I’ve always been skeptical about the ‘robots are taking our jobs’ sentiment because globalization has had a much bigger employment-displacing effect in developed countries. Recent trends, however, have me considering robotics providers as a long-term investment opportunity.
Citi’s monthly Global Theme Machine report, which monitors over 80 investment trends for performance and attractiveness, identified manufacturing onshoring as the most attractive global investment trend. This involves the moving of production facilities from lower wage developing nations back to home countries. Citi’s global product head Alex Miller emphasizes that automation is a big part of this trend.
The current labour shortage as major economies re-open has been well documented. Managers surveyed by the U.S. Institute of Supply Management were in near-panic mode in the most recent results when it came to searching for workers.
The pandemic has caused severe disruption in global supply chains. The ongoing global shortage of semiconductors, for instance, has resulted in shut-downs for major auto manufacturers and millions of gamers are still awaiting the chance to buy PlayStation 5s.
Onshoring will help alleviate supply chain concerns, reducing complexity, but major manufacturers will be reluctant to let higher wage costs – that’s if they can find workers – push profit margins lower. The answer seems to be a big jump in process automation and robotics investment.
The performance of major automation and robotics stocks has been mixed year to date, which implies that it’s still early for a potential investment in the sector. Switzerland-based ABB Ltd. has jumped 31.5 per cent year to date in U.S. dollar terms which is great, but Japan’s Fanuc Corp. and Wisconsin-based Rockwell Automation Inc. have only climbed 11.6 per cent and 18.0 per cent, respectively.
These are not thoughts I’m going to act on right away in my portfolio but I will be following relevant data closely in the coming months.
For readers looking for a more comprehensive look at the global automation trend, Citi has helpfully made “TECHNOLOGY AT WORK v6.0: The Coming of the Post-Production Society” publicly available here
-- Scott Barlow, Globe and Mail market strategist
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Ask Globe Investor
Question: When ETF companies publish performance data for their funds, are the returns before or after fees? And do they include dividends?
Answer: Exchange-traded funds and mutual funds report their returns after fees, with all distributions assumed to have been reinvested in additional units. Similarly, when a fund company provides a benchmark return for comparison – such as the S&P/TSX Composite Index – it is a total return with dividends reinvested. Standardizing returns in this way allows for apples-to-apples comparisons between funds and with indexes.
Unfortunately, not all ETF companies thoroughly explain what their returns measure, which leads to confusion. Bank of Montreal and Vanguard Canada, for instance, refer to the change in “NAV” (net asset value) or “market price” of their ETFs, which may lead some readers to believe, incorrectly, that dividends are not included.
BlackRock Canada does a better job with its iShares ETFs. Its ETF performance tables include a clickable information button that brings up the following text: “Total return represents changes to the NAV and accounts for distributions from the fund.”
What’s up in the days ahead
Stelco shares are on a roll as the steel industry booms, and special dividends could be on the way. Brenda Bouw will take a look at why analysts are so bullish on the stock right now.
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Compiled by Globe Investor Staff