If You Missed Nvidia, This is Even Bigger
Summary
Kuran states that the robotics industry is experiencing "back-to-back breakthroughs" across industrial and humanoid robots, creating significant investment opportunities, particularly in the physical hardware stack required for these advancements. He notes that the total number of operational industrial robots has more than tripled in the last decade, with major demand growth expected from China. Kuran identifies four key stocks that he believes are well-positioned to capitalize on this trend, along with mentions of relevant ETFs as diversified options.
Mentioned Stocks
Reasoning: Kuran states that Novanta is a 'picks and shovels' supplier for the robotics industry, specializing in components like servo drives. The company is experiencing rapid growth, with an expected 21% revenue increase in the next quarter, solid net income, and operating cash flow, and is listed as 16% undervalued. Kuran indicates he likes the stock at today's prices, but he also highlights risks such as the acquisition of Riverpoint Medical making it less of a pure robotics play, increasing Chinese competition, and its relatively small market share. He would consider selling if the automation business doesn't grow faster than the medical side within two years.
Reasoning: Kuran identifies Allegro Microsystems as his overall top pick due to its specialization in edge chips for robotic movement, an area he believes is under the radar. He sees 'better upside at today's prices' compared to trillion-dollar AI stocks. Kuran notes Allegro's potential to sell chips worth $5 to $150 per robot joint across various applications, benefiting from growth regardless of specific robot manufacturers. While primarily automotive-focused, Kuran believes its expertise will lead to a 'hidden business growing inside the company' in robotics. The main risk cited is that it's unproven in the broader robotics market, making it a bet on future growth.
Reasoning: Kuran praises Symbotic as a leader in warehouse automation, highlighting its consistent profitability, increased revenue (up 22% in the past year), and the successful rollout of its major Walmart deal. He points to the recent acquisition of ASRS Innovation as a significant positive, expected to boost recurring, higher-margin software revenue and make Symbotic's valuation 'much more reasonable.' The main risk Kuran identifies is high customer concentration, with Walmart accounting for over 90% of its revenue, though Walmart's ownership stake mitigates this risk somewhat.
Reasoning: Kuran mentions Regal Rexnord as a company specializing in motion control systems, particularly for surgical robots and the broader industrial motion market. He notes that roughly 31% of its sales come from automation and motion control. Kuran states that the company sits at a 'pretty reasonable price' and has 'substantial upside from automation,' despite its primary identity as an industrial company.