Stocks to Own When Robots Take Your Crappy Job
Matt is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Sometime in the near future, you’ll drive to work, go into your cubicle and stretched across your keyboard, you'll see a pink slip.
On your seat will rest a cardboard box, the universal symbol of “you’ve been dismissed.”
The next thing you know, a security guard is standing next to you. But, wait a minute, as you look into the guard's steely, vacant eyes, it hits you. That’s not Hank the security guard! It’s a robot!
OK, so it’s not exactly a great opening for a science fiction movie, but it’s a good thought experiment for investors who want to consider the fast-approaching role that automation, robotics, and artificial intelligence will play in the economy.
That should probably say, “are playing in the economy,” because robots have already started to make their mark in the marketplace and most believe this trend is just starting.
While resistance is futile to this onrushing wave of technological innovation, you can position your portfolio correctly to actually ride this wave.
The stock of iRobot (NASDAQ: IRBT) has climbed about 20% in 5 years, amidst soaring revenue. In those same five years, the company has gone from $307 million in revenue to $465 million. Over the last two years, the manufacturer of the Roomba vacuum cleaner robot has seen its earnings per share (EPS) go from 97 cents a share to $1.48 a share. The price to earnings (PE) is about 16.
As iRobot begins to establish the global market, we should see that EPS grow -- along with competition. So, keep an eye on competitive threats as they arise.
Remember Otto, the autopilot on the movie, Airplane!? It's not as far-fetched anymore.
Robots won’t just be scurrying around on the floors, replacing janitors; they might also be flying overhead and taking the cockpit away from pilots.
Aerial drones are big business for military contractors like Raytheon (NYSE: RTN), but the company is starting to enter new markets, like homeland security and law enforcement. In time, drones could find a place in the cargo and passenger flight sector.
Raytheon has established a leading presence in defense and homeland security. They’ll likely expand their market for drones, too. The company’s most recent EPS was notched at $5.28 a share. A year before the EPS was set at $4.69. Revenue meanwhile has hovered between $23 billion and $25 billion over the past five years. The PE just dropped below 10.
Let’s remember something about Raytheon, though. It’s one of the more controversial calls in this list. If Raytheon’s version of Skynet goes a little crazy flying around up there and causes some collateral damage -- or even death -- your stock will be in peril. Talk about the Terminator.
Most of us think of robots as metallic, clanking vaguely human-looking creatures with pincers. Robots that iRobot and drones like Raytheon build come closest to those robotic visions. But, actually, the robots that most workers are afraid of are automation machinery -- which look nothing like the little guy from Lost in Space.
But, it’s still a way to invest in robotics.
You may want to investigate Siemens AG (NYSE: SI).
Siemens has a low PE, around 14, and a steady EPS. In 2009, the EPS was at $3.38 a share, rose to $5.46 and then leaped to $7.13 in 2011. In 2012, it settled back to $5.45 a share. So, not spectacular, but with more interest in squeezing each dime out of the factory floor through automation, Siemens, which derives about a third of its revenue from automation, should be in a good position.
You now know that robots may one day be walking down the factory aisles and flying around the neighborhood. But, they may be in your pocket, too.
Most people refer to robotic intelligence as artificial intelligence -- AI -- or machine learning.
Siri, the helpful voice in your iPhone, has been a feature hit on Apple’s (NASDAQ: AAPL) iPhone. Since it’s been a hit, you can bet that Apple engineers and product developers are investigating more ways to utilize AI.
Apple’s stock has slid about 15% in the past year, but its low PE (11) and the moat -- as Buffett would say -- continues to make it attractive.
And if Apple is researching AI, then Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT) are also probably sniffing around -- likely with electronic robotic noses. You should consider all three as possible AI plays.
With your portfolio properly adjusted, you can now better embrace your soon-to-be robotic overlords.
mlswayne has no position in any stocks mentioned. The Motley Fool recommends Apple, Google, and iRobot . The Motley Fool owns shares of Apple, Google, Microsoft, and Raytheon Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!