ROBO A Buy Amid Robotics Optimism And Ongoing Re-Shoring … – Seeking Alpha

onurdongel

Re-shoring and automation are key takeaways for global companies following 2022's volatility. Uncertain geopolitical conditions and upheaval across parts of Asia and South America cast doubt on the previous multinational cooperation capitalists enjoyed in the 2000s and early part of the 2010s. Today, harnessing automation and investing in robotics, moving away from second and third-world labor markets and materials sources, are growing in importance.

I have a buy rating on the ROBO Global Robotics and Automation ETF (NYSEARCA:ROBO).

BofA Global Research

According to the issuer, the ROBO ETF invests in global companies that are driving transformative innovations in robotics, automation, and artificial intelligence (RAAI), including companies that create technology to enable truly intelligent systems that can sense, process, and act, and companies that apply those technologies to deliver RAAI-enabled products - including robots - to businesses and consumers.

The ETF features a high 0.95% annual expense ratio, so I don't suggest owning this beyond an intermediate time horizon. With 79 equity holdings, net assets are more than $1.3 billion while the median 30-day bid/ask spread is a bit high at 0.15% - so, using limit orders during periods of light liquidity is prudent. Average daily volume is more than 100,000 shares, while the total dollar volume is decent at $6.2 million.

Digging into the portfolio, data from Morningstar show that ROBO is very much a growth-heavy fund. More than half the allocation is on the right side of the Style Box, with just 1% of ROBO in value. So, lower interest rates should generally help the ETF, but broader macro trends in favor of AI and automation have overtaken the rate-trade factor in recent months. With a high P/E ratio and low yield, this is not a fund for value and income-oriented investors, but earnings quality is high. It's also important to note ROBO's small-cap bent - being equal weight in nature means more SMID exposure versus cap-weighted funds.

Morningstar

ROBO is not a concentrated portfolio. Just 17% of the fund is invested in the top 10 holdings. Also, there is a diverse sector, industry, and geographic exposure, according to ROBOGLOBAL. Still, Industrials and Energy comprise most of the sector breakdown, while Healthcare has about a 13% weight in the ETF.

ROBOGLOBAL

For a check on seasonal trends, data from Equity Clock show a bullish stretch ahead for ROBO. After often notching a low in March, on average, the ETF steadily rises with higher highs and higher lows from Q2 through early Q4. The end of the year has typically featured a strong thrust. From the end of May into mid-October can be volatile, though.

Equity Clock

ROBO has some positive technical features. Notice in the chart below that shares has been working on a rounded bottom pattern. Just recently, the fund broke out from a symmetrical triangle consolidation formation, but there is still some resistance just above $55 to work through. I see the next resistance near the 2021 lows around $60 - that is also where a significant amount of volume by price enters the picture.

But with a now-rising 200-day moving average, the bearish trend has been reversed. Overall, I like the momo on ROBO, and see higher prices ahead. $50 appears as key support, so long here with a stop under that price point looks favorable.

StockCharts.com

Despite a high valuation and lukewarm seasonal trends, I like the emerging bullish trend in ROBO. Near-term upside is likely, but the low $60s to near $70 could be tougher to navigate through.

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ROBO A Buy Amid Robotics Optimism And Ongoing Re-Shoring ... - Seeking Alpha