Megatrends: Part 3 — Robotics
Who gets paid when a robot takes your job?
Merry Christmas! Whether you celebrate the holiday or not, I do, and I hope your day is merry even if it’s got no special significance.
Now that we’ve gotten that out of the way, let’s get to the real reason you’re reading this today. Because it’s certainly not to get a holiday greeting from me.
As you already know from my two previous articles, I had to get a lot done in advance in order for us to give our support staff a little vacation at the end of the year.
So I took the easy way out and planned a four-part series on trends I see shaping the markets for the next 10 years or more. Part 1 was about 5G. Part 2 focused on renewable energy.
And today, we’re getting into Part 3, which you already know from the title of this piece is about robotics.
The Robots Are Coming
Robotics is simply the design, construction, and use of machines (aka robots) to do tasks usually performed by humans. And robots are already widely used in industrial applications around the globe.
They perform simple, repetitive tasks for the automobile manufacturing industry. And they work in hazardous environments that humans just can’t survive in.
They help us dismantle bombs while staying far enough away to ensure our safety. They even scoot around our floors sucking up trash (think Roomba, a robot vacuum).
But the applications we use robots for today are nothing compared to what they’ll be capable of doing tomorrow.
You’ve no doubt heard of someone who used to work in a factory and lost their job to a robot. And by now, you’ve heard of algorithmic trading where robots trade stocks instead of humans.
A side story about that: My closest friend worked for a company that was automating the trading process at the start of all this. His company helped design the first trading system that completely replaced human traders. The desk it took over went from 12 people earning tens of millions a year to one engineer and two techs getting paid around $100,000 a year.
That’s just sort of an interesting story, but it should also drive a point home. Those traders didn’t think a machine could do what they did, but that hedge fund is even more successful now.
So if you don’t think a robot can take your job, you’ve got another think coming.
There are robot doctors and surgeons coming that won’t accidentally sneeze and cut the wrong blood vessel. There are robot nurses coming that won’t forget to take all the sponges out before they sew you back up.
There are already robots writing content that humans can’t tell is written by a machine. They’re producing music, writing top 10 hits, and even helping Hollywood figure out what kind of movie you’ll want to see once you can go back to the theaters.
Literally, every job on this planet can be taken by a robot in the future. Even the robot repairman will be a robot eventually.
So what happens when the robots take all the jobs? Who gets paid?
Make Sure You Get Paid
Just a few years ago, something like universal basic income seemed like a communist pipe dream.
But fast-forward to today and it’s gaining more and more acceptance. That’s because with every day that passes, our advances in artificial intelligence and mechanics get us a little closer to that day when there are no jobs for humans.
And if there aren’t any jobs to be had, it’s not really your fault if you don’t have a job. But without a job (for anyone) we’ve got to figure out how people get paid so they can eat.
But then you look back at the past year. Remember that second stimulus check we got? Me neither. That’s because it never came because our politicians are more concerned about their job security than about our health and well-being.
So if they couldn’t get just one check for $1,200 cut while a virus was ravaging our economy, I don’t know how you’d expect them to get 12 checks a year out to 100% of Americans.
That means it’s likely going to be on us for a long time. And if there are no jobs left, there’s only one way left to make money.
And that’s investing.
But that begs the question: Where should I invest?
And it wouldn’t be fair of me to tell you that investing is your only option and then just leave the rest to you.
So let’s take a look at a couple of companies making major strides in robotics. And at the end, I’ll let you know about a secret income stream I’ve uncovered that transfers the robots' "salaries" to your bank accounts.
It’s All in the Name
First off, I’ve got one whose product I already mentioned. I’m talking about Roomba maker iRobot (NASDAQ: IRBT).
The company absolutely dominates the market for robotic vacuum cleaners. It has 82% of the market share in North America, 61% in EMEA, and 64% in Japan.
If you exclude China, it has 70% of the global market. And if you keep China in the data, it still has over half the market at 52% of global robotic vacuum sales.
And its technology is so superior to competitors that most of them choose to pay iRobot fees and just use its patents.
The company has been growing revenues at a rate in the mid-teens for years. And its stock is up about 300% in the past ten years. But the best times are still ahead.
Robotic vacuums are still an oddity in an American household. And there are still millions of households to convert. The market is at about $10 billion annually and iRobot takes 52% of those sales.
Also, the company is expanding its product offerings to attract more consumers. It’s even going to be selling robotic lawnmowers soon too.
The bottom line here is that iRobot gives investors a way to profit from consumer adoption of robots without the cyclicality of the industrial markets like automotive manufacturing and electronics.
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David and Goliath
Another way investors can get exposure to robotics without being at the whims of economic cycles in industry is through surgical robotics manufacturers.
And in that industry, I’ve got two potential investments for you. One is the little guy that’s been around for a while. The second is a heavyweight in the health care industry that’s making a push into robotics too.
First off is Intuitive Surgical (NASDAQ: ISRG). It’s the manufacturer of the market-leading da Vinci robotic surgery system.
The company has been growing its top line by double digits for some time, and the shares are up over 300% since 2010.
Its surgery system is very expensive, so once it’s installed, a hospital isn’t likely to switch to another brand. So Intuitive’s growth driver will be how fast it can expand that base of installed da Vinci robots.
But there’s a big risk brewing for Intuitive, and it comes in the form of my second surgical recommendation, Medtronic (NYSE: MDT).
You see, Medtronic is already a massive player in the medical device industry. It’s inextricably intertwined with the U.S. health care system, and it’s nearly twice as big as Intuitive.
That means it’s got a little more clout to push around as it makes a bid to enter the robotic surgical market too.
The company has annual revenues north of $30.54 billion (compared to Intuitive’s revenues of about $5 billion) and it has nearly $11 billion in cash just sitting in the bank waiting to be spent on R&D.
I’m not sure who’s going to win this David versus Goliath-like battle, but I’m willing to bet shareholders on both sides will be well-paid as the victor is determined.
Have the Robots Pay You
And finally, I’ve uncovered a way you can collect a share of the salaries those robots are saving companies from paying.
That’s right. When the robots take all the jobs, the companies that used to hire us are going to have a whole lot of payroll they’re not using.
And I’ve found a way that any person with a computer and an internet connection can get a piece of the billions the robots will be saving these companies.
It’s a pretty intricate process, and I’m still not 100% convinced that something this good is actually real. You know what they say about things that sound too good to be true, right?
So I’m still finalizing my research on the strategy to make sure there aren’t any pitfalls or traps hiding out there to ensnare investors.
But with every day, I get more and more certain that this isn’t just the best way to invest in the coming robotic revolution; it’s the only way you should be investing.
I’m hoping to have my research all tied up in the next couple of weeks. And as long as nothing comes up that proves my theory wrong, I’ll be releasing my findings here in Wealth Daily in early 2021.
So while I don’t feel comfortable recommending it just yet, once I’ve addressed all my concerns, you’ll be among the first to get access.
Just make sure to keep an eye out for my emails. If this strategy really proves to be as profitable as it appears so far, a lot of people are going to try and take advantage of it.
And you know how investing works, the later you are to the party, the less punch you get to drink.
So keep an eye out for my emails because this is one party you’ll definitely kick yourself for showing up fashionably late to.
And of course, I'll be back next week (although you could say next year) on the first to give you my fourth installment on megatrends that will shape the future and drive profits for the next decade or more.
To your wealth,
After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter, and co-authors The Wealth Advisory income stock newsletter. He also contributes regularly to Wealth Daily. To learn more about Jason, click here.
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