Best Robotics Stocks

Advances in robotics have excited and worried investors for a number of years now. On one hand, progress in artificial intelligence (AI) and robotics technology has made a number of industries more efficient and productive, creating possibilities that wouldn’t have seemed fathomable a decade ago. On the other hand, economists fear too much automation will shrink the job market as efficient machines take over tasks previously done by humans. There’s even a smaller subset of folks convinced that the Terminator movie series is a futuristic documentary and not pulpy science fiction. All this has led to an increased interest in robotic stocks.

Of course, robotics doesn’t just mean androids and AI. Robots and humans often make each other’s jobs easier, whether through more precise surgical incisions, better estimates on crop harvests or the ability to perform tasks that represent health hazards to humans. Robotics could be one of the largest investment themes of the next decade, but you’ll need to spend some time diligently reviewing these companies to try to pick the winners. Here are five quality robotics firms to start researching today.

Quick Look at the Best Robotics Stocks:

• Emerson Electric Co. (NYSE: EMR)
• Rockwell Automation (NYSE: ROK)
• Intuitive Surgical Inc. (NASDAQ: ISRG)
• Deere & Co. (NYSE: DE)
• iShares Robotics and Artificial Intelligence Multisector ETF (NYSE: IRBO)

Robotics Stocks to Watch Out for This Year

Robots are used in a wide range of industries, so there’s no neat little sector box to fit these firms in. Some are tech, some industrial and some reside in the healthcare field.  Advances in robotic technology don’t just benefit a single sector or industry, so innovators can be found across the business spectrum. Here are five robotics stocks to keep an eye on this year.

Emerson Electric (NYSE: EMR)

Emerson isn’t usually the first company that comes to mind when thinking of advances in robotics and automation. After all, the company has been in business since 1890, when robots were stuck on the pages of science fiction. But today’s version of Emerson is an automation powerhouse with two divisions providing robotics products: Automation Solutions and Commercial and Residential Solutions. The automation division services industries ranging from beverage and food prep to power generation to life sciences. The commercial division offers home solutions for items like thermostats, appliances and gas and electric systems.

Emerson Electric is based in St. Louis and has more than 86,000 full-time employees. The company has a market cap of $57 billion with a dividend yield of just over 2%. The PE ratio is under 25, and more than 3 million shares are traded daily on average.

Rockwell Automation (NYSE: ROK)

Another century-old company at the forefront of robotics and automation research is Milwaukee-based Rockwell Automation. Rockwell focuses exclusively on automation solutions in a variety of fields. Intelligent Devices, Lifecycle Services and Software and Control are the company’s three operating segments offering products like software, drives and sensors,  industrial components and maintenance services.

Rockwell Automation has a $32 billion market cap and quickly recovered from the pandemic, exceeding its 2019 annual revenue in 2021. The company has 24,000 full-time employees and pays a 1.59% dividend.

Intuitive Surgical (NASDAQ: ISRG)

Intuitive Surgical is a $100 billion healthcare behemoth based in Sunnyvale, CA. The company’s focus is surgical tools and equipment, specifically the da Vinci Surgical System. The da Vinci System uses robotic technology to create minimally invasive techniques for surgery. Over 6,000 systems are installed in hospitals across the globe.

Intuitive Surgical has nearly 10,000 full-time employees with a market cap eclipsing $100 billion. ISRG is one of the least volatile stocks in this list as measured by beta, although it's currently trading near its 52-week low.

Deere and Company (NYSE: DE)

Yep, good old John Deere is a lot more than just tractors. The oldest and largest company on this list, Deere and Company provides agricultural and harvesting equipment to farms of all sizes across the globe. What types of robots can farmers use? How about cotton pickers, sugarcane harvesters, seeding equipment, sprayers, hay and foraging machinery and mid-size tractors and residential mowers. Deere has a huge volume of products and no shortage of global customers.

With over 75,000 employees, Deere is a global player in the markets. The company’s market cap is over $126 billion, and it posted a record $43.5 billion in revenue in 2021. Despite these lofty numbers, the stock is relatively cheap with a P/E ratio of 22 and a forward P/E of 18. 

iShares Robotics and Artificial Intelligence Multisector ETF (NYSE: IRBO)

Picking winning stocks in any sector is difficult. The robotics sector is expected to advance quickly, but that also means today’s darlings can be tomorrow’s losers in a short amount of time. Using a sector ETF can increase your odds of having winners in your portfolio since you’ll own a basket of stocks instead of a single name. The IRBO ETF from iShares provides exposure to the robotics sector for an affordable management fee.

