ETF Edge

Here's how you can profit from the rise of the robots

Rise of the robots? One machine-focused ETF is up almost 20% this year

It's the rise of the robots.

ROBO Global's Robotics and Automation Index ETF, ticker ROBO, a fund that tracks 90 cutting-edge companies in the robotics industry, is up over 18% in 2019.

That year-to-date gain — nearly 35% of the ETF's total gain since its launch in 2013 — represents a trend that is nearing a make-or-break moment for the robotics industry and the entire U.S. economy, says William Studebaker, president and CIO of Robo Global.

"We are on the cusp of ubiquitous automation, and we have an undeniable inflection point because of performance capabilities of computing and the cost curve declining such that these now are technologies that used to be science fiction now have actual use applications," Studebaker said Monday on CNBC's "ETF Edge."

"We are at a launching pad in terms of the economic activity that we're seeing and the innovations, and it's being spread out to all parts of the economy," the investment chief said. "Every sector of the economy is going to benefit from robotics and A.I."

Many of ROBO's top holdings might not be familiar to the average investor. They include shares of Oceaneering, which makes remote-controlled vehicles for the energy industry, Hiwin Technologies, a Taiwanese machinery component maker, and thermal imaging company Flir Systems. The most recognizable name in the top five is Nvidia, a U.S. chipmaker.

From ROBO Global's perspective, these are some of the companies leading the charge towards full automation. Earlier this year, the Brookings Institution, a Washington-based think tank, said that a quarter of U.S. jobs were under threat from automation.

"We try to identify the companies that we think have the highest revenue threshold that corresponds directly to selling the technologies," Studebaker said. "So, we're looking for high revenue purity. We're also looking for a large technological moat around their business, and I think we have an interesting lens to capture this."

With seven PhD-holders on the ROBO team, Studebaker said this "who's who in robotics and A.I." is the key to capturing the gains ROBO has seen in its six years of existence.

The team of tech experts, business specialists and academic researchers "give us a great lens to see not what yesterday's winners are, but what the future winners are likely to be," he said.

They also make the ETF fairly costly vis-a-vis the rest of the space, with a fee of 95 basis points. But investors who buy in will get a bang for their buck, Studebaker said, adding that a rebate securities lending plan makes the effective cost for investors only 70 basis points.

"With the team of industry experts that we have tracking this, I think that we do a pretty good job of generating the alpha that investors are looking for," he said. "We think the inflection is starting here, and we've got years, if not decades, of growth ahead of us."

This inflection point has ROBO Global doubling down on another growing space: health-care technology. In June, the firm launched another fund, the ROBO Global Healthcare Technology & Innovation ETF.

"For us, health care is probably one of the most exciting areas for investors to think about," Studebaker said. "Why? We're going into a world of prediction, prevention, [and] individualizing medicine. Effectively, we're going to create much healthier livelihoods for us, but, more importantly, longer longevity."

As the world moves from after-the-fact sick care to wholesale prediction and prevention, that ETF, ticker HTEC, should begin to draw interest in the investment community, the CIO siad.

"A lot of health-care structures tend to focus on therapies," he said. "We're actually focused much more on the prediction and the prevention, so, diagnosis and medical instruments and regenerative medicine and prevention. And so these are kinds of technologies that investors need to embrace when they're thinking about health care."

ROBO fell slightly in Friday's trading session, sinking less than 1%. HTEC lost more than 1%.