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. government.

Industrial policy is back in vogue in Washington. The sprawling CHIPS and Science Act, enacted into law last year, provides more than $200 billion toward scientific research in areas such as robotics, artificial intelligence, quantum computing, and other leading edge technologies that will define competitiveness in the 21^st century. The bill’s funding is starting to kick in this year.

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.

You almost never hear the talking heads on CNBC mention ABB, and that’s good news for average retail investors. Despite its size and global reach, ABB’s stock is a hidden gem.

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 research and development (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 $59.7 billion, ABB is a global diversified powerhouse that’s also a “go to” company whenever the construction sector picks up. Global construction activity is expected to rebound in the latter part of 2023, after central banks ease their tightening cycles.

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 shows life that ABB has historically outperformed. Investors with a long-term horizon should scoop up this stock now, ahead of the inevitable recovery and bull market to come.

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According to a recent report from research firm Statista, global revenue in the robotics industry is on track to generate a compound annual growth rate (CAGR) from 2023 to 2027 of 5.52%, resulting in a market volume of US$43.32 billion by 2027 (see chart):

ABB 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 conditions, such as the recent pandemic.

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 of 77.40% in the current quarter; a whopping 310% next quarter; and 18.50% for the current year. The company’s 12-month forward price-to-earnings ratio is only 18.50, a reasonable valuation in the context of projected earnings growth.

With a healthy dividend yield of 2.86%, ABB provides a “trifecta” of growth, income and value.

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John Persinos is the editorial director of Investing Daily.

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