By Bill Studebaker, CIO & President, ROBO Global
Typically, this is the quiet part of the calendar year in the world of investing. Not so in 2021. At the moment, there is a lot to digest, both on the macro and micro fronts. I suppose this should come as no surprise since things have been far from normal for the past 18 months, but it continues to feel like we are living through some incredibly abnormal times.
It’s interesting that even the taper announcement didn’t squash the enthusiasm of the bulls that have driven the markets to new highs almost daily. The market optimists continue to believe that the growth outlook remains validated by strong prints that indicate both healthy consumer wallets and positive corporate sentiment thanks to a strong rebound in corporate digital initiatives. On the flip side, the bears continue to point out the downsides: that valuations remain stretched, second derivative trends are slowing, and COVID-19 remains in play with the Delta and Mu variants threatening recovery. Bears also see the current demand environment as unsustainable. At the moment, however, earnings continue to impress, with revisions continuing to trend upward as we edge toward the close of 3Q.
Looking at the indices from a global perspective, it is tough to argue with the bulls—at least for now. For the month of August, all three of the ROBO Global ETFs tacked on additional gains, led by THNQ +4.07%, followed by HTEC +2.78%, and ROBO +2.36%1. Results for the past several weeks have been overwhelmingly strong across the board. Some may argue that we are still in an abnormal, possibly transitory demand environment that is creating an illusion of strength. However, as we continue to highlight, we believe the ROBO Global holdings appear poised for long-term growth thanks to the growing need for automation. Here are just a handful of companies that are proof of that reality:
- Nvidia posted another beat and raise driven by product cycle, strong data center, gaming, and professional visualization revenues. Revenue of $6.5B and YoY growth of 68% was higher than expected and a company record. Revenues for gaming, data center, and professional visualization all hit record highs during the quarter, with gaming hitting $3B, up 11% seq and 85% YoY2. Lacking COVID-driven supply constraints, those numbers would likely have been even stronger thanks to strong laptop demand and the impact of the Ampere architecture product lifecycle. Nvidia's earnings were also driven by huge demand for cloud and enterprise services for the data center.
- Atlassian reported another strong quarter with EPS of $0.24 (beats by $0.06), revenue of $560M Q4 FY21 (June) up 30% YoY, and the addition of 23,000 new customers to reach more than 200,000 customers in total3. Revenue surpassed $2B for FY’21, with EBITDA increasing 64% to $194M and approximately 40% of sales coming from 700 channel partners. The customer mix is as impressive as it is diverse, including more than 8,200 customers at $50K/year, 412 customers at $500K/year, and 178 customers at $1M/year—an increase of 70%. The uptick in cloud/large enterprise revenue has been driven largely by pandemic-related remote work, but also increases in interest and demand for automation within the enterprise. The official launch of Atlassian Cloud Enterprise in February and a 4% increase in gross profit margin added to the good news.
- Editas Medicine shares added about 33.8%4 in August as investors anticipate updates on its Phase 1/2 BRILLIANCE trial at the upcoming Retinal Degeneration meeting this fall. This treatment aims to treat LCA10, an early onset retinal degenerative disease that causes blindness. There is also speculative buzz around the recent announcement from Moderna (also an HTEC holding) that it will explore expansion opportunities in gene editing—a significant factor as Editas owns the IP in the US for Cas9 and is currently trading at a discount relative to its gene editing peers. We view the Cas9 capability as a strong strategic complement to Moderna’s current mRNA technology.
The bulls and bears will always have their conflicting opinions about what’s to come, and there will never be a shortage of factors impacting the markets, even long after COVID and its impact on the supply chain and the economy have become a distant memory. From our perspective, what is most important over the long term is the strength of the companies in the ROBO, HTEC, and THNQ ETFs and their ability to meet the growing demand for automation in nearly every market sector. For investors who have the fortitude to look beyond the moment and focus on the future, we believe investing in robotics, artificial intelligence, and healthcare technologies is an option that should not be overlooked—no matter how long these abnormal times continue.
1 Source: ROBO Global®, S&P CapitalIQ, For standardized performance data current to the most recent month end, please visit www.roboglobaletfs.com.
2 Source: Nvidia
3 Source: Atlassian
4 Source: Editas Medicine, S&P CapitalIQ
This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.