In recent years, most investors and stock analysts haven’t focused very much on artificial intelligence. The cloud, e-commerce, streaming, and 5G have all been more popular areas. Yet AI, with its true empowerment of computers, will change our world much more than all those other technologies. And one of the best ways to invest in AI is through robotics stocks.
One important point is that machines don’t have to look like miniature human beings to be robots. My definition of a robot would be any machine that’s able to autonomously or semi-autonomously do a job or task that previously could only be carried out by human beings.
Whatis.com has a similar viewpoint; it defines a robot as “a machine designed to execute one or more tasks automatically with speed and precision.”
With AI and sensor technologies rapidly advancing, more jobs and tasks will be done by robots, and robots will get better at performing the functions that they’re assigned.
Here are three of the top robotics stocks you can buy today:
Robotics Stocks: Elbit Systems (ESLT)
Earlier this year, Elbit announced that it had sold a “search-and-rescue” version of the Hermes 900 to a southeast Asian nation. The product semi-autonomously performs search-and-rescue missions over oceans. The UAS “has been equipped with an inflatable life-saver raft besides detection and identification capabilities.”
Hermes, which automatically spots survivors and picks a drop point, carries rafts that can rescue up to 24 people. The UAS also inflates the rafts.
Obviously, Hermes 900 prevents anyone from getting killed during search-and-rescue missions and enables such missions to be conducted in extremely dangerous conditions. The U.K. recently observed the Hermes 900 performing simulated missions, and Elbit has reported that the UAS “is already deployed with more than a dozen advanced customers around the globe providing search, rescue and reconnaissance capabilities.”
Moreover, the company says that its “Stereo Vision System … allows unmanned ground vehicles.. to autonomously detect and classify image-based objects.” It added that the system is less costly than competing offerings.
Since Elbit looks poised to offer many more highly useful robotic systems in the future and the military could definitely use many robots for dangerous missions, ESLT stock is definitely one of the more promising robotics stocks.
Trading at a forward price-earnings ratio of just 17x and a market capitalization of only $5 billion, the shares have room to climb much further.
ABB appears to be one of the largest suppliers of industrial robots in the world. According to the company’s website, it has installed more than 400,000 robots. It offers robots that perform many types of tasks for industrial companies, including glazing, gluing, painting, welding, and loading. The company also recently started selling robots for hospitals, a potentially lucrative market.
Unsurprisingly, given its high leverage to automotive and industrial markets, ABB stock has been badly hurt by the novel coronavirus pandemic. Factory closings and weaker car sales contributed to a 10% year-over-year decline in its second-quarter revenue, and its orders tumbled 14% YOY.
But with auto sales strongly rebounding and a vaccine for the coronavirus likely coming soon, ABB’s industrial business should rebound a great deal in 2021, pushing ABB stock much higher.
The shares are up over 50% from their April lows, but they have a reasonable forward price-earnings ratio of 19x and an attractive dividend yield of 3.3%.
Nuance Communications (NUAN)
Nuance’s Dragon Medical One is a product for healthcare professionals that performs many of the functions typically performed by a secretary or assistant. Specifically, it uses AI and health professionals’ speech during examinations to electronically record details about each patient.
According to Nuance, the product is 99% accurate and does not require any health care professionals to undergo any special training. It also works with Windows devices and is compatible with electronic health records systems, or EHRs.
Nuance also offers Dragon Medical Adviser, which can be paired with Dragon Medical One and functions like a research assistant. Additionally, Dragon Medical Adviser provides medical data and information, suggesting ways that clinicians can diagnose conditions and even making its own diagnoses.
I believe that the revenue potential of Nuance’s products is huge. In August, the company announced that MITRE, a research organization, would use Drago One Medical One to electronically record data about cancer patients into EHRs with clinicians’ voices. All medical researchers and even researchers in most other fields could save a great deal of time by adopting Nuance’s products.
Importantly, on Sept. 15, Nuance’s mobile Dragon offering was integrated into Microsoft’s (NASDAQ:MSFT) collaborative Teams product. The deal leaves Nuance well-positioned to benefit from the telehealth megatrend and incentivizes Microsoft, with its huge sales team, to promote Nuance’s products.
Nuance’s top line is growing at a 10% annual clip, and its revenue growth has accelerated in recent years. A Seeking Alpha columnist expects its growth to accelerate to 13% to 21%. I think that its deal with Microsoft, along with its ability to save health care professionals a great deal of money, should indeed cause its growth to accelerate going forward. In 2019, the company’s operating income came in at an impressive $222 million.
NUAN stock is trading at a forward P/E ratio of 40x, which is quite reasonable these days for a tech stock with great growth prospects.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, Plug Power, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.