ROBO Global Q3 2020 Review
The ROBO Global innovation indices posted double-digit returns in Q3, continuing to outperform global equities. This performance was due, in part, to the digitalization of the economy that has been turbocharged by the COVID-19 crisis. The Robotics & Automation Index (ROBO) returned 11%, the Artificial Intelligence Index (THNQ) increased 10%, and the Healthcare Technology & Innovation Index (HTEC) rose 14% for the quarter. Our strategies are focused on technology disruptors, especially in the areas of artificial intelligence, factory and logistics automation, enterprise software, and healthcare technologies. In this report, we discuss key sector trends and big movers in each space.
ROBO: Robotics & Automation
Robotics, automation, and AI stocks continued to outperform global equities in Q3, with the ROBO Global Robotics & Automation Index (ROBO) returning a total 10.6% in the quarter—2.5 percentage points more than the MSCI ACWI return of 8.1%. This performance included a 1.6% benefit from a weaker US Dollar. Overall, 9 of the 11 subsectors recorded gains, led by Logistics Automation (+17%), Healthcare (+17%), and Sensing (+12%) while Security (-25%), and Consumer (-9%) declined. By region, Europe (+24%) and Asia (+9%) led the US (+6%). As of 30 September 2020, 59% of ROBO index members held a net cash position. At the portfolio level, the net cash to EBITDA for the portfolio stood at 0.1x.
HTEC: Healthcare Technology & Innovation
Healthcare tech continued to outperform global equities in Q3, with the ROBO Global Healthcare Technology and Innovation Index (HTEC) returning a total 13.8% in the quarter, outperforming the MSCI ACWI return of 8.1%, and the S&P Global Healthcare Index of 4.0%. By subsector, Genomics, Data Analytics, and Process Automation led the group, returning 30%, 23%, and 19%, respectively. All subsectors saw double-digit returns with the exception of Regenerative Medicine (+6%) and Precision Medicine (-4%). As of 30 September 2020, 56% of HTEC index members held a net cash position, and a median forward E/V to sales ratio of 6.95x
THNQ: Artificial Intelligence
The ROBO Global Artificial Intelligence Index (THNQ) posted gains of 10.5% in Q3 as many of the index members took a breather after surging almost 44% in the previous quarter. THNQ continued to outperform broader market indices, including the MSCI ACWI (+8.1%) and the S&P 500 (+8.9%). Cognitive Computing (31.9%), E-Commerce (19.7%), and Semiconductor (+15.0%) were top contributors during the quarter. Despite a volatile quarter, underlying fundamentals remain strong, and the continued investment by enterprises in their digital transformation initiatives was evidenced by strong earnings results during the quarter.