Portfolio manager says Industry 4.0 is being built as we speak – and robot-makers are where "true growth" can be found
Investors with one eye on the future should be exposed to tech companies currently laying down the building blocks for Industry 4.0.
Hans Albrecht, portfolio manager at Horizons ETFs, is an enthusiastic follower of the behind-the-scenes warehouse revolution led by Amazon – and he believes other companies are struggling to keep up and match Jeff Bezos’s company’s ruthless efficiency.
The “fulfilment process”, from the original order to getting it into the customer’s hands, is undergoing what Albrecht calls a huge upgrade cycle, with the likes of Amazon using robots and censors in their warehouses to work with people to ensure logistics are as cheap and economical as possible.
It’s all happening now, he said, and is set to continue for the next five to 10 years, adding that any firm that hasn’t noticed how high this bar has been set will simply not be able to compete.
He told WP: “Only about 20% of warehouses have any kind of automation to them so they are going to find themselves falling behind based on very advanced examples like Amazon, which are using robots, censors and augmented reality. These aren’t just standalone solutions like robots going about their business, they work with people.”
Augmented reality glasses can tell you what aisle something is in, how many you need, whether it’s fragile, and it can also be used for safety warnings, informing employees there’s a forklift truck nearby, for example.
Albrecht added that agriculture is another area ripe for this upgrade cycle: “Around the world, warehouses are feeling this pressure to move into this new paradigm of innovation.”
So how can investors capitalize on these innovations? How do they get a piece of the 4.0 pie? Albrecht believes a broad exposure to companies like robotic makers gives you the best chance. Rather than attempting to pick one company that may become the next Apple, Amazon or Netflix, why not focus on the people who are building this new infrastructure.
Horizons has a Robotics and Automation ETF (RBOT) that has holdings in about 35 companies, including Toronto-based Yaskawa, which make robot arms and develops motion control, and Japanese firms like Keyence and Fanuc, which are developing the sensory eyes and ears of this new generation of automated process.
Albrecht said: “It’s recognising that there is a new kind of foundation being built and I think you want to be invested in the areas that are building that. I think that’s the way to go. Instead of saying this [one] company is going to be successful, why not own companies that are helping to create what the industry as a whole needs to accomplish, which is improving profitability through these advancements.”
While this doesn’t quite mean the death knoll for the famed FAANG group, Albrecht said it’s time to look beyond the successes of Industry 3.0 and look at what the next cloud-based iteration will consist of.
FAANG stocks have had a great run and remain top performers. Google, said Albrecht, is the “Saudi Arabia of data, and data is the new oil”, although he believes Facebook has problems because of the changing attitudes towards personal data.
He said: “Now the companies are moving their cybersecurity to the cloud and moving their basic functions to the cloud, we could see firms like Palo Alto taking over; they are growing at twice the rate in the area of infrastructure as the old companies.”
He added: “In our view, FAANG have had a great run but let’s look at the next stage of innovation and the building blocks of this next phase, and this is very much looking at things in a more digital cloud-based way and in a way that deals with cybersecurity.
“Which of these companies can become the next Cisco, Amazon or Apple? Will they be as big? We don’t know but if you are looking for true growth, you want the companies that are building the next iteration.”
