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Robots Are Just What The Doctor Ordered

21 February 2014 in Trading Ideas

You probably wouldn’t need to convince investors in our Robotic Revolution motif that this burgeoning industry is the real deal.

Since its inception just under a year ago, the motif has gained 35.7%. During that same period, the S&P 500 has gained 19.9%.

In the past month, the motif has increased 3.1% while the S&P 500, in that same period is roughly flat. However, a look over the past quarter shows the motif has increased 13.1%. In that same time frame the S&P 500 is up 3.2%.

Take three of the motif’s stocks – Intuitive Surgical, iRobot and Cognex, which together make up a little more than 39% of the motif’s weight.

Intuitive Surgical has jumped 11.5% in the past three months, which was helped immensely last month after a recent surgical study indicated that using robots in prostrate surgery results in a shorter average hospital stay and lower overall complication rate as compared to an open surgery.1

 

The study also found that as key measures improved as a surgeon’s robotic-assisted case volume increased. The news pushed the stock up by more than 8% in one day.

And earlier this month, another study revealed that robot-assisted hysterectomy procedures performed on women with non-malignant conditions provided better results than non-robot assisted surgery on several parameters. That news provided another lift since questions about costs and benefits related to the company’s da Vinci robot systems, particularly in hysterectomies, had hurt the company’s results and stock price for much of 2013.2

Shares of iRobot have been even more impressive, jumping nearly 29% in the past three months. As Forbes recently suggested, investors have spent much of 2014 embracing the company’s stock as a pure-play alternative for an expected robotics boom. Some of it, Forbes said, may be a benefit from Google’s recent purchase of Boston Dynamics as well as Amazon’s headline-splashing drone delivery plans.3

However, falling in 2012 as the US government scaled down its war plans and cut orders for more bomb-hunting robots, iRobot has also benefited from its renewed focus in the consumer space.

Cognex, meanwhile, has risen more than 21% in the past three months as the company’s promise in helping automate various industrial tasks has resonated with investors. (The stock has recently stumbled, however, after the company’s recent profit report.).

Three strong stock performances from three separate robotics segments: industrial, medical and consumer. While a significant outperformance from a few top holdings has driven the motif higher, it’s the cross-industry strength that may give investors more reason for cautionary optimism, while they pay close attention to warning signs that add to the risks of investing in companies that fall within an evolving and unproven industry.

1http://www.4-traders.com/INTUITIVE-SURGICAL-INC-9740/news/Intuitive-Surgical-Inc–Database-Study-Shows-Shorter-Hospital-Stay-Fewer-Complications-for-Robot-17774472/

2Trefis Team, “New Study Provides Good News for Intuitive Surgical,” Forbes.com, Feb. 7, 2014, http://www.forbes.com/sites/greatspeculations/2014/02/07/new-study-provides-good-news-for-intuitive-surgical/?partner=yahootix, (accessed Feb. 19, 2014).

3Brian Solomon, “Roomba maker iRobot Soars After Google, Amazon Show Off Robotic Future, Forbes.com, Dec. 17, 2013, http://www.forbes.com/sites/briansolomon/2013/12/17/roomba-maker-irobot-soars-after-google-amazon-show-off-robotic-future/, (accessed Feb. 19, 2014).

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