Robotics and IoT are particularly relevant for American companies looking to shift manufacturing operations back to the US.
Why Robotics & IoT Sectors Stand out in the Current Political Situation
The months from February were dominated by the perceived effects of the Covid-19 pandemic. In online stock trading, investment decisions all revolved around combating the effects of the pandemic. As the lockdown eased and the economy reopened in the United States, the focus expanded to political events, particularly the trade and political tensions between the US and China.
Political Uncertainty Could Shift Operations Back Home
There is much uncertainty surrounding China’s trade conflict with the US, which has caused companies in the manufacturing field to think about moving their operations back to American shores. Tariffs for imported Chinese goods have risen and has made sourcing raw materials from China more expensive. Besides, there are significant disruptions in the supply chain caused by Covid-19. Therefore, companies would need to source raw materials and manufacture locally.
It was also reported by Motley Fool back in May that President Trump was looking for ways to direct back supply chains to the United States and away from China. The US government could provide incentives for bringing manufacturing back to American shores.
Robotics and IoT
If that were to happen, there are some companies that would particularly benefit. Analyst Lee Samaha points out some of them:
● Robotics company Rockwell Automation ($ROK) could hugely benefit from the simple fact that manufacturing plants in the US would need the services of Rockwell to set up the automation systems at their factories. Automated systems could help companies ensure cost-effective manufacturing to countries like the US with a high wage cost.
● While there are other bigger automation companies, Rockwell has a significant presence in North America. The continent has contributed to 61% of the company’s Q2 sales. The Covid-19 pandemic has affected the company, but with the manufacturing shift, you could soon see its best days. However, at $8.67 per share, it is trading 25 times its earnings in 2019. It is expected to continue at that level at least until fiscal 2022.
● Rockwell is in partnership with IoT company PTC ($PTC). As important as automation hardware is the software and digital technology powering the hardware. The Internet of Things (IoT) or connected tech is an essential part of automation technology. PTC is a leader in industrial software.
● There is a great deal of interest in PTC’s IoT and augmented reality solutions that help businesses manage their assets better. The importance of IoT and augmented reality is further realized in the era of Covid-19. PTC’s augmented reality solutions enable factory equipment to be checked and inspected even without the specialist being at the site.
These are two key industries that could play a major part in the months to come. The demand for all industrial services and infrastructure is bound to increase when many American manufacturers decide to shift their operations back home. As things stand, the government favors such a shift. But you still need to be watching the news to understand how the dynamics of US-China relations keep evolving.