Savvy investors are always on the lookout for the next big trend to sink their teeth into. Robotics stocks aren’t exactly a new way to invest your money, but these companies are gaining traction because of the novel coronavirus pandemic.
If there is one thing that this crisis has done, it has exacerbated the need for robotics in our lives. Any job involving human contact is considered hazardous. That’s why we are we see more of an onus on mechanical replacements.
Now for the fun part. There are a couple of ways of playing the space–you can either invest in pure plays or more diversified conglomerates. Alphabet (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL) have robotics divisions, but it will be years before they become significant revenue drivers.
Meanwhile, you have pure plays that are focused on developing robots and drones that can do human chores. Those companies are the ones that we will be focusing on in this article. However, one thing that you have to keep in mind before moving forward. A lot of these companies aren’t making profits at this stage.
Bottom line you have to believe in the company’s long-term potential before investing your hard-earned capital in these.
- iRobot (NASDAQ:IRBT)
- Intuitive Surgical (NASDAQ:ISRG)
- Rockwell Automation (NYSE:ROK)
- ABB (NYSE:ABB)
- Nuance Communications (NASDAQ:NUAN)
Robotics Stocks to Buy: iRobot (IRBT)
Delaware-based iRobot is a company that makes consumer robots like robot vacuums and mops. The company is known for its Roomba product — a series of autonomous robotic vacuum cleaners.
Boring? To be sure, when AI and robotics are advancing in several niches and innovative business lines, the IRBT stock vacuum story could seem a bit dull. But then again, you could also use the word stable, a keyword that every investor likes. iRobot’s net income has consistently grown over the last four years by more than 250% since generating $42 million in 2016.
From a balance sheet perspective as well, the company is doing a great job. It has $227 million more in cash than it has in long-term debt. Basically, iRobot is a solid company, which is now more valuable than before the pandemic. Demand for automated home cleaning products will continue to grow by leaps and bounds due to the new normal.
Intuitive Surgical (ISRG)
Our next entry, Intuitive Surgical, is a component of both the NASDAQ 100 and S&P 500 indexes. The firm develops, manufactures and markets robotic products to enhance patients’ clinical outcomes through minimally invasive surgery, most notably with its da Vinci Surgical System, used in more than one million surgical procedures per year.
The best part of investing in ISRG stock is that you are buying into a company that already has a competitive advantage over the development and commercialization of robotic surgery.
The technology also helps in certain other ways. For instance, it ensures fewer conversions to open surgery, greater flexibility and faster patient recovery times. And once you are using the machinery, it’s tough to transition to a different company because switching costs are very high.
So you have significant barriers to entry that are protecting profits, making the name one of the best robotics stocks out there.
Rockwell Automation (ROK)
Rockwell Automation has roots that go back to 1903. Initially, the company developed a carbon disc compression motor for industrial cranes. Now in the 21st century, the company is known primarily as a global leader in industrial automation. Clients stand to benefit substantially from adopting the industrial internet of things (IIoT) and its enterprise-grade analytics.
The only thing going against the company is that Covid-19 induced headwinds will stall industrial activity for the foreseeable future. That will affect its results since the adoption of its products has slowed down.
Markets are ignoring this fact, though. ROK stock is trading off its recent post-election high of almost $266 a share. But the long-run growth story for the company remains intact. And moving forward, we will continue to see increased automation across factory floors of the U.S. and indeed the world. That’s why you should take dips to establish or add to your position in this one.
ABB, formerly ASEA Brown Boveri, is a Swiss-Swedish multinational having interests across several sectors, including automation. The company is one of the largest suppliers of industrial robots in the world. It makes machines for industrial uses and is also venturing into the healthcare market.
The company suffered a hit due to the pandemic, as factories closed across the United States and worldwide. However, the blip is temporary, and you should be taking advantage of any weakness in ABB stock.
One important development to note is that the company is undergoing a reorganization process called the ABB Way under its new CEO, Bjorn Rosengren. It’s hoped that the process will help increase shareholder value. I believe that it should give you other reasons to invest in this one.
Investors pouring capital into the robotics space are always urged to be patient, and the returns will come. It’s heartening to see the company take a forward-looking approach and be a bit more aggressive in pursuing returns.
Nuance Communications (NUAN)
Our final entry on this list is a company that has intimate ties to the healthcare sector — Nuance Communications. Headquartered in Burlington, Massachusetts, the company provides speech recognition and artificial intelligence technology.
Nuance’s Dragon Medical One allows healthcare professionals to have a robotic medical assistant that will perform the same functions as a human assistant or secretary.
According to Nuance, the product is 99% accurate, and healthcare professionals do not have to undergo any training to use their offerings. It also has an agreement with Microsoft’s (NASDAQ:MSFT) that allows for the integration of its collaborative Teams platform with its product. A collaboration with such a big platform will do wonders for sales and brand recognition.
While NUAN stock is traded lately close to 52-week highs — having doubled in price from pandemic-fueled March lows, analysts at the high end of market targets see almost 15% upside from current levels.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. He has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.