Automation is one of several themes I indentified as being areas I want to invest in. Read a bit of background or skip ahead using the links.
McDonalds Are Already Automating Their Workforce
McDonalds has recently announced a roll-out of touch screens to replace cashiers in the US. This has been happening across Europe for the last few years.
At the start of 2016 Amazon warehouses ’employed’ over 30000 Kiva robots. Amazon have stopped selling the robots to other companies to maintain their competitive edge. There are now several automation companies stepping into the breach.
Below is a photo of one of these tireless robots navigating a maze of corridors in the Amazon fulfilment centre
Walmart Cutting Down on Accounting Staff
One of the worlds largest employers – Walmart – has just announced 7000 redundancies as it automates back office and accounting roles. They also plan to start using drones to check inventory at their warehouses.
No More Drunk Drivers
Tesla and Uber already have self driving cars, so taxi and long range trucker jobs are in the sights. And they aren’t the only companies moving into this area.
This paints a pretty grim picture for employment prospects in a whole range of industries.
Millions of jobs are destined to become automated in the coming decades. This will probably result in some variation of basic income being implemented in many countries, but that is a discussion for another day.
Predicted 9% Growth Per Annum
The robotics market is predicted to grow at 9% per annum, with the manufacturing industry having the largest share of the pie. There is also predicted to be massive growth in medical applications and robots around the home for entertainment amongst other things.
There is a definite long term trend to be tapped here. It’s a revolution of sorts that will affect the lives of much of the planet. Depending on who you ask it will be a boon for humanity; or the end… cue scary Terminator picture.
Five Automation Robotics Shares
Market Cap: £258 million
These software robots aim to take the robot out of the human. Not a robot in the typical sense, but automation software that can perform the mundane repetitive tasks that don’t require the human touch. The software robots:
- Perform the tasks much faster than humans
- They make no mistakes
- Don’t get tired or take coffee breaks, so can work 24 hours a day.
- Every step is entirely auditable.
Blue Prism listed on the FTSE in Q1 of 2016 and shares have quadrupled in priced. There is no earnings data on which to base a judgement but there are some reports of additional contracts being signed and they’re in the driving seat of RPA, having practically created their own market. Hat tip to blue ocean strategy.
Given that there is no historical financial data and these are listed on the smallest end of the UK market with a market cap of £258 million investing in these would be a blind bet. Albeit in a market that is destined to grow massively. I’m tempted to say they would be a takeover target despite their CEO saying otherwise.
In a recent trading update they confimed the signup of over 90 new customers in the last year including. Their client list currently includes Commerzbank, ING, Swinton Insurance, Maersk, Siemens, IBM, Procter & Gamble, and Nokia.
Market Cap: USD$ 44825 million
At the forefront of Power and Automation and Smart Grids. This combines several themes I like. Energy generation is becoming more distributed and innovative ways to manage the grid will become more important. Perhaps their automation software will drive revenue increases.
ABB has a solid yield of around 3% but stagnating revenue. It’s also near 5 year highs so not the best time to buy. This is a potential buy at a cheaper price.
Rockwell Automation ROK
Market Cap: USD$ 15117 million
A fortune 500 company focused on industrial automation. At the time of writing Rockwell is the subject of takeover speculation which has caused the price to spike. It has a steady dividend of around 2%. However, the fact that it’s US based makes it a little expensive at the moment given the recent hammering the pound has taken.
Market Cap: €3031 million
A German based company specialising in automotive robots. Strong revenue and EPS growth make this a tempting proposition. It was a 5bn takeover target in June 2016, although nothing solidified. The price has returned to the level it was prior to the offer but it’s still at a P/E of 40. A slim dividend of less than 1% doesn’t hold much allure.
Market Cap: USD$ 1328 million
I first heard about this company when I saw their little roomba vacuum cleaner robots a few years back. I’m not a big fan of housework so I like the idea of a robot doing it for me. In addition they have robots for cleaning hard floors and clearing gutters. At the start of 2016 they sold off their military robots division, so the ED209 blueprints will start to gather dust.
No dividend to date and the CEO sold 55000 shares a few months ago as the shares reached new highs.