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ROBO Global sees US-China trade war as rare market opportunity to invest in robotics and AI stocks

ROBO Global Director of Research Jeremie Capron says he sees 'room for continued improvements' in fundamentals, sentiment throughout the rest of the year

FANUC industrial robots
Robotics supplier FANUC has one of the largest offerings of factory robots with payload capabilities from 0.5 to 2,300 kilograms

The US-China trade war induced pullback presents investors with “a rare opportunity” to increase exposure to robotics, automation and artificial intelligence (AI) companies at discounted prices, according to a report from ROBO Global.

US stocks fell sharply this week as China moved to raise tariffs on US goods and take other retaliatory measures after Washington last week increased duties on Chinese imports and both sides appeared to harden their positions.

“We believe that such a pullback presents investors with a rare opportunity to increase exposure to robotics, automation and artificial intelligence companies at discounted prices,” wrote ROBO Global director of research Jeremie Capron. 

READ: AeroVironment is changing the landscape of precision agriculture, says ROBO Global

ROBO Global created the ROBO Global Robotics & Automation Index, the world’s first benchmark index to track companies that focus on robotics, automation and artificial intelligence.

“We believe that a resolution to the trade war is likely before the G-20 summit in Osaka at the end of June,” wrote Capron.

According to ROBO Global strategic advisor and Gavekal Research CEO Louis-Vincent Gave and his team, both sides face “significant political pressure” to ultimately secure a deal.

READ: ROBO Global captures the high-octane growth of robotics and artificial intelligence

“President Trump needs to shore up his 2020 chances, while Xi Jinping looks to give his recently revived economy a much-needed boost and to tame critics,” wrote Capron. “Both sides also stand to lose significantly in the case of a breakdown, which would undoubtedly send the markets in a downspin.”

The report said the US and China have agreed to support significant market-access openings in a variety of sectors and to introduce “credibly tougher enforcement” of intellectual property rights and protections for foreign investors — a move likely to create a “boon” for foreign suppliers of advanced technology in the industrial robotics market.

The report noted that the earnings season has brought its “fair share” of good news so far.

“This is because order rates in China began to improve in March, with the upward climb continuing in April following improvements in credit growth early in the year and a raft of better-than-expected macro numbers in the first quarter,” wrote Capron.

Hidden gems

The report said FANUC Ltd (OTCMKTS:FANUY), the world’s biggest industrial robot company, hit a “turning point” as orders grew sequentially for the first time in five quarters. Fanuc stock is up 23% year to date.

of the world’s biggest industrial robot company

FANUC which has a vast number of industrial robots with lightweight painting arms, grippers and intelligent features has been a longtime ROBO Global index member. With over 24 million products installed worldwide, FANUC is a very familiar brand for manufacturers. It has the largest offering of robot models with payload capabilities from 0.5 to 2,300 kilograms. 

Other Japanese factory automation and robotic system exporters like Harmonic Drive Systems Inc (TYO: 6324), OMRON Corp (OTCMKTS:OMRNY), NACHI-FUJIKOSHI Corp (TYO:6474) are all up anywhere from 33% to 47% year to date, the report added. All three companies are components of the ROBO Global benchmark index.

“With China effectively bottoming, Europe poised to dodge a recession, and analysts remaining relatively downbeat, we see room for continued improvements in both fundamentals and sentiment throughout the remainder of the year,” wrote Capron.

Investors can buy directly into the popular ROBO ETF based on the benchmark index comprised of around 87 top robotics, automation and AI companies.

The ROBO Global Robotics & Automation Index ETF (NYSEARCA:ROBO) traded 1.12% lower to $38.11 on a broad market pullback.

Contact Uttara Choudhury at [email protected]

Follow her on Twitter@UttaraProactive 

Quick facts: ROBO Global

Price: $39.29

Market: NYSE
Market Cap: $2.19 billion
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Full interview: ROBO Global assessing the new 'mega-trends' in AI and robotics

Proactive London speaks to ROBO Global's director of research Jeremie Capron and co-founder Dr Henrik Christensen. Henrik is an active member of the ROBO Global Strategic Advisory Board. Capron joined ROBO Global in 2017 with more than ten years of experience as an equity research analyst...

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