Comparing The Two Robotics ETFS (BOTZ, ROBO)

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September 12, 2017 6:04am NASDAQ:BOTZ

robot-arm

From Zacks: The global robotics market is experiencing robust growth as demand for automation is increasing. With the advancement of technology and a drive towards more efficient business operations, robotics sector has garnered a lot of investor attention, as they seek to get a share of the pie of returns this sector offers.


Industry-Wise Demand

Per a new report by Global Market Insights, the automotive sector will see the robotics market worth almost $6 billion by 2024. Usage of robotics is expected to lower labor costs and increase product quality and efficiency in production.

Global Mobile Robotics Software Market is expected to reach $3.5 billion by 2024, per the report. Increased focus on safety, while working with robots, is driving growth in the sector. Advancements in Artificial Intelligence (AI) are driving expansion. Moreover, the military robotics market is expected to hit $30.8 billion by 2022.

Therefore, it does not come as a shocker that Robotics ETFs are getting attention as they are an efficient way of gaining exposure to this sector. Let us look at two ETFs that offer exposure to stocks in the sector and do a comparison between the two funds (see all Technology ETFs here).

ROBO Global Robotics and Automation Index ETF (ROBO – Free Report)

This fund seeks to provide a diversified exposure to Robotics stocks and tracks the Robo-Stox Global Robotics and Automation Index. It has AUM of $1.18 billion and charges a fee of 95 basis points a year. It has 89 holdings and is well diversified with no individual security holding over 2.6% of the assets.

The fund is heavily inclined towards Industrials and Technology, with 44% and 42% exposure, respectively. The fund’s top three holdings are Aerovironment Inc, Daifuku Co Ltd and Hiwin Technologies Corp with 2.55%, 2.41% and 2.22% allocation, respectively. From a geographical perspective, the fund’s top three allocations are to the United States, Japan and Taiwan, with 41%, 28% and 6% exposure, respectively. The fund has returned 35.9% in a year and 28.22% year to date (as of Sep 8, 2017).

Robotics & Artificial Intelligence ETF (BOTZ – Free Report)

This fund seeks to invest in companies that have chances of benefitting from increased demand of robotics and AI. It tracks the Indxx Global Robotics & Artificial Intelligence Thematic Index. It has AUM of $434.3 million and charges a fee of 68 basis points a year. The fund has 30 holdings in its portfolio but has significant concentration risk, with over 67% allocated to the top 10 holdings.

The fund is heavily inclined towards Industrial Machinery, Electronic Equipment & Instruments and Electronic Components, with 30.56%, 11.47% and 10.86% exposure, respectively (as of Jun 30, 2017). The fund’s top three holdings are Keyence Corp, Intuitive Surgical Inc and Mitsubishi Electric Corp with 8.43%, 7.83% and 7.64% allocation, respectively (as of Sep 8, 2017). From a geographical perspective, the fund’s top three allocations are to the Japan, United States and Switzerland, with 46.14%, 22.86% and 9.57% exposure, respectively (as of Jun 30, 2017).  The fund has returned 41.27% in a year and 39.07% year to date (as of Sep 8, 2017).

Bottom Line

Although ROBO is more popular than BOTZ, as evident from its higher AUM, BOTZ may be appealing to some investors owing to its cheaper expense ratio. However, BOTZ has higher international exposure compared to ROBO.
Moreover, ROBO is better diversified than BOTZ, and thus bears less company concentration risk. The performance of BOTZ has been better than ROBO over the past year and also in the year-to-date timeframe. With the growing appeal of the sector and higher technological advancements, both these ETFs are poised to offer great growth potential.

The Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ) was unchanged in premarket trading Tuesday. Year-to-date, BOTZ has gained 40.93%, versus a 12.52% rise in the benchmark S&P 500 index during the same period.

BOTZ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #21 of 52 ETFs in the Technology Equities ETFs category.


This article is brought to you courtesy of Zacks Research.


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