Proposition #1: Automation and robotics
Current global economic news remains solid with the rate of employment set to shrink in 2014 and beyond. The European equity market is looking particularly attractive given the continent is emerging from a recession; and as a result consumer sentiment is set to improve further. Any major setback is a potential buying opportunity for risky assets, as the course of action planned by the ECB, the FED, and the BOE is highly predictable.
As the major economies evolve further over time, business has a particular interest in rationalizing repetitive, dangerous, and/or complex operations by implementing more advanced automation and robotics. The integration of artificial intelligence results in more consistent transactions, faster execution and decreases the cost of production. While in the past only the simplest of operations were performed by robots, today, they perform more delicate tasks, and advanced robots are able to respond to an open-ended number of tasks. The integration of technology into the workspace, even at a simple level, offers the industrial and service worlds significant opportunities.
The most popular application of robotics will occur in fields such as manufacturing, maintenance, design, healthcare and consumer services. According to a McKinsey report, the application of advanced automation and robotics across sectors such as healthcare and general services could generate an investment impact of up to USD 4.5 trillion in the next 12 years.
Early adopters will gain quality, cost and speed, and will therefore increase market share over the competition.
This secular growth trend will benefit not only the companies that design and manufacture microchips and applications, but also the companies using the applications developed. Companies producing in the earlier stages of this economic activity are highly leveraged to technology, and the applications they have developed may not be familiar to us. At present, there are very few pure plays in this field, but the larger selection (see 2nd table below) offers a range of excellent investment opportunities across the globe. While pure plays are set to benefit the most because automation and robotics are critical to their strategic development, global conglomerates should be encouraged to use more advanced robotics to improve operating efficiencies across the board.
List of pure plays:
Investment Proposition 2014 Automation and robotics.pdf
Downside:
Over the coming decades the developments occurring in this area will revolutionize the way we think and operate with an item, interact within our own ecosystem, and live our lives.
The companies active in this field will require additional workforce for their higher-skilled jobs; however, at present there are very few education and training opportunities available in the academic world. Additionally, and more importantly, it is expected that by 2025 about 40 million to 75 million medium qualified full-time jobs will change function and eventually be put at risk. This will affect not only job-opportunities in emerging markets, where the potential to rationalize jobs is the highest, but also jobs in the developed world, where the potential is the highest in terms of cost savings.
Finally, the broader based companies will be able to offer higher qualified job opportunities, setting the education benchmark higher than today.