The Global X Robotics & Artificial Intelligence Thematic ETF (NASDAQ:BOTZ), which started trading in Sep. 2016, is one of the most widely followed exchange-traded funds (ETFs) that specialize in a niche market. If you want to get in on the AI boom, BOTZ ETF might be your easiest entry point.
The robotics and AI industry is expected to grow in double digits in the next decade. Analysts expect global AI revenues to grow “$3.2 billion in 2016 to an expected $ 89.85 billion by 2025.” Similarly, “by 2022, the size of the surgical robots and artificial intelligence market is expected to be worth 1$8 billion.”
Robots hoover the floor in our homes, perform surgeries, search for objects underwater, and entertain moviegoers. In general, AI makes it easier the train robots. As automated devices that integrate machine learning, robotics and artificial intelligence enter our daily lives at an increasing speed, the investment theme of these segments become more attractive for the average investor.
Therefore, if you are a long-term investor that is interested in participating in the growth potential of the technological advances, you may want to consider investing in the sector through a fund like the BOTZ.
Here is why:
Global Mix of Robotics and AI Players
BOTZ ETF follows the Indxx Global Robotics & Artificial Intelligence Thematic Index. This index, which has been around since 2010, divides the robotics and artificial intelligence sector into four sub-themes:
- Industrial Robots and Automation
- Unmanned Vehicles and Drones
- Non-industrial Robotics (such as application in agriculture, healthcare, or entertainment)
- Artificial Intelligence
The fund has 37 exchange-listed stocks in its portfolio — with the top 10 companies accounting for 60.69% of the holdings. In less than three years, assets under management have reached $1.7 billion. The fund’s expense ratio stands at a reasonable 0.68% or $68 per $10,000 invested.
BOTZ has a high level of exposure to Japan (49% of assets), followed by the U.S. (31%) and Switzerland (10%). In terms of sector concentrations, industrials top the list (45%), followed by information technology (33%), and health care (14%). Other industries include consumer discretionary, energy, and communication services.
Intuitive Surgical (NASDAQ:ISRG), the developer of robotics-assisted surgical systems that specialize in minimally invasive surgical procedures, has the highest weighting among the holdings of the BOTZ ETF.
Next is Keyence Corp NPV (OTCMKTS:KYCCF), which develops machine vision systems and fiber optic sensors, followed by Mitsubishi Electric Corporation (OTCMKTS:MIELY), which specializes in manufacturing robots. As a general rule, the companies in the fund derive at least 50% of their revenues from robotics or AI industries.
Short-term Technical Analysis
The 52-week range of BOTZ ending April 18 has been $24.54 and $16.01. Year-to-date, BOTZ is up over 27%. So, in the next few weeks, there might be some profit taking in the fund.
As a result of the recent impressive run-up in the price, short-term technical indicators have become somewhat over-extended. Investors who pay attention to short-term oscillators should note that Visa’s technical message has also become “overbought.”
In April and May, BOTZ could trade sideways for several weeks, and even have a pullback toward $20 or even $19 level, where the stock is likely to find major support.
If you already own BOTZ ETF, you might want to hold your position. However, within the parameters of your portfolio allocation and risk/return profile, you may consider placing a stop loss at about 5-7% below the current price point.
If you are an experienced investor in the options market, you may also consider using a covered call strategy with approximately a three-month time horizon.
The Bottom Line on Robotics and AI Stocks
If you are an investor with a long-term focus, then a thematic ETF such as BOTZ would give you a good and potentially rewarding exposure to robotics and artificial intelligence stocks.
In addition to the BOTZ ETF, you may also want to learn more about two other similar funds, namely, the ROBO Global Robotics & Automation Index ETF (NASDAQ:ROBO) and the First Trust Nasdaq Artificial Intelligence and Robotics ETF (NASDAQ:ROBT).
As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.