By Bill Studebaker, CIO & President, ROBO Global
As we head into April 2021, the world gladly looks much different than it did just one year ago when the COVID-19 pandemic first began to shut down life as we once knew it. It’s been an incredibly difficult year in myriad ways, but one silver lining has been how individuals, communities, and businesses across the globe have adapted and changed for the better. By the end of March, more than 51 million Americans had received the vaccine, and the goal is to have every American adult vaccinated within the next few months. Even as other countries and certain US regions struggle with vaccine distribution, it feels like there is finally some light at the end of the tunnel. It comes as no surprise that much of that progress—the stunning speed of vaccine development, the ability for e-commerce retailers to respond to record-breaking growth in demand, and so much more—was made possible by the innovative companies that enable smart automation.
March 23, 2020, marked a low for the S&P and MSCI World, which closed at 2237 and 1602, respectively. Little did we know at the time that in the midst of chaos, uncertainty, and fear, every one of the global indices was about to embark on the greatest and fastest bull run in recent history. If only from an equities perspective, 2020 turned out to be a great year, indeed. Case in point: the ROBO ETF closed at $28.96 on March 20, 2020. On March 31, 2021, the ETF closed at $63.51.1
Despite this impressive progress, tech companies across the board, including those in the ROBO Global strategies, faced challenges recently. For the month of March, the ROBO ETF rose 1.15%, the THNQ ETF climbed 1.88%, and the HTEC ETF declined -2.94%, vs. a 2.70% gain for ACWI2. In light of the current market environment, the small drop points to buying opportunities for investors who know where to look for future growth. Here are some key considerations as we head into Q2:
A special purpose acquisitions company (SPAC) is a shell company that is created by investors with the sole purpose of raising capital through an IPO in order to eventually acquire another company. The remarkable volume of front-end SPAC issuance YTD may be heading for an arguably healthy pause. The total number of SPAC issuance in 2021 now stands at a whopping 189 that, combined, have raised $60.2B – that’s 76.2% of last year’s numbers already coming in at 248 SPACs and $82.4B.3 If a pause does occur, this could help the SPAC back-ends. The back-end pressure has been driven, in part, by a growing deluge of its own issuance, with $61.5B raised in 194 SPAC deals for the first eight weeks of 2021 alone – compared to 231 SPACs that raised over $81B over the entirety of the last year.4 On the flip side, the turmoil has created an opportunity for fresh money eyeing the product; there are now hundreds of positive-yielding SPACs to choose from, few of which are in the announced and yet-to-close SPAC deal set.
Earnings may soon be the catalyst to bring fundamentals back to the forefront of investors’ minds. However, expectations this quarter will be much higher than previously because we are now lapping easier COVID comps. Arguably, we are currently sitting in an environment that is better than what we saw pre-COVID, with leaner and more profitable corporates, healthier consumer balance sheets, and endless fiscal and monetary support. Robotics, artificial intelligence, and healthcare innovation remain the foundational technologies that are helping companies in every region to drive productivity and enable growth. In years past, this scenario would have been seen as science fiction. Today, it is reality. As a result, we believe many of the earnings dips we are seeing for individual companies are creating strong buy signals for the ROBO indices as we continue to invest in this growth theme for years to come.
We think companies like US-based Brooks Automation present smart, long-term opportunities. A decade ago, Brooks Automation was the world leader in semiconductor fab automation. Since then, it has expanded its reach and gained a leadership position in automation solutions for Life Science applications. It’s a shift that has positioned Brooks well to deliver sustainable growth at a time when the tailwinds of equipment spending are expected to drive another year of outperformance in both semiconductor and advanced packaging. We expect the company’s Life Sciences division to see continued growth in sample management. In 2020, Brooks delivered on strong demand for diagnostics, drug, and vaccine development. The company’s technology solutions support the most demanding environments for clean, precise, and temperature-controlled workflows. Its GENEWIZ platform offers gene therapy workflow for the fast-growing precision medicine industry, and automated cold storage solutions for biospecimen samples and vaccine workflows. Shares of Brooks increased +273% in the last 12 months, and the company now has a market capitalization of $7.3B.5
Brooks Automation is just one of the many ROBO Global constituents delivering robotics, automation, and healthcare technologies at a time when the world needs it most. 2020 served as a latent proving ground for innovations that, pre-pandemic, were seen as futuristic ‘nice to haves.’ The pandemic showed the world that these technologies have become the ‘must haves’ of today. For investors, we believe the time to buy the dip has come. It’s an opportunity that surely won’t last for long.
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: ROBO Global®, S&P CapitalIQ, For standardized performance data current to the most recent month end, please visit www.roboglobaletfs.com.
3 Source: SIFMA Insights Spotlight: SPACs vs. IPOs A Look at Year-to-Date Issuance Compared to Historical Trends
4 Source: JP Morgan, What is a SPAC Report
5 Source: Bloomberg
The performance data quoted represents past performance and does not guarantee future results. High short-term performance of the fund is unusual and investors should not expect such performance to be repeated.