Automatic for the People
It was 1959 when car maker General Motors (GM) unveiled the imposing 2,700 pound Unimate #001 – the world’s first robotic arm. The brain-child of George Delvo, Unimates were soon fully deployed across GM’s die-casting plant, with over 450 machines in operation by the early 1960s.1
A robotic revolution was born
Since then, automation has grown in sophistication, efficiency and operational range. It has become ubiquitous across the business landscape, used in everything from car manufacturing and industrial warehousing, to instrument inspection and security. As investors, we are stock pickers at heart and portfolio construction is driven by company insights, not by top down themes. However, our bottom-up investment process at times results in certain themes emerging, with the global smaller companies portfolio currently containing a number of niche smaller companies that have market-leading positions in automation.
The world is just one click away
Since the advent of the internet, the face of retail has changed irrevocably. Tempted by choice, price and convenience, consumers increasingly make their purchases online. Indeed, UK shoppers spent some £130 billion in 2016 alone.2 As a result, many high-street firms have withered. However, this move from ‘bricks to clicks’ has seen an exponential rise in demand for warehousing. And with that, the need for ever-more sophisticated automation to pick, pack and ship the goods. This has created opportunities for the likes of Jungheinrich, the German forklift and warehouse specialist. Its logistics business is now the fastest-growing segment of its operations, as it expands organically. More interestingly, it is rolling out its Industry 4.0 solutions. This system manages and controls the various warehouse procedures, creating a simplified, efficient and ‘dynamic’ operation.
Staying with efficiency, Japan’s Monotaro, an e-commerce company providing industrial supply products, recently conducted an assessment of its workforce practices. It found that its employees spent most of their time walking from one part of the warehouse to the other. Monotaro’s response? Racrew – a fleet of automated guided vehicles that it hopes will double productivity at its newly built Kasama Distribution Centre. These are merely two companies operating in the automated warehouse space – a sector that looks set to grow as businesses increasingly move their operations online.
Once confined to the realms of science fiction, the self-driving car is now becoming a reality. From 1980s pioneers like Navlab and Mercedes-Benz, to today’s Waymo (owned by Google) and Waylab, automated vehicles have increasingly captured the public’s imagination.
“The ultimate goal is to eliminate crashes all together, and to do that, cars will need to perfectly perceive and understand the world around them—they’ll need superhuman senses.” Wired 3
As such, companies have had to develop ever-more complex and accurate control systems to enable their cars to safely navigate the roads. Cameras play a vital role here, tracking road signs, pedestrians and other road users. And every good camera needs a good lens, which is where the likes of Sunny Optical comes in.
Among the plethora of lenses it makes (for mobile phones, medical microscopes, industrial inspection systems), it also manufactures high-end automotive lens sets. These are primarily used for the vital sensor/driver safety suites that characterise modern vehicles. The penetration of cameras per vehicle is increasing (the latest Tesla has eight cameras), driven by both regulation and consumer awareness. And then there is autonomous driving. The average self-drive car requires 12 cameras, with Sunny Optical the global-leader in this field. This demand looks set to grow as the self-driving revolution rolls on.
Move Over Rover
Automation is not just found in industry: numerous household functions are increasingly carried out by autonomous machines. Take home security. Thanks to the advances in mobile technology and the ‘Internet of Things’, the homeowner has more control over their own security than ever before. One company to highlight is Alarm.com. It is the market leader in interactive home security, allowing consumers to create a fully-automated, state-of-the-art smart home. Alarm.com has achieved this by marrying smart security systems, video monitoring and access control into one cohesive system.
“An innovative app to control everything from locks and lights to security systems and thermostats” CNN 4
Of course Alarm.com is not alone in this field, which includes Honeywell, Ring.com and Verisure, among others. However, we believe Alarm.com’s open eco-system, use of a cellular network (after all, Wi-Fi cables can be cut by industrious burglars) and an expansive network of over 6,000 local dealers, give it a competitive advantage over its rivals.
In the year 2525…
Looking to the future, from the warehouse to the home, we believe that automation will become increasingly multifunctional, able to adapt to different tasks and operations. The evolution of A.I. means machines could, eventually, be able to make on-the-spot decisions and perform self-diagnostics.
Of course, there are concerns that automation will lead to mass unemployment. Some of these concerns are genuine; however, we also believe that more sophisticated automation and human interactions will create alternative jobs, in a variety of burgeoning or as-yet undiscovered fields.
The growth in automation – and all the related industries – will also create new investment opportunities from across the business world. Our job as investors is to apply our rigorous bottom-up investment process, seeking to discover the larger companies of tomorrow – today.
“One of the coolest integrations...just a few taps and you can keep tabs from anywhere” Wired 5
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