Weekly Bot Brief Newsletter on Robotics 9/20/2019

"There is no force on earth more powerful than an idea whose time has come" -Victor Hugo

Bot Index Highlights:

Seems as if the market has emulated the movie Ground Hog Day over the past few months. Initially, there is optimism regarding the status of the ongoing China/U.S. trade wars, which push the bots upward due to their higher betas. Typically, the weaker or lower priced names dominate the top performers. Then when trade talks breakdown, as they did this week, the bots get hammered except for stocks in the defense industries. It was that latter scenario that unfolded in the past week. The Bot Index fell 2% versus the S & P 500’s mere drop of one-half a percentage point. The only real gainers within the Index were Teledyne who rose 1.29%, Northrup Grumman up 1.24% and Lockheed Martin whose fortunes gained .88%, all of which are defense manufacturers, and all were among the prior weeks’ worst performers. This risk on/risk off situation has been played over and over. Diplomats from either side could earn a fortune by going long on historically weaker bot names when coming to the negotiation table. Likewise, selling short those same names or buying defense names when they renege or cut short a trade session would be a profitable (and hopefully an illegal) strategy.

In the loser’s group there were five components whose declines exceeded five percent. The 9.41% bounce that Oceaneering International experienced in the prior week was nearly erased by this week’s decrease of 6.64%. Joining OII were the low-priced issues NIO Corp. that was down 5.29% and Ekso Bionics who fell 5.26%. Investors continue to have apprehensions for the prospects of two bellwether issues and drove down iRobot 5.73% and NIVIDA Corp. 5.08%

The New Apple iPhone 11 Series:

Just as the swallows return to San Juan Capistrano every March from their Argentina migration, so Apple introduces its new smart phones each autumn. This September, the company’s iPhone 11 and iPhone 11 Pro series hit the showrooms. With new features in photography and extended battery life, the strong demand caused famed analyst Ming-Chi Kuo to increase his range of expected sales by 5 million to 70-75 million units. The pricing of the phones added to the demand as the iPhone 11’s $699 price tag stimulated Chinese sales while the top price of the iPhone 11 Pro was attractive to U.S. buyers. Even with prices lower than last year’s model, the phones were priced at 1 to 1.3 the average annual salary in China. In the U.S. the Pro price, at $1099, was lower than the 10 series whose higher end was $1449.

 Consequently, the Bot Brief’s calculation of how many shares of Apple stock it takes to purchase a new phone dropped dramatically. In past articles, the Bot Brief has encouraged Apple to review its pricing policy and, perhaps management has come to the same conclusion. The new ratio of 5.05 is significantly below last spring’s 8.38 shares-to-phone and was aided by both the lower series price and the increase of share price from $172.91 to Friday’s $217.73. The graph below notes the historical and current relationship of the stock and the iPhone price.

Member: American Economic Association, Society of Professional Journalists, United States Press Association. Institute of Chartered Financial Analysts, Robotic Industries Association.

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 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