Robotics Sector Declines But Growth Outlook Strengthens

Articles From: AlphaCentric Funds
Website: AlphaCentric Funds


Director, Key Accounts at AlphaCentric Funds

The Robotics and Automation (R&A) sector declined by a comparable 22.89% during the quarter, driven by a variety of macro factors, which included:

  • Higher Interest Rates – and by extension, higher discount rates for high growth companies operating in disruptive technology fields – resulting in P/E multiple contraction;
  • Supply Chain Disruptions, Higher Raw Material Costs, And Increased Freight Costs, driving increased COGS and resulting in EPS short falls; and
  • A Strong U.S. Dollar leading to slowing sales trends due to the decline in purchasing power parity for foreign buyers of U.S. made products, and depressed net asset values of foreign company holdings in U.S. portfolios.

In addition, small-cap companies lagged the sector substantially due to their low relative floats as liquidity conditions became more restrictive.

Looking forward, we would note that the size of the global robotics market is expected to reach $74 billion by 2026, according to the well-regarded industry think tank Mordor Intelligence. That translates to an approximate 17.5% compound annual growth rate. The key end-markets driving this growth include Automotive, Food & Beverage, Electronics, Logistics Services, Military & Defense, and Medical & Healthcare Services.

The largest growth is expected to come from Asia, followed by North America, and then Europe. Fanuc Corp is expected to be the largest beneficiary of this global investment trend, followed by Kuka AG. No one knows how the markets will ebb and flow over the next quarter or two, but over the next four years we are confident that our long-term investment thesis is fundamentally sound.


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