The #1 Stock to Profit on the Rise of Robotics
To borrow the famous title from one of my favorite action films, we’re witnessing “the rise of the machines.” Robotics is the investment theme of a lifetime and it just got a helping hand from the U.S. Senate.
This week, the Senate passed by an overwhelming margin a $195 billion industrial policy bill that aims to funnel substantial funding toward research and development (R&D) in robotics, machine learning, quantum computing, microchips, artificial intelligence, and other leading edge technologies that will define competitiveness in the 21st century.
The surest way to wealth is to pinpoint a trend with irresistible momentum and find the leading company behind it. One such multi-year trend is robotics, of which ABB (NYSE: ABB) occupies the vanguard.
ABB is a mega-cap industrial company that’s a dominant developer of advanced robotics. However, many investors mistakenly view the company as a conventional industrial play, a widely shared myopia that makes the stock a good value right now. The stock is a “game changing” technological innovator that’s poised to deliver market-beating growth over the long haul.
During the economic recovery this year, as the coronavirus pandemic gets under control and businesses re-open, the stock market is rotating toward economically sensitive cyclical plays. ABB fits the bill.
Founded in 1883 and headquartered in Zurich, ABB is one of the top robotics companies in the world. ABB has nearly 21,000 employees in 53 countries around the globe. Its facilities for R&D and manufacturing are located in China, the Czech Republic, Japan, Norway, Mexico, the United States, and Sweden.
Innovation plus diversification…
With a market cap of $70.2 billion, ABB is a global diversified powerhouse that’s also a “go to” company when construction activity picks up. A manufacturer of electrical equipment for utilities and industrial customers, ABB operates through five divisions: Power Products, Power Systems, Discrete Automation and Motion, Low Voltage Products, and Process Automation.
ABB’s diversification bestows stability during economic downturns. But it’s when the economy picks up, as we’re seeing now, that ABB really shines.
ABB’s stock has outpaced the broader market so far this year, with a gain of 24.21% versus 12.34% for the S&P 500 index (see chart).
ABB shares are poised for further market-beating performance this year and beyond. The company consistently spends heavily on R&D, as it combines conventional manufacturing muscle with advanced high technology. Investors do well by focusing on far-sighted tech companies that are devoted to robust R&D.
ABB’s management is positioning the company to reap long-term growth from the increasing transfer of manufacturing capabilities to robots. At the same time, ABB’s diversification has held it in good stead amid difficult pandemic conditions.
The company has successfully enhanced operating profits through cost cutting and improved performance in Robotics, as well as in its Power Systems segment that builds projects such as offshore wind farms.
Renewable energy is a thriving area, with the Biden administration and other foreign governments such as China gearing up to invest vast sums in its development. ABB also is an infrastructure play and as such, should benefit from a slew of public works projects throughout the world.
The average analyst expectation is for ABB to generate year-over-year earnings growth next quarter of 66.7%; 26.5% for the current year; and 30.6% next year. And yet the company’s 12-month forward price-to-earnings ratio is only 26.1, an attractive price in the context of projected earnings growth.
With a healthy dividend yield of 2.52%, ABB provides a “trifecta” of growth, income and value.
Robots that heal…
The push for robotics is a powerful trend in the health services sector. Computerized systems, for example, can translate a surgeon’s hand movements into corresponding micro movements of instruments inside the patient.
This dynamic explains the increasing prevalence of telemedicine. Robotics is being integrated with ultra-fast wireless capabilities to transform the doctor-patient relationship.
Our investment team has pinpointed the best plays on telemedicine, but they’re flying under the radar. The time to invest in these little-known companies is now, before the herd catches on and bids up their shares. For details, click here.