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The Zacks Electronics - Miscellaneous Components industry is benefiting from the ongoing automation drive, and increased spending by manufacturers of semiconductors, automobiles, machinery and mobile phones. Notably, industry players like Fabrinet FN, Novanta NOVT, OSI Systems OSIS and American Superconductor AMSC are well-poised to benefit from the solid adoption of AI and the democratization of IoT techniques, which are transforming robotics, industrial automation, transportation systems, retail and healthcare. Easing supply-chain constraints are also benefiting the industry participants.
However, a challenging global macroeconomic environment and end-market volatility worldwide are concerning for the underlined industry. Rising inflationary pressure, growing geo-political tensions and foreign-currency headwinds are taking a toll on the industry players.
Industry Description
The Zacks Electronics - Miscellaneous Components industry primarily comprises companies providing various accessories and parts used in electronic products. The industry participants’ offerings include power control and sensor technologies to mitigate equipment damage, testing products for safety, and advanced medical solutions. They cater to varied end markets, such as telecommunications, automotive electronics, medical devices, industrial, transportation, energy harvesting, defense and aerospace electronic systems, and consumer electronics. Customers in this industry are mainly original equipment manufacturers, independent electronic component distributors and electronic manufacturing service providers.
3 Trends Shaping the Future of Electronics - Miscellaneous Components Industry
Automation Boom a Tailwind: The requirement for faster, more powerful and energy-efficient electronics leads to increased automation. Control systems, such as computers, and robots and information technologies for handling different processes and machinery, are driving the industry. The growing installation of collaborative robots, which add efficiency to production processes by working with production workers, will benefit the industry participants. IoT-supported factory automation solutions are other contributing factors. The evolution of smart cars and autonomous vehicles is expected to drive growth for the industry.
Miniaturization Remains a Key Lever: The industry participants are benefiting from the ongoing transition in semiconductor manufacturing technology. Demand for advanced packaging, enabling the miniaturization of electronic products, remains strong. The consistent shift to smaller dimensions, the rapid adoption of device architectures like FinFET transistors and 3D-NAND, and the increasing utilization of new manufacturing materials to increase transistor and bit density are driving the demand for solutions provided by industry players.
Geo-political Tensions are Worrisome: The ongoing Russia-Ukraine war and, the souring relationship between the United States and China are headwinds. Increasing dependency on AI-backed electronic devices on semiconductors and current restrictions ordered by the United States on trading with China, which remains the main hub for chip production, is a significant negative for the underlined industry.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Electronics – Miscellaneous Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #66, placing it in the top 26% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bearish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since June 30, 2024, the industry’s earnings estimates for the current year have moved 0.9% up.
Before we present a few stocks worth considering for your portfolio, let us look at the industry’s recent stock-market performance and the valuation picture.
Industry Underperforms S&P 500 & Sector
The Zacks Electronics - Semiconductors industry has underperformed the Zacks S&P 500 composite and the broader Zacks Computer and Technology sector in the past year.
The industry has returned 12.7% over this period compared with the S&P 500’s growth of 25.7% and the broader sector’s rally of 33%.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month price to earnings, a commonly-used multiple for valuing electronics - miscellaneous components stocks, the industry is currently trading at 19.79X compared with the S&P 500’s 21.45X and the sector’s 26.07X.
In the past five years, the industry has traded as high as 27.04X, as low as 15.98X and recorded a median of 21.33X, depicted in the charts below.
Price/Earnings Ratio (F12M)
4 Electronics - Miscellaneous Components Stocks to Buy
American Superconductor: The Ayer, MA-based leading energy technologies company develops and sells a wide range of products based on power electronic systems and high-temperature superconductor wires. American Superconductor is riding on solid momentum in its new energy power systems and ship protection systems, which is driving its Grid revenues. The growing shipment of 3-megawatt electrical control systems (“ECS”) is benefiting its Wind business.
This Zacks Rank #1 (Strong Buy) company remains well-poised to gain substantial traction across military and navy markets on the back of its robust Grid business. Its new energy product lineup in the power grid is a positive. Additionally, the company’s recent acquisition of NWL, which has expanded its product offerings in the military and industrial sectors, is expected to accretive to earnings per share.
You can see the complete list of today’s Zacks #1 Rank stocks here.
