January 2022 has been a tricky begin to the 12 months offering, in our opinion, traders one other actual alternative to earn cash. The market has been hit by rising inflation and low cost charge expectations and, consequently, a rotation from development to worth/cyclicals. As a present or potential ROBO Index investor, we wish to inform you about how ROBO is positioned, in addition to stress the chance round automation and robotics going into 2022 and past.
The present drop in share worth could also be unsettling for traders. That’s comprehensible. The sudden tech rout has despatched inventory valuations tumbling to their lowest degree because the first few months of the pandemic. Including salt to the wound, this shift arrived simply as optimistic key earnings for a number of the key ROBO constituents started. But when we take a deep breath and step again, we will see that a lot of the froth has already subsided for a lot of market segments. Headline multiples have contracted to extra affordable ranges, and expectations have been meaningfully (and appropriately) curtailed.
Importantly, the query stays: Will robotics, automation, and AI proceed to develop in 1, 3, and 5 years? We imagine the reply is unequivocally YES, which is why traders want to remain invested on this theme. Downturns are by no means fairly, however we proceed to imagine that robotics, automation, AI, and healthcare applied sciences symbolize one of the crucial highly effective funding alternatives of our era. The pandemic proved that time, creating an pressing name to automate which accelerated the adoption of present applied sciences and elevated demand for extra analysis and improvement.
Given the wholesome reset in valuations, we wish to illustrate why we imagine this presents an ideal shopping for alternative for our traders:
- ROBO is a battle-tested portfolio with an 8+ 12 months historical past of efficiently navigating markets by choosing best-of-breed corporations that exhibit dominant market share and technological management, in addition to sustaining world diversification with no concentrated bets—the highest 10 positions symbolize lower than a 20% weight, and we rebalance quarterly to easy out volatility and keep that important diversification.
- ROBO is at the moment buying and selling on 27x ahead EARNINGS, simply 10% above its long-term 24.6x historic common, with 10 names with EV/Gross sales <1x, making it a way more balanced portfolio from a valuation standpoint. Moreover, about 10% of the portfolio trades at a 52-week low whereas 40% are 10% from their 52-week low.
- Roughly 40% of the ROBO portfolio captures publicity to cyclical/worth areas in Manufacturing, Industrial, & Logistic Automation, which we imagine are within the early days of a multi-year restoration.
- Nearly 60% of our corporations in ROBO are web money optimistic vs 17% of the S&P 500. As well as, 94% of index members in ROBO are worthwhile primarily based on ahead earnings, and that may be a testomony to the businesses that undergo our rigorous choice with our proprietary screening.
- All knowledge represents as of 1/27/2022 from ROBO International Analysis
- An organization that’s web money optimistic = an organization that holds no debt, or debt on the steadiness sheet is lower than money.