Weekly Bot Brief on Robotic Research and Investment Review 10-12-2018

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

Bot Index Highlights:

When the Bot Index was created at the end of 2015, the analysts at Balcones Investment Research were disheartened to witness its decline of 7.61% after the first week of trading. Fortunately, that was an aberration whose magnitude of decline has yet to be equaled in the ensuing years. Unfortunately, we came close this week as all but three components of the index posted negative returns. The robotic issues fell almost 5 ½ % in the week ending October 12, 2018, the worst decline since that opening week. The broader market also took a hit, sliding some 4.10%.

There were five companies in the index that experienced double digit declines. They included:

IRobot Corp.                     -14.57%

Accuray Inc.                      -12.99%

Keyence Corp.                   -11.69%

Cognex Corp.                    -11.59%

Faro Technologies            -11.43%

There was no appreciable news which would account for the significant declines simply market forces drove down the higher beta and more vulnerable issues.

Even the three companies that managed to post positive results for the week were as a result of (dead cat) bounces from extreme weakness in prior periods. The best performer for the week was NIO, the Chinese electric car company that has had roller-coaster ride since its September 11th IPO. The stock jumped 19.17% during the week; however, the prior week witnessed a 10% decline. Since the IPO price of $6.26, the stock has ranged from a low of $5.35 to a high of $13.80. It closed this week at $7.46. Cyberdyne popped up 2.43% bouncing from the prior week’s 13% drop and Ekso Bionic’s .9% improvement followed a 9% retreat.

The Bot Brief Interview with Jeff Burnstein, President of the Association for Advancing Automation and President of the Robotic Industries Association:

In conjunction with developing a video format, the Bot Brief recently conducted taped interviews with both Jeff Burnstein and Dr. Arthur Laffer. We have already provided an excerpt from the Laffer dialogue and now we are pleased to present you with Mr. Burnstein’s view on the industry.

RIA’s own Bob Doyle conducted the interview and initiated the conversation with a request to discuss the history and role of the Association.

Mr. Burnstein commented, “RIA is the leading trade group in the world with over 1,100 companies involved in robotics, machine vision, motion control, artificial intelligence basically all the technologies that are driving automation forward. Our job is to promote the successful use of these technologies by educating people on how to apply them.

To the question, “How has the Association membership evolved over the past ten years?”

Mr. Burnstein responded that, “What a change! It is growing so much more rapidly now as a result of the growth in the use of these technologies in industry and the technology is going beyond industry but now you see it in all facets of our daily lives. You can go into stores and see the results of automation. We can go into warehouses. You can go into restaurants and have a robotic barista serve you coffee. There are so many exciting things going on and that serves to drive our membership.”

Mr. Doyle inquired about international activities involving robots to which Mr. Burnstein commented,

“That has probably been the biggest change in the industry in the 35 years that I have been involved. Robot technology was developed in the U.S. Joe Engelberger is, of course, the pioneer in the subject and we currently have awards in his name. It didn’t take off in the U.S., so Joe became a bit frustrated and licensed the technology to Japan. Japan then became the leading robotic user and, of course, the Europeans became major robotic suppliers as well as users. And now China has become the world’s largest robot user and has goals of becoming the world’s largest robot supplier. It does cause a lot of excitement but also tensions globally as a result of the trade policy between the U.S. and China.”

The next question was one that Mr. Bernstein has frequently broached and that is regarding robots taking away human employment jobs.

Mr. Bernstein suggested that, “Certainly robots aren’t taking all the jobs. Our viewpoint has been, for many years, that robots save and create jobs. Why do we say that? One reason is that we looked at it over a 20-year period and we found something extraordinary. That whenever robot sales went up, unemployment in the U.S. went down. And when robot sales went down, unemployment went up. Now that doesn’t sound like a job killer. As we came out of the great recession of 2008-09, in the record period of expansion in the use of robots in the U.S., unemployment fell from near 10% to below 4%. It is just the opposite of being a job killer. It is a job creator. Now why is that? It is because companies invest in automation, so they can become more competitive, make better products, so that they can ship their products faster and, as a result, they win more business. They win more business, then they add more people. The future, as is the present, is that people and robots are working together.”

The final question posed to Mr. Bernstein was, “What do you see of the industry in the next ten years”.

To which Mr. Bernstein responded, “Joe Engelberger used to say. ‘If you are going to make predictions, make sure they are far enough in the future to make sure that you are not alive at the outcome.’ Well, I plan on being here ten years from now so I will have to be a little bit careful. We have seen a lot of predictions over the years that have not turned out to be accurate. But what we are seeing is a rapid advancement of Artificial Intelligence and the impact that AI is going to have on robotics and all aspects of our lives is going to be very significant. We’re already seeing it but we are going to see a lot more in the next ten year. I really think this Artificial Intelligence revolution is going to make a major impact.”

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.