American Superconductor has gained 178.3% in the past year. The Zacks Consensus Estimate for AMSC’s fiscal 2024 earnings has been revised upward by 210% to 31 cents per share in the past 60 days.
Price and Consensus: AMSC
Fabrinet: The Bangkok, Thailand-based company offers advanced optical packaging, precision optical, and electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products. It is benefiting from a favorable demand environment. Further, a solid momentum across optical communications products is aiding Fabrinet’s financial performance.
The Zacks Rank #2 (Buy) player will likely remain on the growth trajectory, owing to the rising momentum across optical communications OEM customers. Increasing demand for optical communications components and modules, driven by growing outsourcing production activities to third parties by OEMs, is a tailwind. The company’s strengthening AI product offerings are other tailwinds.
Fabrinet has gained 49.6% in the past year. The Zacks Consensus Estimate for fiscal 2025 earnings has moved north by 3.9% to $9.91 per share in the past 60 days.
Price and Consensus: FN
Novanta: The Bedford, MA-based company designs, develops, manufactures, and sells precision photonic and motion-control components and subsystems to original equipment manufacturers (OEM) in the medical equipment and advanced industrial technology markets. The company is benefiting from strong momentum across medical applications, thanks to which it is experiencing solid relationships with leading OEMs.
The Zacks Rank #2 player is well-poised to capitalize on the growing demand for robotics and automation, minimally invasive and robotic surgery, and precision medicine on the back of its robust portfolio. The company’s sticky business model is a plus.
Novanta has returned 11.3% in the past year. The Zacks Consensus Estimate for 2024 earnings has moved 1.2% north to $3.30 per share in the past 60 days.
Price and Consensus: NOVT
OSI Systems: This Hawthorne, CA-headquartered company is a vertically integrated designer and manufacturer of specialized electronic systems and components. Its products are primarily utilized for critical homeland security, healthcare, defense and aerospace applications. The company is riding on its strong portfolio of security screening solutions. Its strong contract wins for mobile cargo, vehicle inspection, and advanced security inspection technology and services are major positives.
The Zacks Rank #2 player also benefits from its strengthening optoelectronics business. Its growing customer base across multiple industries is bringing higher-margin opportunities to the business.
OSI Systems has gained 23.8% in the past year. The Zacks Consensus Estimate for OSIS’ fiscal 2025 earnings has been revised upward by 3.1% to $8.93 per share in the past 60 days.
Price and Consensus: OSIS
Zacks Investment Research
The Computer and Technology group has plenty of great stocks, but investors should always be looking for companies that are outperforming their peers. American Superconductor (AMSC) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? Let's take a closer look at the stock's year-to-date performance to find out.
American Superconductor is a member of our Computer and Technology group, which includes 617 different companies and currently sits at #8 in the Zacks Sector Rank. The Zacks Sector Rank considers 16 different groups, measuring the average Zacks Rank of the individual stocks within the sector to gauge the strength of each group.
The Zacks Rank is a proven model that highlights a variety of stocks with the right characteristics to outperform the market over the next one to three months. The system emphasizes earnings estimate revisions and favors companies with improving earnings outlooks. American Superconductor is currently sporting a Zacks Rank of #1 (Strong Buy).
The Zacks Consensus Estimate for AMSC's full-year earnings has moved 477.8% higher within the past quarter. This is a sign of improving analyst sentiment and a positive earnings outlook trend.
According to our latest data, AMSC has moved about 92.5% on a year-to-date basis. In comparison, Computer and Technology companies have returned an average of 20.6%. This shows that American Superconductor is outperforming its peers so far this year.
Another stock in the Computer and Technology sector, Amphenol (APH), has outperformed the sector so far this year. The stock's year-to-date return is 28.3%.
For Amphenol, the consensus EPS estimate for the current year has increased 4% over the past three months. The stock currently has a Zacks Rank #2 (Buy).
To break things down more, American Superconductor belongs to the Electronics - Miscellaneous Components industry, a group that includes 28 individual companies and currently sits at #76 in the Zacks Industry Rank. Stocks in this group have gained about 3.1% so far this year, so AMSC is performing better this group in terms of year-to-date returns.
In contrast, Amphenol falls under the Electronics - Connectors industry. Currently, this industry has 2 stocks and is ranked #94. Since the beginning of the year, the industry has moved +27.3%.
