From the palm of your hand, to your refrigerator, and your car, technology is everywhere. Alongside disrupting consumers’ lives, tech has also transformed industries and shaken up the way in which firms manage their plants and warehouses. Robots and drones are everywhere, from the hospital bed to the factory floor and the skies of a warzone, and powering all this innovation is the automation sector.
Before we get to the nitty gritty of the industry, it is important to take stock of what automation really means. According to Electrical Technology, industrial automation is a step beyond simple mechanization. While mechanization involves operators running machines on the factory floor, automation replaces them with logic boards that come preprogrammed with commands instead. However automation is not limited to industrial applications, and neither is it a new concept. You’d be surprised to learn that one of the first applications of automation came in 1892 in the form of the telephone switchboard, which automated the process of connecting phone calls between users.
Since then, the industry has rapidly evolved. As of 2022 the global industrial application market was worth $206 billion according to research from Fortune Business Insights. From 2022 until 2039, the research firm expects that the sector will grow at a compounded annual growth rate (CAGR) of 9.8% to sit at an estimated $395 billion at the end of the forecast period. Fortune Business Insights believes that the pairing of digital technology into commercial operations and a growing interlinkage of firms within the sector will drive this growth. It adds that Europe was the dominating player in the industrial automation industry in 2021, as it accounted for $61.8 billion of the $192 billion market, but adds that Asia Pacific will be the fastest growing region due to rapid industrialization.
While so far we have talked about industrial automation, one area that you might not know that is being affected by this change is the finance industry. Investment bank UBS, which deals with countless client orders for stock trading, is using artificial intelligence to sort through these requests. According to Deloitte, this has reduced the time that it takes for UBS to sort these allocation requests by a stunning 96%, as it has dropped from an earlier 45 minutes to now just two minutes. Deloitte further expects that up to 861,000 public sector jobs within the U.K. will be replaced by automation by 2030, allowing a £15 billion cost reduction compared to 2015. This will be done through a subsegment of the automation market called Robotic Process Automation (RPA). This segment is purely software based, with the software robots aiding firms in decision making and taking the workload off of human employees.
Finally, alongside software robots, hardware robots have also made their mark. One of the strongest examples of this is Boston Dynamics, whose robot dog, Spot, is already aiding a variety of sectors with their daily operations. These range from SpaceX using the robot to manage chemicals around its launch pad, to the British Royal Air Force using it to navigate through rough terrain during patrols.
Image by Computerizer from Pixabay
Another robot that has made waves is the one made by Intuitive Surgical, Inc. (NASDAQ:ISRG). This is used to aid surgeons during their surgeries. Surgeries are among the most complex operations performed by humans, and during a recent earnings call, Intuit’s head of investor relations Mr. Brian King commented on the current state of the industry as he outlined:
Overall procedure growth for the full year 2022 was 18% and increased 15% on a three-year compound annual growth basis. Overall procedure growth was comprised of 16% growth in the US and 22% growth outside of the US. In the US, fourth quarter 2022 procedures grew 18% year-over-year, compared to 16% for the fourth quarter of 2021 and 18% last quarter. The US procedure growth rate reflected a favorable comparison to the quarter a year ago, given the impact of the Omicron variant in December of last year. On a three-year compound annual growth basis, US procedure growth was 13%. Outside of the US, fourth quarter procedure volume grew approximately 18% year-over-year, compared to 28% for the fourth quarter of 2021 and 24% last quarter.
On a three-year compound annual growth basis, procedure growth was 19%. Turning to Europe. Procedure growth in the quarter was led by strong growth in UK, Germany and Italy. In the regions noted, procedure growth outside of urology was strong in general surgery and gynecology categories. Specifically in the UK, we experienced strong early-stage growth in colorectal surgery and continued strong growth in hysterectomy. Turning to Asia. Growth outside of China continued to be solid, with notable strength in capital and procedure growth in Japan. Procedure growth in Korea was healthy and India and Taiwan continue to experience strong early-stage growth. In Japan, as Jamie noted earlier, 51 systems were placed in the country, the most in a single quarter.
Overall procedure growth in Japan for the quarter was led by general surgery, with strong early stage growth in colon resection and hysterectomy and also in urology with newly reimbursed nephrectomy procedures.
Today, we’ll look at some of the best automation stocks that are on hedge funds’ watchlist, with their top picks being NVIDIA Corporation (NASDAQ:NVDA), Intuitive Surgical, Inc. (NASDAQ:ISRG), and Applied Materials, Inc. (NASDAQ:AMAT).
Our Methodology
We dug through Insider Monkey’s fourth quarter of 2022 database of 943 hedge funds to pick automation stocks that were their favorites. Out of these, the top thirteen have been listed and ranked according to the number of hedge funds that hold them in their portfolios.
Best Automation Stocks To Buy Now
13. Ambarella, Inc. (NASDAQ:AMBA)
Number of Hedge Fund Investors in Q4 2022: 30
Ambarella, Inc. (NASDAQ:AMBA) is an American firm headquartered in Santa Clara, California. The firm sells imaging and image processing products that are used in automation systems such as driver assistance systems and robotics.
