This article is a part of InvestorPlace’s Best ETFs for 2019 contest. Tom Taulli’s pick for the contest is the Global X Robotics & Artificial Intelligence Thematic ETF (NASDAQ:BOTZ).
For InvestorPlace.com’s Best ETFs contest for 2019, my pick is the Global X Robotics & Artificial Intelligence Thematic ETF (NASDAQ:BOTZ). The fund covers two of my favorite growth areas of tech. But I think the timing should be good as well. The recent market correction has certainly taken a toll on the tech sector. So yes, there are some bargains available now for investors.
An ETF vehicle is a smart way to play AI and Robotics, as these sectors can be highly competitive. With diversification, investors have a better chance of capturing returns.
It also helps that the manager of the ETF, Global X, is well-known for its thematic investment vehicles. According to the company’s website, it targets “companies that may be poised to benefit from structural shifts in technology, people and demographics, and infrastructure development…” Just some of the focus areas of its funds include Fintech, IoT (Internet of things) social media and autonomous vehicles.
Finally, BOTZ should benefit from some major secular tailwinds. Here’s a look:
AI: Analytics technology in this market is forecasted to hit a staggering $70 billion by 2020, according to research from Bank of America (NYSE:BAC). In other words, there’s lots of room for growth for many players.
While AI has been around for decades, the technology has finally gotten to a point where it is highly useful. A big part of this has to due with the advances in processing power, such as with GPUs (Graphics Processing Units). This has made it possible to have much more accuracy with visual and audio recognition as well as in determining patterns and insights from huge amounts of data.
The applications for AI are also extensive. They cover industries like autos, healthcare, agriculture, military and manufacturing.
Robotics: This technology category has been crucial for car manufacturers for decades. But as robots’ systems have gotten more powerful and cheaper, the applications have been expanding. For example, in 2012, Amazon.com (NASDAQ:AMZN) shelled out $775 million for Kiva Systems, which allowed for increased automation of the company’s fulfillment centers.
But going forward, there are some catalysts that should help propel growth in the robotics market. One is the tight labor force. Then there are the problems of offshoring, as wages have been increasing. The U.S. trade tensions with China will also be a driver, as companies look at domestic manufacturing.
In terms of the market size, it is enormous. According to IDC, the spending on robotics and drones is forecasted to rise by 17.6% this year to $115.7 billion. By 2022, the market is projected to hit $210.3 billion. That should make funds in this area strong contenders for the Best ETFs title.
Background on the BOTZ ETF
Global X Robotics & Artificial Intelligence Thematic ETF is relatively new, having launched in late 2016. The fund currently has assets of $1.61 billion and an expense ratio of 0.68%.
Of course, it has been a rough year for the fund, with the return coming to nearly -24%. But in 2017, it posted a blistering gain of 58%!
In terms of the portfolio, the average market cap is $9.1 billion and the forward price-to-earnings ratio is 20X. Some of the holdings include Intuitive Surgical (NASDAQ:ISRG), Nvidia (NASDAQ:NVDA), iRobot (NASDAQ:IRBT), Brooks Automation (NASDAQ:BRKS) and Maxar Technologies (NYSE:MAXR).
Now, there will likely to be more volatility with the BOTZ ETF. But I think the categories of AI and robotics should remain strong, even with economic uncertainty.
Also, as part of the Best ETFs contest, I will provide three quarterly updates on BOTZ, so stay tuned!
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.