On Smart People, the Big Picture, and the Future of Robotics
Written by: Chris Buck
Steve Wozniak once said, “Wherever smart people work, doors are unlocked.”
I’m completely humbled by the intelligent people I get to work with every day. It’s one of the incredible perks of working at a research company rather than a product mill. And it’s one of the primary reasons I am constantly energized and re-energized about our mission at ROBO Global. It’s on days like this—when smart people paint a crystal-clear picture of where our industry is heading—that, in Steve Wozniak’s words, doors are truly unlocked. I understand completely why it’s so important that we spend our days and nights identifying where to invest and why.
I’ve spent my entire career in financial services, so I’m well aware of the thinking and rationale behind most financial products. Because we live in a world where low cost seems to drive every decision, I get it. I get why some investors chase short-term returns and quick, easy wins. But it’s critical that investors look at the bigger picture. When it comes to investing in the future of robotics, automation, and artificial intelligence (RAAI), that bigger picture matters more than ever.
I’m fascinated by the potential of RAAI. Not only is the investment perspective and the immense growth that is happening before our eyes exciting, but even more so is the fact that no one knows precisely where this massive transformation is heading. There are just too many unknowns. Innovation is happening more quickly than ever in our history, and RAAI is playing a huge part in that transformation, reaching into every area of every industry, and nearly every aspect of our lives.
That’s precisely why the intellects that I work with believe that our investments in RAAI should reach just as far. Beyond the biggest, fastest growing robotics companies. Beyond the names that are already known in the industry and may already be peaking when it comes to innovation. Beyond the short list of the established winners.
Because we know just how difficult it is to pick the winners over the long term, our team of industry experts spends their time in deep research, identifying new trends, understanding new innovations, and exploring every company on the radar—and even some that are flying below the radar—regardless of size, market cap, or technology.
To give you a sense of the caliber of people I’m fortunate enough to call my colleagues, in quick are just three of the experts (in the handful of amazing innovators) on our team who help us unlock doors every day:
Henrik Christensen, PhD is the director of the UC San Diego Contextual Robotics Institute whose mission is to develop safe and practical robotics systems to interact seamlessly with human in their everyday lives. He has also served as the Director of Robotics at Georgia Tech (where he was also named the KUKA Chair of Robotics, a position endowed by a $1.5 million grant from KUKA Robotics) and founded the European Network of Excellence in Robotics. He coordinated formulation of the first US Roadmap for Robotics in 2009 and participates in its regular updates, he is the coordinator of the Robotics Virtual Organization that formulates the national robotics agenda, coordinates educational efforts, and promotes technology transfer of research results. Henrik has published more than 350 contributions across robotics, computer vision and artificial intelligence. The co-founder of five robotics-focused companies, he continues to collaborate with major companies worldwide on the utilization of robot technology.
Raffaello D'Andrea, PhD has built his career n his unique ability to bridge theory and practice: He is Professor of Dynamic Systems and Control at ETH Zurich, where his research redefines what autonomous systems are capable of. He is co-founder of Kiva Systems, now operating as Amazon Robotics, and was the faculty advisor and system architect of the Cornell Robot Soccer Team, four time world champions at the international RoboCup competition. He recently founded Verity Studios to develop a new breed of interactive and autonomous flying machines. On top of his highly impressive business accomplishments, Raffaello is also a new media artist with exhibitions at various international venues, including the Venice Biennale, Ars Electronica, and the FRAC Centre. His most recent awards include the IEEE Robotics and Automation Award and the Engelberger Robotics Award, two of the highest achievements in the field.
Ken Goldberg, PhD is an artist, inventor, as well as a professor at UC Berkeley where he is Chair of the Industrial Engineering and Operations Research Department. He holds secondary appointments in EECS, Art Practice, the School of Information, and Radiation Oncology at the UCSF Medical School, and he is Director of the CITRIS "People and Robots" Initiative and the UC Berkeley AUTOLAB where he and his students pursue research in geometric algorithms and machine learning for robotics and automation in surgery, manufacturing, and other applications. Ken's artwork has appeared in 70 exhibits including the Whitney Biennial, and films he has co-written have been selected for the Sundance Film Festival and nominated for an Emmy Award. Ken was awarded the Presidential Early Career Award for Scientists and Engineers from President Bill Clinton, elected as an IEEE Fellow, and was recently received the George Saridis Leadership Award from the IEEE Robotics and Automation Society.
I’m thrilled that we’ve been able to pull together an incredibly gifted team that includes men and women of this caliber. Every time I hear our team talk about next steps, I love that we’re not just looking at numbers when we build the ROBO Global Robotics & Automation Index. With the work of a growing team of smart people, we’re combing the entire robotics and automation landscape to identify the companies that are poised to drive the greatest change tomorrow… and far into the future. No one knows what the future of RAAI holds, but today I’m humbled and proud and confident walking that path among today’s industry giants.
An Emerging Theme In Thematic Investing
Exchange traded funds (ETFs) are popular vehicles for market participants looking to engage in thematic investing. Thematic investing looks to take advantage of future growth trends, including disruptive technologies. Given that forward-looking approach, stock-picking in the thematic universe is equally as hard, if not harder, than in traditional market segments.