Investors interested in the Computer and Technology sector may want to keep a close eye on American Superconductor and Amphenol as they attempt to continue their solid performance.
Zacks Investment Research
Investors interested in Electronics - Miscellaneous Components stocks are likely familiar with OSI Systems (OSIS) and TE Connectivity (TEL). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, OSI Systems is sporting a Zacks Rank of #2 (Buy), while TE Connectivity has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that OSIS likely has seen a stronger improvement to its earnings outlook than TEL has recently. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
OSIS currently has a forward P/E ratio of 15.69, while TEL has a forward P/E of 19.06. We also note that OSIS has a PEG ratio of 1.43. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. TEL currently has a PEG ratio of 1.96.
Another notable valuation metric for OSIS is its P/B ratio of 2.77. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, TEL has a P/B of 3.47.
These metrics, and several others, help OSIS earn a Value grade of B, while TEL has been given a Value grade of C.
OSIS sticks out from TEL in both our Zacks Rank and Style Scores models, so value investors will likely feel that OSIS is the better option right now.
Zacks Investment Research
The robotics market is booming, with projections calling for a 15.1% CAGR to $169.8 billion by 2032. As a major player, in the global market, the U.S. is expected to rake in $784.6 billion from robotics in 2024 alone, largely due to advancements in artificial intelligence (AI) and automation - and especially generative AI, which has been making headlines.
Money is pouring into robotics companies, too. In July, investments totaled $1.3 billion across 47 deals. One standout example is Serve Robotics , whose stock jumped over 300% in a month after NVIDIA invested $3.7 million.
But if you're thinking about making a robotics investment of your own, it's not necessary to speculate on individual stocks. There are ETFs (exchange-traded funds) that offer broader exposure to the robotics and AI theme, allowing investors to benefit from this megatrend over time. Let's look at three top funds that each take a slightly different approach to investing in robotics.
ROBO Global Robotics & Automation Index ETF (ROBO)
The ROBO Global Robotics & Automation Index ETF is a solid choice for investors seeking exposure to the robotics and automation sectors. Launched in 2013, ROBO is one of the largest and most established robotics ETFs, with $1.07 billion in assets under management.
ROBO tracks the ROBO Global Robotics and Automation Index, which measures the performance of companies in the global robotics and automation industry. The fund holds a diverse portfolio of 79 stocks, with no single holding accounting for more than 2.2% of the ETF's value.
The fund's top holdings include well-known names in the robotics and automation field. Intuitive Surgical , the maker of the da Vinci surgical robot, is among the top five holdings at 2.20%. Other notable companies in the top 5 include wireless sensor specialist Samsara (2.20%), ServiceNow Inc. (2.13%), motion control tech company Novanta Inc. (1.99%), and automation firm Zebra Technologies Corp. (1.99%).
ROBO's performance has been mixed in recent years. While it has shown promise in capturing the growth potential of the robotics and automation sector, it has underperformed the broader S&P 500 Index since its inception. ROBO is down 8.1% on a year to date basis, though the stock's roughly 12% pullback from its annual high may provide an appealing entry point.
ROBO's expense ratio is 0.95%, which is relatively high, but understandable given the fund's specialized focus. Investors also get a small dividend yield of 0.05%.
First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT)
The First Trust Nasdaq Artificial Intelligence and Robotics ETF is an attractive option for investors looking to gain exposure to the growing AI and robotics sectors. Launched on Feb. 21, 2018, ROBT tracks the Nasdaq CTA Artificial Intelligence and Robotics Index, focusing on companies involved in AI, robotics, and automation across various industries.
With around $463.7 million in AUM, ROBT is a smaller fund compared to some of its peers, but it's been steadily growing, with a net inflow of $30.56 million over the past year. This growth shows increasing investor interest in the potential of AI and robotics technologies.
The ETF holds a diverse portfolio of 114 stocks, which provides broad exposure to the sector while mitigating single-stock risk. Top holdings feature big names like new S&P 500 member Palantir Technologies (2.96%), AI fintech platform Upstart Holdings (2.51%), cloud software company ServiceNow (2.41%), cybersecurity stock SentinelOne (2.37%), and genetic testing specialist Illumina Inc. (2.25%). The ETF's passive management style aims to replicate the performance of its underlying index, giving investors a comprehensive view of the sector's potential.
