After being stressed by momentum sell-off for the most of this year, 3D printing and robotics stocks have strongly bounced back and have seen an incredible surge lately on favorable broad industry trends (read: The Momentum Stock Crash Puts These ETFs in Focus).
This is especially true, as most analysts made upward revisions to their earnings and revenue estimates, suggesting that the companies are poised to grow at a healthy rate in the coming months. In addition, the prolonged weakness in the robotics and automation stocks makes the current valuation cheap, leading to attractive entry points for investors.
Further, this corner of the technology segment is in the early stages of development and set for stupendous growth over the coming years with new entrants expanding this fast-evolving industry. As per Canalys, the global 3D printing market, including printer sales, materials and associated services, is expected to grow from $2.5 billion in 2013 to $3.8 billion in 2014 and reach $16.2 billion by 2018. This represents expected compound annual growth rate of 45.7% over the next five years (see: all the Technology ETFs here).
Investors can target this growing market with the relatively niche ROBO-STOX Global Robotics and Automation Index ETF (). This product, buoyed by the high-flying 3D printing stocks and solid industry trends, has risen nearly 5% over the trailing one month. The ETF attracted about $105 million in its asset base since its debut more than nine months ago and sees moderate average daily volume of more than 53,000 shares.
Given this, it might be worth it to shed some light on this ETF and its holdings for those who are unfamiliar with the product, but are thinking about jumping in on the space. Below, we highlight some of the key details of ROBO and how the recent run-up in 3D stocks led to this fund’s solid run.
ROBO in Focus
The fund tracks the Robo-Stox Global Robotics and Automation Index, which measures the performance of the companies that derive a portion of revenues and profits from robotics-related or automation-related products or services (read: 5 Long Term ETF Buys for Your Roth IRA Contribution).
The product has an interesting mix of ‘bellwether’ and ‘non-bellwether’ stocks. Bellwether companies are indicative of the performance of the segment, while non-bellwether firms have some aspect of their business in robotics, but don’t rely entirely on the space for their revenues. ROBO puts 40% of its portfolio in the bellwethers and 60% into the non-bellwethers, though each individual ‘bellwether’ stock make up about 2.2% of the index, compared to just over 1% for the non-bellwether firms.
The ETF holds about 78 stocks with heavy exposure to American firms at 38%, closely followed by Japan (26%). Germany, Switzerland and Thailand round off to the top five countries with a single-digit allocation. From a sector look, about half of the portfolio is dominated by industrials while technology and healthcare make up for 32% and 10% share, respectively.
Further, the fund is tilted toward small and micro cap stocks, which account for 41% of total assets while growth securities also dominate the fund’s return in terms of style. The product is pretty well spread out across each security as none of these holds more than 2.85% of ROBO (read: 3 Small Cap ETFs Outperforming the Russell 2000 Index).
Some of the well-known 3D printing stocks include ExOne (XONE - Snapshot Report), 3D Systems (DDD - Analyst Report) and iRobot Corporation (IRBT - Analyst Report) that gained over 49%, 22.5% and 17.5%, respectively, in the trailing one-month period. Deere (DE) and Siemens AG are among the non-bellwethers stocks.
Investors should note that ROBO is one of the high cost choices in the unleveraged ETF space, charging 95 bps in fees per year from investors. However, this steep expense seems justified due to its unique niche exposure, which is definitely a merit to this high cost fund.
This ETF looks a perfect play for growth investors seeking above-average returns. This is because robotics and automation looks like an industry, which is likely to gain prominence over the next several decades.
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