Go back to the late 1990s, before the bursting of the Internet/technology bubble. Back then, investors stood an equal chance of selecting E-Toys over Amazon or some no longer in existence networking equipment maker over Cisco.
“History is littered with examples of prospering industries with no indication of which company will come to dominate the industry,” according to Nasdaq. “This suggests that successful thematic investing is more about selecting baskets of investments rather than single securities.”1
The ALPS Disruptive Technologies ETF (DTEC) provides basket exposure to a broad swath of thematic investments. DTEC features exposure to not just one or two emerging technologies, but 10 such themes on an equal-weight basis.
The 10 themes represented in DTEC are as follows: 3D printing, clean energy, cloud computing, cybersecurity, data and analytics, fintech, healthcare innovation, Internet of Things (IoT), mobile payments and robotics and artificial intelligence (AI).
Generally speaking, fund issuers have been quick to respond to disruptive and transformative technologies, bringing products to market to tap these themes. Prior to DTEC coming to market late last year, there were ETFs devoted exclusively to cloud computing, cybersecurity, robotics and other themes featured in DTEC. However, few use the basket approach to themes employed by DTEC.
February, a rough month for U.S. stocks, highlighted the advantages of DTEC's multi-theme methodology. Seven of the 10 themes found in the fund finished the month lower, but DTEC was able to outperform the S&P 500 on a monthly basis.
Focusing on individual themes can be rewarding over the long-term, but not all investors have the risk tolerance for such a strategy. Consider this: the Indxx Global Robotics & Artificial Intelligence Thematic Index jumped more than 48% in 2017. That type of performance is enough to seduce many investors, but that same benchmark slipped 7.60% in February, generating monthly volatility of 34.10%.2 Said another way, that robotics and AI index's February slide was more than triple the loss experienced by DTEC during the month.
While it probably is not accurate to call the indexes devoted to individual disruptive themes “old,” many use old school weighting methodologies. For example, the two largest components in the ISE Cloud Computing Index are Netflix, Inc. (NFLX) and Amazon.com Inc. (AMZN). Only two members of the S&P 500 have larger market values than Amazon while Netflix currently has a larger market cap than Wal-Mart (WMT) and McDonald's (MCD).
Holdings subject ot change as of 12/31/17
For its part, DTEC not only equally weights its 10 disruptive themes, but its 100 components as well, potentially reducing single stock risk in the process. As the chart below confirms, equally weighting stocks is rewarding across sectors and market capitalization segments.
Past performance does not guarantee future results
Annualized returns for the past 10 years show seven of the 11 S&P 500 sectors, when equally weighted, outperform cap-weighted equivalents, according to S&P. Three of those seven sectors – financial services, healthcare and technology – are prominent parts of DTEC's roster.
1 Source: Nasdaq Dec. 28, 2015 https://www.nasdaq.com/article/what-thematic-investing-is-and-its-strengths-and-risks-cm559209
2 Source: ETF Replay data
An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus which contain this and other information call 866.675.2639 or visit www.alpsfunds.com. Read the prospectus carefully before investing.
An investment in the ALPS Disruptive Technologies ETF (DTEC) may be subject to substantially greater risk and volatility than investments in larger and more mature technology companies.
There is no assurance that the market developments and sector growth based upon the themes discussed in the article will come to pass.
ALPS Disruptive Technologies ETF shares are not individually redeemable. Investors buy and sell shares of the ALPS Disruptive Technologies ETF on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
ALPS Advisors, Inc. (AAI) has engaged IRIS Werks, LLC (IRIS) to produce analysis and commentary on ALPS-advised ETFs. IRIS currently has a compensated business relationship with AAI. AAI is not affiliated with IRIS.
The content and opinions expressed in this article are that of the author and not the views and opinions of AAI. In addition, AAI assumes no responsibility to ensure the accuracy of the content written by the author.
There are risks involved with investing in ETFs including the loss of money. Additional information regarding the risks of this investment is available in the prospectus. Past Performance is not indicative of future results.
The fund is new and has limited operating history.
ALPS Portfolio Solutions Distributor, Inc. is the distributor for the ALPS Disruptive Technologies ETF. AAI is affiliated with ALPS Portfolio Solutions Distributor, Inc.
The author is not an investment professional and this article should not be considered investment advice. While the information and statistical data contained herein are based on sources believed to be reliable, the author takes no responsibility to ensure the accuracy of the content. Additionally, this article should not be relied on or be the basis for an investment decision. Information that is historical is not indicative of future results, and subject to change.
S&P 500®: A capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
S&P SmallCap 600®: A capitalization-weighted index that measures the small-cap segment of the U.S. equity market.
S&P MidCap 400®: A capitalization-weighted index that measures the mid-cap segment of the U.S. equity market.
Indxx Global Robotics & Artifical Intelligence Thematic Index: The Indxx Global Robotics & Artificial Intelligence Thematic Index is designed to track the performance of companies listed in developed markets that are expected to benefit from the increased adoption and utilization of robotics and Artificial Intelligence ("AI"), including companies involved in Industrial Robotics and Automation, Non-Industrial Robots, Artificial Intelligence and Unmanned Vehicles.
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