The fund holds 53% U.S. stocks but also has holdings from Canada, Europe, Asia and Australia. The 0.47% expense ratio is lower than most funds in the robotics and AI sectors, and there’s plenty of liquidity with more than $330M under management. The fund also has a good mix of large, mid and small cap stocks so investors get exposure to robotics from all angles.

Overview: Robotics Stocks

The idea of robotics often stirs images of complex machines operating in a futuristic society, but in reality, robotics is a science that began hundreds of years ago. Leonardo da Vinci wrote extensively about his ideas for automated machines that could reduce the friction and stress on humans in the workforce. By the mid-1700s, a number of self-operating machines had been created, including a mechanical duck that pretended to eat grain. Investing in metal ducks didn’t produce many millionaires, but the idea of using machines to enhance efficiency while reducing human error and injury continued spreading.

Today, robotics combines computer programming and mechanical engineering to create machines capable of performing all kinds of different tasks. Robots assemble cars, cut out tumors, build skyscrapers and explore everywhere from the depths of the oceans to the farthest reaches of the solar system. Public companies in a wide array of industries are using robot technology to enhance their systems, and there’s no shortage of investment opportunities to take advantage of. 

How to Buy Robotics Stocks

To invest in robotics stocks, you’ll need capital and access to shares. Determine how much capital you’re willing to devote toward the robotics industry. Typically anything more than 3% to 5% of your capital in a single stock is probably too much risk if you want a diversified portfolio.

Once you’ve determined how much capital to invest and which stocks to buy, you’ll need to locate a broker that has shares available. Thankfully, all the stocks on this list trade on the Nasdaq or the New York Stock Exchange, so locating them shouldn’t be a problem for any major brokerage you have an account with.

Best Online Brokers for Robotics Stocks

Since you can find these shares at any reputable broker, you’ll want to choose one that best fits your investment style and goals. Here’s a list of brokers to consider:

Features to Look for in Robotics Stocks

Revenue growth: Using margins to analyze robotics stocks can be tricky since some software and hardware firms have different fixed costs to produce their goods. Since the robotics sector is expected to grow at 10% annually through 2028, look for companies that are consistently growing revenue as well. 

Sustainable debt level: One thing that can stymie growth in a competitive field like robotics is too much debt. Companies in the sector must be able to move quickly when trends change and have the ability to cycle cash into research and development. A company saddled with too much debt will struggle to stay ahead of the curve.

Commitment to innovation: Larger firms may be able to outspend and overwhelm their competition, but that’s an inefficient way to get ahead. The best companies in this space will be constantly innovating and looking for better ways to do things. Most robotics firms will be plowing profits back into research and development, building new factories or equipment and applying for plenty of patents.

Pros and Cons of Robotics Stocks

Sector diversity: Investing in robotics doesn’t mean resigning yourself to a single sector or field. Robotic innovations can help companies from the agricultural sector to the healthcare sector. Wherever there's a tedious task that requires precision or repetition, robots will be there.

Capital intensive: Companies in the robotics sphere usually have to spend a lot of money to get their products off the ground. Research must be completed, patents must be filed, prototypes must be built, and production must be brought up to scale. And once products are scaled and launched, maintenance and upkeep become an issue, especially with machines that can break, rust or malfunction. 

Strong growth expectations: The robotics sector is primed for serious growth over the next decade and healthy expectations are good for investment in a world that looks pretty uncertain at the moment. Statista projects the robotics industry to grow to $70.6 billion in revenue by 2028.

Potential worker displacement: Modern economies have found ways to adjust when major disruptions occur, but automation is something unique with potentially wider and longer-lasting effects. Jobs requiring manual labor could be severely threatened by efficient machines that don’t need to rest. Worker displacement could send shockwaves through the economy.

Are Robotics Stocks a Good Investment Right Now?

So far, 2022 has been a roller coaster for stocks, especially those in the tech sector like many robotics firms. Short-term investing when interest rates are rising can be tricky, and growth stocks often suffer most in those environments. But long-term investing in the robotics sector could pay off as automation and AI begin to filter into more areas of life.

Robotics and AI are Aiding Different Sectors Across the Investment Spectrum

Robotics and AI are certain to change the future in many ways. Automation will create efficiencies in dangerous and difficult tasks while also creating new jobs in programming, coding and engineering. Some jobs will be lost, but others will be gained. 

The sector is bubbling with excitement, but it's unfolding in an uncertain environment. Many of these stocks are currently trading below their 50- and 200-day moving averages, an area where stocks can be dangerous to play around with. That’s why despite the excitement, proper due diligence is still required for stocks in this industry. Broader economic and geopolitical conditions can throw a wrench into even the most promising sectors.

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