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Weekly Bot Brief on Robotic Research and Investment Review 4-27-2018

POSTED 04/29/2018

Bot Index Highlights:Bot Index vs. S & P 500, 4-30-2018

In the worst relative performance since the Bot Index was created at the end of 2015, the market essentially dismantled robotic stocks in the week ending April 27, 2018. With only four of the 30 stocks in the index with positive returns, the Bot Index collapsed 4.39% versus the S & P 500, which was virtually flat. Two unlikely companies were the leaders in the positive column. Ekso Bionics led the gainers with a remarkable 15.53% increase. The company was subject to a CNBC story regarding their bionic vests which are currently being tested by Ford Motors in two assembly plants. Ekso’s vest provides workers with wearable strength and stability enhancements that permit greater safety and less muscle fatigue. The product received rave reviews as it seemingly provides a contrary argument that robots will replace workers. At the end of the feature, Ekso Bionics’ Russ Angold indicated that larger companies felt their vest was an augmentation to worker performance rather than an employee replacement.

Oceaneering International, Inc. was also among the gainers with a 6.67% increase despite reporting a quarterly loss of 50 cents per share versus Wall Street’s expectations for a loss of only 33 cents. The only other two gainers were Amazon who rose 2.95% as Goldman Sachs raised their target price to $2000 (currently trading at $1572.62) and Keyence who rose 1.30%.

The losers were many and, in particular, there were four stocks that experienced double digit declines. Clearly analysts, who were looking for 8 cents of first quarter earnings, did not like the 3 cents report of FARO Technologies Inc. The stock dropped 20.28% to lead the losers’ column. Also, Hiwin Technologies and Fanuc Inc. fell 15.58% and 11.16% respectively during the week. On May 2nd, 3D Systems will report its first quarter earnings; however, some investors (perhaps anticipating a disappointing quarter) chose to liquidate this week and drove the shares down by 11.47%.

Three other of the significant losers during the week included companies that reported first quarter earnings. Northrup Grumman             (-9.57%), Lincoln Electric (-9.08%), and IRobot (-8.29%) reported generally excellent numbers, however, investors used the good news to formulate exit plans. Lockheed Martin declined 8.51% probably as a result of peace talks in the Korean peninsula and Cognex Inc. (-9.21%), Mazor Robotics Co. (-8.84%) and Yaskawa Electric (-8.2%) rounded out the major decliners for the week.

It’s Still A Bad, Really Bad Idea:

On January 26, 2017 the Bot Brief tackled the issue of how governments are viewing the potential employment impact of robots in the work force. At that time a number of influential individuals were espousing the application of a ‘universal income’ as a means of replacing ‘earned’ income. The rationale behind such a scheme is that automation is replacing jobs at such a rapid pace that eventually unemployment would be so vast and so pervasive that social unrest would ensue and economic growth would stagnate. The evidence, instead, points to increases in economic activity due to productivity expansion and an enhancement to employment progress. Scientific and technological leaps forward have invariably served as a betterment to mankind in a variety of ways. The Bot Brief’s view is that the current activity expansion in space exploration, underseas mining, surgical advancements, transportation, production engineering, autonomous vehicles, infrastructure rebuilding, environmental issues, telecommunications, agricultural efficiencies,  and entertainment (reference a recent Bot Brief article on the new sport of drone racing) are all a result of robotic applications. All of which will, most likely, serve to open up significant new avenues of human employment.

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Back to Bot Brief’s January 2017 article, we suggested nine factors in which a ‘universal income’ was a bad idea. A synopsis of our thoughts at that time included the impact of emigration from countries that could not afford such a welfare distribution, the impact upon family planning, a potential negative impact upon the need for employment-leading education, a political Pandora’s box, self-esteem deterioration, funding sources, the impact upon intellectual and physical health, and the influence upon inflation. Apparently, the manifestation of some of these evils have now led to the cessation of a Finnish social experiment on their application of this form of social engineering. Back in 2016 the government of Finland launched a program of providing $685 per month to 2,000 of its citizens. The intent was to provide a safety net “to make sure that everyone has a cushion to try new ideas.” Clearly, the experiment was so costly and did not add an incentive to seek employment, that it was terminated even before the 2019 demise prediction by Fortune Magazine! To us, the concept of universal income is solution in search of a problem. With unemployment in the U.S. at 4.1% and 2.5% in Japan, two of the world’s leaders in AI, drones, autonomous vehicles, 3-D printing, and robotics applications, it would appear that statistics point to reinforce the Finnish government’s decision to end their social experiment. There simply has been no evidence of any negative impact that robotics has had on unemployment and any solution to a problem that fails to emerge is a problem unto itself.

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.

Balcones Investment Research can be reached at its website BalconesInvestmentResearch.com and is headquartered in Florida; with offices in Texas and North Carolina, United States

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