Robotics ETF Offers Growth At A Surprisingly Reasonable Price

Look now because the Global X Robotics & Artificial Intelligence ETF BOTZ is on the mend.

One of the largest exchange traded funds dedicated to the robotics and artificial intelligence themes is up 4.51% over the past week and if the fund can take some near-term resistance, it could easily gain another 8% on its way back to its 52-week high.

What Happened

Up more than 20% year to date, the $1.35 billion BOTZ tracks the Indxx Global Robotics & Artificial Intelligence Thematic Index, providing exposure to “companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence (AI), including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicle,” according to Global X.

Data confirm that robotics is indeed a fast-growing market.

“Between 2009 and 2017, the unit sales of industrial robots increased from 60,000 to 381,000 annually, a 26% compounded annual growth rate (CAGR),” according to Global X research.

“The auto industry has been at the forefront of this adoption, contributing the largest share of demand, as efficiency and precision remain top priorities. Autos are followed closely by the consumer electronics industry, primarily using robots for smaller-scale tasks such as machining and assembly of the latest gadgets. Together, the two industries have comprised of about two-thirds of total robotics purchases.”

Why It's Important

The average market value of BOTZ components is $12.9 billion, indicating that this is mostly a mid-cap fund. Additionally, the fund's 39 holdings primarily reside in fast-growing industries, such as electronic components and health care equipment.

Those traits may imply that BOTZ is a growth story trading at dangerously high multiples. However, only one of those assessments is accurate and it's the one about growth, not frothy valuations.

Based on price-to-sales growth and enterprise-value-to-sales-growth, BOTZ trades at 0.20 times and 0.21 times, respectively. Those are discounts to the S&P 500, confirming investors don't have to pay up for the BOTZ growth story.

What's Next

A longer-ranging catalyst for BOTZ is the booming industrial robotics market and data confirm that boom has some room to run.

“The industrial robotics market (excluding the prices of peripherals, software, and system engineering) was valued at USD 16.9 billion in 2018 and is expected to grow at a CAGR of 12% during 2019-2024 to reach USD 31.7 billion by 2024,” according to Research and Markets. “In terms of volume, the market registered a shipment of 420 thousand units in 2018 and is expected to grow at a CAGR of 12.7% to reach 774 thousand units by 2024.”

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