Weekly Bot Brief 5-7-02021
"There is no force on earth more powerful than an idea whose time has come" Victor Hugo
Bots in The News:
While the Bot Index entered 2021 with a wide margin of excess performance over the broader averages, recent trading patterns denote a narrowing of the differential built up since the Index’s inception in 2016. That recent trend continued in the first week of May with the bots producing a 14 basis point return, far below the 1.23% of the S & P 500. While the return generated by the Bot Index was just barely breakeven, the differential between the performance patterns of the better performers and the worst performers was dramatic. Nearly half the 30 components of the Index experienced gains or losses more than 5% for the week. In the past five plus years of the Index’s history this has never happened. The announcement of earnings drove much of the variance in performance.
Of the significant gainers for the week, Oceaneering International carried, by far, the most impactful performance for the Index. Management reported that the earnings per share for the quarter was three cents, significantly above the consensus of Wall Street’s expectations for a loss of a nickel. The turnaround convinced Bank of America to up its ranking of the company from ‘neutral’ to a ‘buy’ causing the stock to soar 43.26%.
While far from as dramatic as the OII announcement, Textron blew past consensus earnings of $.47 and reported a $.70 quarter. Revenue growth came in at 3.7% higher than the prior year and the stock gained almost 6%.
ABB Ltd.’s 5.18% was in response to its earnings beat of $.31 versus expectations of $.28. Revenues came in at $6.9 billion, up 11% year over year.
In the past few weeks the Japanese stocks within the index have had a tough go. However, this week Fanuc Corp. and Yaskawa Electric each rebounded by 5.72% and 5.07% respectively.
There were nine companies whose stocks retreated in excess of 5%.
The Taiwanese company Hiwin Technologies was the leader among the losers with a twelve and a half percent drop. Political factors may have had an influence on the performance due to rising tensions between the Island and China. It certainly didn’t help that this week’s The Economist cover story was entitled, “The most dangerous place on Earth” in referring to Taiwan.
Both NIO Ltd. and Tesla joined the ranks of the weaker performers due to the shortage of semiconductor chips in the supply chain that is hampering production throughout the auto industry. The stocks fell 7.28% and 5.23% respectively.
Immersion Corp’s rosy earnings picture of good revenue growth and EPS of $.07 (versus Y-O-Y of -$.16) simply met expectations and disappointed investors to the tune of a 7.80% decline in stock value.
Likewise, a good earnings report by Cognex of $.39 as opposed to Wall Street’s expectations of $.35 did not excite investors. Neither did the only 1.85% growth in revenues. The stock dropped almost 10% as shareholders expected more for their company who has been trading at a premium of 61 times earnings.
Faro Corp.’s 6.25% slide was also due to investor disappointment in the 3 cent EPS. The consensus of the Street was that the company would report a 7 cent gain.
Finally, 3D Systems announced it will report earnings on Monday, May 10. Recent analysts’ comments have revenues virtually flat. The stock fell 10.82%.
A Word About Intellectual Property:
This past week President Joe Biden indicated he was considering the rejection of any patent protection for the efforts of Pfizer, Moderna and Johnson and Johnson in the production of their vaccines for the Coronavirus. In something of a timely release, the March issue of The American Economic Review carried a research analysis entitled Knowledge Spillovers and Corporate Investment in Scientific Research by Professor Ashish Arora, Sharon Belenzon and Lia Sheer all from Duke University. The authors used data from 800,000 corporate publication and patent citations to develop an understanding of the Research and Development by corporations in the U.S. They noted that in 2018 corporations invested $337 billion in R & D, but of that portion only about one fifth of that went into pure research. The
authors noted that “firms were less willing to produce such knowledge, preferring to shift attention and resources from upstream research to downstream development.” This less R and more D was felt that “firms were more concerned with ensuring a return on their investment in research, than they are likely to focus on fewer research projects, more likely to serve clearly identified internal needs, and perhaps narrower in scope and less likely to spill out to others.” The conclusion from the analysis was that “The declining corporate engagement in research may be contributing to the reported decline in R & D productivity and the associated decline in productivity growth.”
Certainly, any ‘toying’ with patent and intellectual properties are likely to have an impact on corporations’ willingness to extend capital toward research projects and further expand the ‘D’ in R & D to the extent that global U.S. competitiveness suffers.
Member: American Economic Association, Society of Professional Journalists, United States Press Association. Institute of Chartered Financial Analysts, Robotic Industries Association, Member IEEE.
The Bot Brief is a weekly newsletter designed for economists, investment specialists, journalists, and academicians. It receives no remuneration from any companies that may from time to time be featured in the brief and its commentaries, analysis, opinions, and research represent the subjective views of Balcones Investment Research, LLC. Due to the complex and rapidly changing nature of the subject matter, the company makes no assurances as to the absolute accuracy of material presented.