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Robots are being used to clean and disinfect hospitals and public areas during the COVID-19 pandemic.

RODRIGO BUENDIA/AFP/Getty Images

Robots have been getting attention recently as health-care systems worldwide look for ways to cope with the COVID-19 pandemic.

Specifically, robots are being used to clean hospital rooms and operating theatres, disinfect public areas and take temperatures and pulse as well as free up maintenance and medical staff for other tasks.

“The coronavirus is acting as an accelerant,” says Hans Albrecht, vice president, portfolio manager and options strategist at Horizons ETF Management (Canada) Inc. in Toronto. “We have had industrial robots for 30 years, but the difference now is that artificial intelligence (AI), robotics and automation are intertwined. So, the robots learn and they’re getting better and better at what they do.”

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For investors, it’s an area of opportunity. While robots are gaining a foothold in health care, helping surgeons operate and as janitorial tools, their uses are expanding in manufacturing and in e-commerce, in which more and more robots are sorting and packaging goods.

The advantage of robots is that they’re experts at performing simple, repetitive tasks. They can do them flawlessly and continuously, freeing people up to do more important things. The combination of better hardware and advances in AI are making them cheaper and easier to use.

“Innovation takes off in times of turmoil because that’s when companies are willing to look at new ways of doing things,” says Sam Korus, a robotics and automation analyst with Ark Investment Management LLC in New York. “When you need to cut costs, you start exploring options. Robots can do certain things better than people, so they have a chance to take hold.”

ARK manages five exchange-traded funds (ETFs) that focus on technology and innovation, including a robotics fund. In Canada, it subadvises for Emerge Canada Inc., which launched its ETFs here in July 2019, including Emerge ARK Autonomous Tech & Robotics ETF (EAUT-NE). Horizons launched Canada’s first ETF in this space in 2017 with Horizons Robotics and Automation Index ETF (RBOT-T).

Both Mr. Albrecht and Mr. Korus say collaborative robots, or cobots, which are machines guided by people, have a lot of momentum. They have dropped in price to $25,000 or less and are easy to operate.

Amazon.com Inc. (AMZN-N) has been a pioneer, with service robots that help package and move goods. The machines select items, put them in boxes, stack the boxes on skids and move them, assisted by workers.

Amazon started with 1,000 warehouse robots in 2012 with its acquisition of Boston-based Kiva Systems, since renamed Amazon Robotics. It now has 200,000.

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“Cobotting is a combination that’s really powerful,” Mr. Albrecht says, citing BMW as another example. The automaker’s productivity has increased significantly by pairing humans with robots. Where once “these were big, lumbering, dangerous machines behind a fence, now, [workers] sit beside them while the [robots] perform intricate tasks.”

Learning software has been one catalyst. Before AI, the robots required extensive and expensive computer programming to understand what to do. Now, they learn by performing tasks and creating a database of information.

“Taking an object off a shelf and placing it in a box is something that people do very well,” Mr. Korus says. “Five years ago, robots could barely do that. How do you get a robot to pick up an egg and not smash it? Now the robot says, ‘I’ve seen this before. It’s fragile. Don’t squeeze hard.’”

Mr. Korus says there were 400,000 robotic arms sold in 2018, which will grow to 1.6 million by 2024.

Delivery robots are another opportunity. For example, privately-held Starship Technologies, based in San Francisco, is developing small self-driving robotic delivery vehicles. They look like coolers on wheels and have been introduced on university campuses and elsewhere to pick up and deliver food. Domino’s Pizza Inc. is one company experimenting with this technology.

A third area is fully automated factory systems in which companies like ABB Ltd. (ABB-N), the Switzerland-based engineering firm, is a leader. Others include North Reading, Mass.-based Teradyne Inc. (TER-Q) and Rockwell Automation Inc. (ROK-N).

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The Emerge ARK and Horizons ETFs approach this theme differently.

The Horizon’s ETF is managed passively, following the Indxx Global Robotics & Artificial Intelligence Thematic Index. It has a management fee of 0.45 per cent and $41.5-million in assets under management (AUM). The 36 stocks are weighted by market capitalization with 44 per cent of the companies based in Japan and 40 per cent based in the U.S. Almost half the holdings are in the area of industrial robots. The top holding is Nvidia Corp. (NVDA-Q).

The Emerge ARK ETF is managed actively, has a management fee of 0.80 per cent and AUM $2.6-million. It typically holds between 35 and 50 stocks and a much higher component of U.S. stocks, at 71 per cent, while 7 per cent are in Asia. It also has a smaller pure robotics holding at 23 per cent. One-third of its holdings are in autonomous vehicles and 30 per cent is in 3-D printing. The top holding is Tesla Inc. (TSLA-Q).

Both Mr. Korus and Mr. Albrecht say the best way for investors to tackle this sector is through a basket of stocks.

“Technology is very fast-moving, so unless you are really good at picking these stocks you probably want to let somebody else do it,” Mr. Albrecht says.

Adam Mayers is a contributing editor to the Internet Wealth Builder investment newsletter.

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