12% in 2018. That’s a 33% increase from the rate forecast just last November.
And that’s going to provide a nice catalyst – a profit “trigger” – to the robotics and automation hardware and software sectors through at least 2020.
No One’s Talking About This Tax Cuts Beneficiary
We all know that robotics and automation are sweeping industries everywhere.
But even I’m surprised at some of the places where they’re turning up.
A recent report by International Data Corp. found that the two fastest growing industries for robotics are healthcare and process manufacturing. The latter is a branch of manufacturing that involves developing products based on recipes or formulas, like sodas or drugs.
“Ride the Unstoppable Trends” is one of the game-changing moves I told you to make on Friday. And robotics and automation definitely fit under that category.
Just check out these numbers…
IDC found that worldwide spending on robotics and related services will hit $135.4 billion in 2019. That’s more than double the $71 billion spent in 2015, and IDC is forecasting a compound annual growth rate of 17%.
Those kinds of capital waves have led to a surge of mergers among AI firms, particularly those with strong links to robotics. Robotics and automation systems, of course, increasingly use sophisticated artificial intelligence (AI) algorithms to work even more freely from human involvement.
According to CB Insights, the AI mergers-and-acquisitions market has soared from $559 million in 2012 to more than $4.8 billion last year, a roughly eightfold increase.
Grand View Research predicts spending on AI-robotics systems will rise at a 57% yearly clip through 2025. By that time we’ll be talking about a $58.9 billion market.
And all of this was before President Trump’s signature made those new tax rules into law late last year and put a rocket booster under the robotics sector.
Now, you could try to pick and choose among all the small robotics players out there – before they get scooped up by a Silicon Valley giant. In fact, that’s exactly what we do at my Nova-X Report service – finding breakout small- and midcap stocks before they set the market on fire. To find out how to join us, just click here.
But for investors just getting started, that can be a risk-filled endeavor.
And that’s why I’m bringing you this play. It beat the market by more than double over the past year – and I believe it can keep doing that and more as it rides the robotics revolution wave.
The Unstoppable Way to Play This Unstoppable Trend
Just check out the track record and the robust portfolio of the Robo-Stox Global Robotics & Automation Index ETF (Nasdaq: ROBO).
This exchange-traded fund is clearly a great way to play the long-term trend in AI-powered robotics and automation.
In all, ROBO has 92 stocks in its lineup, covering just about every conceivable robotics and automation angle. We’re talking everything from 3D printing and semiconductors to drones and massive industrial robots.
The 0.95% expense ratio is higher than I generally like to pay. (According to our ETF Profit Screens, we like to pay no more than 0.5%.) But let’s make an exception here because ROBO appears especially well built to capture this Unstoppable Trend’s sizzling growth.
ROBO owns the world’s top automation and robotics firms, bringing broad-based exposure to many industries and tech systems. Take a look…
- Mazor Robotics Ltd. (Nasdaq: MZOR) is ROBO’s largest holding, making up 1.94% of the fund. This Israel-based firm is a fast-growing maker of a robotic guidance system for spine surgery. That system, according to a survey of doctors who have used it, performs surgeries with 98.3% accuracy. That translated into a 56% reduction in unnecessary follow-up X-rays, a 48% drop in postsurgical complications, and a 46% drop in the need for a second spinal surgery. The company says an exclusive arrangement to supply its Mazor X system to Medtronic PLC (NYSE: MDT) led to record sales in the fourth quarter and full year.
- Nvidia Corp. (Nasdaq: NVDA), which has a weight of 1.17% in ROBO, makes a series of advanced graphics processing units (GPU) lie at the heart of a sector that poised to grow from $7.2 billion in 2017 to $75 billion by 2021 – virtual reality (VR). Nvidia’s hardware is used in deep learning and AI, too. More to the point, the Silicon Valley company’s GPUs are also used in drones, industrial robotic systems, and self-driving car features. In its most recent quarter, Nvidia saw sales jump 32% – to a record $2.6 billion.
- Cognex Corp. (Nasdaq: CGNX) is a world leader in machine vision, the technology that provides imaging-based automatic inspection and analysis for automatic inspections, process controls, robot guidance and more. The Boston-area company, which has a weight of 1.42% in ROBO, also supplies software, vision sensors, and industrial ID readers used in manufacturing automation. Cognex is a key supplier of quality-control vision systems that can detect product defects to Apple. It also makes logistics barcode readers and tracking software.
- Aerovironment Inc. (Nasdaq: AVAV) is best known for its work with the U.S. military, where it ranks as the top drone supplier to the Pentagon. Its Raven is the most widely used unmanned aircraft system in the world today, in no small measure because soldiers can launch it simply by throwing it into the air. Besides the manual version, the Raven also can be operated automatically using drone-centric avionics and precise GPS. Aerovironment has a weight of 1.43% in ROBO.
Automating Your Wealth
ROBO launched in late November 2013. And to mark the occasion, Nasdaq officials used a robotic arm to ring the closing bell.
Priced at just $37, the ETF trades at a fraction of some of its notable portfolio holdings. And Wall Street is starting to wake up to the value that a balanced robotics play like ROBO represents.
The fund has $2.16 billion in assets, which is quite impressive when you consider to was launched less than five years ago. Over the past year, it has returned nearly 33% to investors. That’s more than double the S&P 500’s gains over the period.
And frankly, this young ETF is just getting started. The firms in its portfolio are making heavy investments now to prepare for an AI-led robotics future.
With the new tax incentives providing a strong catalyst, this is a fund that you can count on beat the market for at least the next five years.
Finally, instead of getting bogged down in the negativity, realize that the economy – especially the Silicon Valley economy – is still on the rise.
And that makes ROBO a first post-correction “Buy” with real muscle.
I’ll be back here later this week with another move to make.
See you then.