30 of the 943 hedge funds polled by Insider Monkey during Q4 2022 had bought Ambarella, Inc. (NASDAQ:AMBA)’s shares. Out of these, the firm’s largest investor is Israel Englander’s Millennium Management which owns 1.3 million shares that are worth $103 million.
Along with NVIDIA Corporation (NASDAQ:NVDA), Intuitive Surgical, Inc. (NASDAQ:ISRG), and Applied Materials, Inc. (NASDAQ:AMAT), Ambarella, Inc. (NASDAQ:AMBA) is one of the best automation stocks on the hedge fund radar.
12. Emerson Electric Co. (NYSE:EMR)
Number of Hedge Fund Investors in Q4 2022: 32
Emerson Electric Co. (NYSE:EMR) provides automation products and services to food, power generation, life sciences, and other industries. It is headquartered in Saint Louis, Missouri.
By the end of last year’s fourth quarter, 32 of the 943 hedge funds polled by Insider Monkey had bought a stake in Emerson Electric Co. (NYSE:EMR), making it a favorite hedge fund automation stock. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the company’s largest investor through a $152 million stake that comes via 1.5 million shares.
11. Teradyne, Inc. (NASDAQ:TER)
Number of Hedge Fund Investors in Q4 2022: 33
Teradyne, Inc. (NASDAQ:TER) is an American firm that provides automation equipment for testing semiconductors after manufacturing. It is based in North Reading, Massachusetts.
Insider Monkey took a look at 943 hedge fund portfolios for 2022’s December quarter and found out that 33 had bought Teradyne, Inc. (NASDAQ:TER)’s shares. The firm’s largest investor in our database is Panayotis Takis Sparaggis’s Alkeon Capital Management which owns 2.1 million shares that are worth $186 million.
10. Rockwell Automation, Inc. (NYSE:ROK)
Number of Hedge Fund Investors in Q4 2022: 34
Rockwell Automation, Inc. (NYSE:ROK) is an American firm headquartered in Milwaukee, Wisconsin. The firm sells sensors and components for automation devices and is a top hedge fund pick in the automation industry.
By the end of Q4 2022, 34 of the 943 hedge funds polled by Insider Monkey had invested in the company. Out of these, Rockwell Automation, Inc. (NYSE:ROK)’s largest investor is Ian Simm’s Impax Asset Management which owns 525,684 shares that are worth $135 million.
9. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Investors in Q4 2022: 36
UiPath Inc. (NYSE:PATH) provide robotic process automation software for process analytics and implementation to a variety of industries such as banking, healthcare, and finance. The firm is based in New York, New York.
Insider Monkey dug through 943 hedge fund portfolios for last year’s fourth quarter and found out that 36 had bought UiPath Inc. (NYSE:PATH)’s shares. The company’s largest investor is Catherine D. Wood’s ARK Investment Management which owns 44 million shares that are worth $559 million.
8. PTC Inc. (NASDAQ:PTC)
Number of Hedge Fund Investors in Q4 2022: 44
PTC Inc. (NASDAQ:PTC) is a software company that allows firms to digitally transform their industrial operations and generate insights from automated factories. It is headquartered in Boston, Massachusetts.
As of 2022’s December quarter, 44 of the 943 hedge funds polled by Insider Monkey had invested in the company. PTC Inc. (NASDAQ:PTC) ‘s largest hedge fund shareholder is Robert Joseph Caruso’s Select Equity Group which owns 3.5 million shares that are worth $420 million, and the firm is one of the most favorite hedge fund automation stock picks.
7. Honeywell International Inc. (NASDAQ:HON)
Number of Hedge Fund Investors in Q4 2022: 44
Honeywell International Inc. (NASDAQ:HON) provides automation hardware and software products to industries. It is based in Charlotte, North Carolina.
44 of the 943 hedge funds surveyed by Insider Monkey for their final quarter of 2022 investments had bought a stake in Honeywell International Inc. (NASDAQ:HON). Out of these, Ric Dillon’s Diamond Hill Capital is the company’s largest shareholder as it owns 1.1 million shares that are worth $245 million.
6. Alteryx, Inc. (NYSE:AYX)
Number of Hedge Fund Investors in Q4 2022: 45
Alteryx, Inc. (NYSE:AYX)’s products automate natural language processing, character recognition, and other software functions. It is headquartered in Irvine, California.
By the end of Q4 2022, 45 of the 943 hedge funds polled by Insider Monkey had bought Alteryx, Inc. (NYSE:AYX)’s shares. The firm’s largest investor is Brian Bares’ Bares Capital Management which owns 2.5 million shares that are worth $127 million.
NVIDIA Corporation (NASDAQ:NVDA), Alteryx, Inc. (NYSE:AYX), Intuitive Surgical, Inc. (NASDAQ:ISRG), and Applied Materials, Inc. (NASDAQ:AMAT) are some best automation stocks on the hedge fund radar.
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Disclosure: None. 13 Best Automation Stocks To Buy Now is originally published on Insider Monkey.