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Seeking a Long-Term Investment with Boundless Growth Potential?

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Seeking a Long-Term Investment with Boundless Growth Potential?

Written by: Travis Briggs, CEO, ROBO Global

Welcome to the World of Disruptive Technologies.

Following companies that disrupt the status quo is fascinating. In nearly every industry, innovative companies are now using the power of robotics and AI to drive change that was unimaginable just a decade ago. Their technologies, products, and solutions are turning the competitive landscape upside down and creating new market leaders more quickly than ever before. These companies are bona fide disruptors that we believe create a smart, long-term investment opportunity that should be capitalized on in the early stages. But while they hold a high potential for rapid growth, they are often missed by investors who are distracted by today’s short-term market swings. This combination is creating a prime opportunity for investors who understand this new reality and position their portfolios for long-term growth.

As this new tipping point for technology emerges, the laws of physics will ultimately defy Moore’s Law, and under the new law of exponential growth that replaces it, innovation will accelerate at a previously unattainable pace. The resulting technological arms race is already creating a level of disruption that’s causing companies around the world to rethink how to survive and thrive. There may have never been a better time for investors to position for the growth ahead. The key is to recognize this massive shift and learn how to approach it from an investor’s perspective. 

You can’t time the market, especially when it comes to disruptors.

An unfortunate but common mistake when investing in emerging technology is attempting to time the market. While some disruptive securities may seem like overnight successes, the reality is that ‘big-bang disruptors’ are few and far between. In most cases, the time between invention and mass adoption is difficult to predict. Once a new technology reaches critical mass, however, the market takes notice quickly and acts swiftly. One notable example is Intuitive Surgical (ISRG), makers of the Da Vinci surgical robot.  From 2005 through 2015, ISRG returned a respectable 16% annualized return, which was 6% higher per year than the S&P Healthcare Index. However, from 2016 through 2019 year-to-date, ISRG has delivered an astounding 34.8% annualized return, compared to 8.4% for the S&P Healthcare Index. This unpredictable timeline is one we have seen time and time again, and it highlights why we see a long-term buy-and-hold strategy as the optimal—if not the only—prudent way to benefit from the growth curve of emerging technology stocks.

Market volatility does not always represent risk.

While market volatility can punish short-term investors, it does not serve as an adequate measure of risk for long-term investors. In fact, those who have the foresight to grasp the future and resist the urge to sell in volatile markets are more often rewarded for their conviction and persistence. Most investors know this intellectually, but emotions seem to take the lead in uncertain markets.

Targeting the industries that are leading disruption is key.

When Amazon disrupted retail with its Kiva robots (now Amazon Robotics), it was seen as unique. Since then, companies have used AI and robotics to create equally massive change in myriad other industries:

  • Telehealth companies like Teladoc and Ping An are disrupting the healthcare industry by using AI technologies to enable providers and patients to remotely manage patient care. Using the power of AI, they are solving the global crises around access to healthcare, helping to reduce costs, and easing the issues presented by the pending physician shortage.[1] The solutions they deliver are helping to serve the exploding population of aging adults[2] and transforming the delivery of healthcare services around the world.
  • Genomics, diagnostics, and precision medicine companies are also changing healthcare as we know it. The ability to sequence the human genome, discovered just 15 years ago, has made it possible to predict, diagnose, and treat diseases more precisely and more personally than ever. Illumina was largely responsible for the dramatic drop in the cost—and the increase in availability—of human genome sequencing. Genome data provided by Illumina and others has created an entirely new market for liquid biopsies. Veracyte and Exact Sciences are targeting cancer detection through non-invasive and pain-free methods. Natera and Genomic Health are leading the way in genomic screening that can detect organ transplant rejection and cancer recurrence monitoring with a simple blood test. And companies like Editas Medicine and Intellia Therapeutics are using cell-based gene therapy (CRISPR) to help find a cure for cancer.
  • Computing, processing, and AI companies like Cognex and Ambarella are using the power of machine vision to create solutions in a whole new area of AI that is proving to be one of the most promising sectors. Cognex has made tremendous headway in logistics as machine vision has displaced traditional laser-based barcode readers at the likes of Amazon and FedEx. Ambarella, once known solely for its popular GoPro product line, acquired VisLab in 2015 and set off on a new path to become a leader in vision chips. Five professional security camera OEMs that use Ambarella’s latest computer vision chip are slated to ship within the year, and its use cases in the automotive market are expected to further expand its reach and its larger vision for the future.

Diversification is mandatory.

While every one of these disruptive technologies is compelling, there are many others waiting in the wings—which is why trying to predict the winners is a fool’s game. That’s precisely why the ROBO Global indices are designed with diversification as a top priority. The ROBO Global Robotics & Automation Index (ROBO) includes more than 80 stocks across 12 subsectors in 14 countries, while the ROBO Global Healthcare Technology & Innovation Index (HTEC) includes more than 80 stocks across 9 subsectors. Both portfolios have been built to minimize individual stock risk and to focus on the entire value chain of growth in RAAI (robotics, automation, and AI) and healthcare. This approach of investing in many companies with great promise of delivering disruption reinforces the potential for long-term growth.

At ROBO Global, we see disruptive technology as one of the most inefficient areas in the market, and as an area where diversification and a longer-term investment horizon can enable investors to harvest this outsized return potential. By taking the time to research and validate the theme and to understand the exposure within each of our strategies, we believe investors can use disruptive technologies to their advantage and to the benefit of their own portfolios.

Related: How Vocera Replaces Chaos with Quiet in Hospitals

[1] According to the Association of American Medical Colleges, the US will be short 47,000-122,000 physicians by 2032.

[2] The US Census Bureau projects the US population to grow by 10% by 2032, and that the number of people over age 65 will increase by 48%.

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