Robo-Stox: Investing in the Robotics Revolution

How I helped create a new stock index for the robotics industry

4 min read
Robo-Stox: Investing in the Robotics Revolution
Photo: Nasdaq

In this guest post, Frank Tobe, a robotics analyst and publisher of The Robot Report, describes the launch of Robo-Stox, a stock index of robotics and automation companies. The views expressed here are solely those of the author and do not represent positions of IEEE Spectrum or the IEEE.

On Tuesday, a sleek robotic arm rang the closing bell of the Nasdaq stock exchange. It was the first time a robot performed the task.

The event celebrated the launch of Robo-Stox, a stock index focused on robotics, automation, and related technologies. Thanks to Robo-Stox, individuals and institutions can now easily invest in the continuing growth of the robotics industry worldwide. The index, based on an algorithm and database of robotics I helped develop, is something I've dreamed of and worked on for almost eight years.

Robot arm presses the button for the Nasdaq closing bell on Times Square in New York.

First, some background on investment terms and what Robo-Stox represents. You might be familiar with major stock indices like the S&P 500, Dow Jones Industrial Average, and the Nasdaq Composite. Those indices track a large number of publicly-listed companies from a variety of industries. To target specific industries, investors created indices that track companies operating in those particular sectors. You can invest in indices focused on biotechnology, pharmaceutical, aerospace, home construction, insurance, medical equipment, oil exploration, telecommunications, among many others. The Robo-Stox Global Robotics & Automation Index is the first to provide a comprehensive and focused measure of the value of robotics and automation.

Here's how it all got started. Nearly a decade ago, after a long career in the computer industry, I began to read about robotics. As I set about learning about the industry and those involved, I called my stock broker and asked for a basket of robotics-related stocks that I could invest in for my retirement. To my surprise, he was able to give me only two stocks. I called another broker and got the same answer. Then I checked Bloomberg and found that they didn't even have a category for robotics.

That's when I decided to put my research and database skills to work by compiling a comprehensive list of companies involved in the robotics industry. I quickly found that this was truly a global project. As I continued my work on the database, I was approached by a group of financial people about using my research to set up an industry tracking stock index. We worked together to form a company and set out to select the companies we wanted to include.

The Universal Robots UR5 robot arm, equipped with a three-fingered Schunk gripper.

"Pure play" is an investment term referring to a company that is exclusively focused on a particular product or service. Examples in robotics are iRobot, Kuka, and Intuitive Surgical. But since "pure-play" robot companies are rare, we evaluated companies across industries, objectives, geographic locations, and market capitalizations to find innovative firms that can fuel productivity and economic growth in robotics and automation for years to come.

That means we included some companies that might not appear, at first glance, related to robotics. But they are! Consider Boeing and John Deere, for example. Though robotics is not their primary business and represents a small fraction of their profits, both companies use industrial robots in their manufacturing processes, and Boeing designs and manufactures unmanned aerial systems for defense and space agencies, while Deere is developing a line of autonomous ground vehicles (AUGs), including robotic lawn mowers and unmanned tractors. Many aerospace and healthcare companies that produce robotics-related products are similarly not pure plays, but those that fit our criteria are in our index.

From left: Rob Wilson, CEO of Robo-Stox LLC, Rich Hogan, principal of Exchange Traded Concepts, and Frank Tobe, co-founder of Robo-Stox LLC and editor of The Robot Report, receive instructions from a Nasdaq producer.

Other criteria for selecting companies are that they derive a certain percent of their income from robotics and have a market value greater than US $200 million. The result is we have 77 companies, and they are truly diverse: 38 percent are in North America; 34 percent in Asia and 27 percent are European. In terms of their target markets, 26 percent are industrial robot makers; 23 percent provide unmanned aerial, underwater, or ground systems for space, defense, and civilian use; 10 percent are in healthcare; and the remaining companies are vision and software systems and other component providers. When back-tested over 10 years, these companies reflected the growth pattern of the industry. Performance details and a full listing and fact sheet for the 77 stocks are available on the Robo-Stox website.

The next step was making the index available to investors. We did this by establishing an Exchange Traded Fund. An ETF is a mutual fund that is traded just like a stock on a stock exchange. (And like other funds, it charges an annual fee, called the expense ratio, for its services.) Through a company specialized in ETFs, our robotics industry ETF, ticker code ROBO, is now listed on Nasdaq. Now anyone in the world who can purchase U.S. stocks can buy shares of Nasdaq:ROBO.

And that's why, on Tuesday, I found myself at Nasdaq in New York City, along with my Robo-Stox partners, to see a robot press the closing bell in celebration of the new Robo-Stox index and Nasdaq:ROBO ETF. Also present were folks from robot makers Universal Robots and Schunk. Universal Robots brought the robotic arm, called UR5, and Schunk provided the three-fingered hand used to push the button.

I've worked a long time to make this happen and am very pleased with the results. It enables investors everywhere to capitalize on the accelerating growth and promising future of robotics. And it lets me do what I originally wanted: invest in what I believe to be an exciting and profitable industry. As a friend told me, "Asimo, who rang the New York Stock Exchange bell in 2002, would be proud!" I hope so.

Frank Tobe is the owner and publisher of The Robot Report.

The Conversation (0)