Index-based and thematic investing have been on the rise in recent decades as more investors look for easy, research-light investment strategies. In 2019, investments in passive strategies surpassed investments in active strategies for the first time, and the lead of passive investing has only grown since then.
This is one of the key factors behind the increasing underperformance of many active investing strategies. More and more, the stocks that investors are buying are the ones that are bought as part of an index or an exchange-traded fund centering around a specific investment theme, such as real estate, clean energy or lithium batteries for the EV market.
The stock market is far from the only area of the market that is becoming increasingly automated. As robotics technology advances, the prospect of automating certain tasks for higher efficiency and lower operating costs is becoming more feasible. According to the Industrial Robotics Market report from Market Reports World, the global industrial robotics market is expected to achieve a compound annual growth rate of 14.11% through 2024. Meanwhile, the global artificial intelligence market, which crosses over with the robotics market in several places but ultimately has much broader applications, is expected to grow at a CAGR of 36.10% through 2028, based on a report from Verified Market Research.
With strong growth expected in robotics and artificial intelligence, investors may be interested in the five high-quality stocks below. These stocks all have GuruFocus financial strength and profitability ratings of at least 5 out of 10, and they have also been growing their top and bottom lines in recent years. Moreover, they are all members of the Global X Robotics & Artificial Intelligence ETF (BOTZ, Financial), so they should benefit not only from market growth but also from the increasing popularity of passive investment vehicles.
John Bean Technologies
John Bean Technologies Corp. (JBT, Financial) is a developer of food processing machinery and airport equipment. Headquartered in Chicago, the company aims to add value to the food and air travel industries by automating certain processes.
GuruFocus gives the company a financial strength rating of 5 out of 10. The Piotroski F-Score of 6 out of 10 indicates a healthy financial situation, while the Altman Z-Score of 4 shows the company is not in danger of bankruptcy. The profitability rating is 8 out of 10, driven by a return on capital of 57.55%, which outperforms 92% of industry peers.
John Bean Technologies has been showing some growth in recent years with a three-year revenue per share growth rate of 1.6% and a three-year Ebitda per share growth rate of 5.2%. Business floundered in 2020 due to difficulties in the food and air travel sectors, but demand has begun to recover.
Nvidia
Nvidia Corp. (NVDA, Financial) is a Santa Clara, California-based technology company that designs graphics processing units and system on a chip units. It has a strong presence in the mobile computing and automotive markets and is a leader in artificial intelligence and internet of things innovations.
Nvidia has a GuruFocus financial strength rating of 6 out of 10, with a cash-debt ratio of 1.63 and an Altman Z-Score of 27.93 showing plenty of cash on the balance sheet. Its profitability rating comes in at 9 out of 10 with operating margins that are outperforming 94% of industry peers.
The company has a three-year revenue per share growth rate of 20% and a three-year Ebitda per share growth rate of 18.3%, which are high numbers, especially considering the company has been a net issuer of shares over the same period of time.
Daifuku
Daifuku Co. Ltd. (TSE:6383, Financial) is the leading global provider of automated material handling solutions. Based in Osaka, Japan, the company provides customers with the solutions they need to automate processes in a wide variety of industries, including pharmaceutical, transportation and food handling.
GuruFocus gives Daifuku a financial strength rating of 8 out of 10. The interest coverage ratio of 86.31% and the cash-debt ratio of 3.51 show a fortress-like balance sheet. The company’s profitability is rated 8 out of 10 as well, with the return on invested capital more than doubling the weighted average cost of capital.
Over the past three years, Daifuku has recorded a revenue per share growth rate of 4.6% and an Ebitda per share growth rate of 3.3%.
Tecan Group
Tecan Group Ltd. (XSWX:TECN, Financial) is a Swiss company that develops, produces and distributes automated workflow solutions for laboratories in the life sciences sector. Its narrow focus has helped it grow quickly, as has the fact that investment in life sciences research is growing.
Tecan Group has a GuruFocus financial strength rating of 8 out of 10, driven by a Piotroski F-Score of 7 out of 10 and a cash-debt ratio of 15.2. Its profitability also gets a rating of 8 out of 10, with the return on capital of 97.06% beating 92% of industry peers.
The company has achieved a three-year revenue per share growth rate of 9.3% and a three-year Ebitda per share growth rate of 13.8%, despite a share buyback ratio of -0.8, which shows the company has been a net issuer of shares.
Intuitive Surgical
Intuitive Surgical Inc. (ISRG, Financial) is a leading developer and producer of robotic products for minimally invasive surgery. Based in Sunnyvale, California, it is particularly famous for its da Vinci Surgical System platforms, which altogether have performed more than 5 million surgeries over the past 20 years.
GuruFocus gives the company a financial strength rating of 9 out of 10. It has no debt on its balance sheet and a strong Piotroski F-Score of 7 out of 9. The profitability rating is also 9 out of 10 on the back of operating and net margins that outperform 91% of industry peers.
Intuitive Surgical has a three-year revenue per share growth rate of 10.3% and a three-year Ebitda per share growth rate of 3.3%. Growth encountered a stumbling block in 2020, and the three-year share buyback ratio is -1.6%, indicating net issuance of stock.
