Robotics are at a very early development stage, offering some attractive “greenfield” investment opportunities, but it shouldn’t be played through the supply chain, said Angus Muirhead, senior portfolio manager for robotics at Credit Suisse.
”Playing the supply chain is something that typically we try not to do, because I find it very difficult,” he said at the Credit Suisse Asian Investment Conference in Hong Kong on Tuesday. “The supply chain is quite often reliant on one or two very big companies and it’s very difficult to predict and typically it’s very cyclical.”
Muirhead said it’s a much easier long-term strategy to instead identify “critical and unique” technology.
“We have to be aware that nothing is unique forever. So, we’re looking at barriers to entry, we’re looking at can this technology be advanced, can they keep up their leadership,” he said. “But typically, I would tend to stay away personally from memory companies, from fairly commodity-type supply chain companies.”
Muirhead also noted that many of the robotics ETFs aren’t offering much of a pure play on the segment, and are instead investing in “generic” companies, such as Google, Alibaba, Nvidia and Intel.
How to play the sector
He said that much of the innovation in robotics is coming from private companies, adding that innovation tends not to come from giant companies, something that is true across most sectors.
“In our work, we are meeting with a lot of private companies. We can not invest in private,” he said, noting his Creidt Suisse fund is set up to only invest in public companies.
But he added, “in the private space, this is where a lot of the innovation happens and quite often, these private companies could be attractive partners or acquisition targets for our companies. They could be competitive threats.”
Muirhead said he tends to look at smaller public companies for investments. He noted that around 50-60 percent of his fund is in companies with market capitalisation below $10 billion and that 70-75 percent is companies with market caps under $20 billion.