ROBT is down 10% in 2024, providing an opportunity to buy the dip in this growth-focused ETF.
One of ROBT's strengths is its relatively low expense ratio of 0.65%, which is competitive for a specialized thematic ETF. This lower cost structure can help preserve returns for investors over the long term.
ROBT also offers a modest dividend yield of 0.28%, paid quarterly. While not substantial, this provides a small income stream for investors, which is uncommon among many growth-oriented tech ETFs.
For investors seeking targeted exposure to AI and robotics while tempering the risks associated with picking individual stocks, ROBT offers a balanced approach with its mix of established and emerging companies in the field.
Global X Robotics & Artificial Intelligence ETF (BOTZ)
The Global X Robotics & Artificial Intelligence ETF is a popular choice for investors seeking to capitalize on the growth potential of robotics and AI. Launched in 2016, BOTZ tracks the Indxx Global Robotics & Artificial Intelligence Thematic v2 Index, which focuses on companies that could benefit from increased adoption and utilization of robotics and artificial intelligence.
BOTZ has a significant asset base of $2.55 billion, making it one of the largest robotics ETFs. The fund holds a concentrated portfolio of 44 stocks, with a strong emphasis on large-cap companies, which account for 51.5% of its holdings.
The top five holdings include global tech industry leaders NVIDIA (11.04%), Intuitive Surgical (10.64%), Swiss automation giant ABB Ltd (9.96%), Japanese sensor specialist Keyence Corp (8.05%), and Tokyo-based automation company SMC Corp (5.79%). This diverse mix across various industries and regions helps reduce risk, while providing exposure to the key players driving innovation in robotics, AI, and automation.
Performance-wise, BOTZ has been on a slow but steady upward trend over the past year, with a 52-week gain of 15.1%. Its 2024 performance has been more modest, with a 4.8% gain, but the ETF has outperformed its rival robotics ETFs - likely due to its heavy NVDA exposure. That said, with BOTZ down 11% from its March highs, investors can still buy the dip on this ETF.
BOTZ also has a relatively low expense ratio of 0.68%, which is competitive for a thematic ETF. The fund offers a modest dividend yield of 0.16%, making it more suitable for growth-oriented investors rather than those seeking income.
Conclusion
In conclusion, with the robotics, automation, and AI industries poised for significant long-term growth, investing in ETFs like ROBO, ROBT, and BOTZ offers a smart way to tap into this exciting trend. Each fund has its own twist, from ROBO's broad market approach to BOTZ's concentrated bet on industry leaders. While the returns have been muted so far, the explosive growth potential in robotics and AI makes them worth a look for patient investors with a longer-term time frame.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
Fund manager Matthew Tuttle made waves in the ETF space for his unique funds that offer ways for investors to get leveraged exposure or bet against well-known financial figures like Jim Cramer and Cathie Wood.
Tuttle is back with a new fund that gives investors a way to invest in companies that are not meeting ESG (environmental, social, and governance) requirements.
What Happened: Tuttle Capital Management launched the ETF Opportunities Trust Tuttle Capital Shareholders First Index ETF E, a new ETF that gives investors a way to invest in companies that "focus on profits, not politics or trendy activisms of the moment."
"ESGX allows investors to choose a portfolio of companies that follow the comment sense notion that companies that focus on profits are better for investors than companies that don't," a press release for the fund reads.
The ETF follows the AJN Shareholders First Index, which tracks a portfolio of U.S. companies that meet the requirement of focusing on profits and ignoring politics and "trendy activisms of the moment."
"Too many companies today put ESG and DEI politics first and their shareholders' profits last," Tuttle Capital CEO Matthew Tuttle said. "ESG has become a way for liberal executives and large investors to enact social changes that they can't pass at the ballot box."
Tuttle said CEOs can be pressured to "cave to the trendy politics of the moment," and often times this is not in the best interest of shareholders.
"That's why we launched ESGX – to put shareholders and profits first."
Tuttle added that investors had limited options of ways to invest in companies that put profits ahead of politics before the ETF launched.
As of Sept. 9, the following were the top holdings in the ESGX ETF:
The ETF launch comes after companies like Anheuser-Busch InBev , Planet Fitness , Target Corporation and others have been accused by consumers and investors of focusing too heavily on ESG and DEI policies and "going woke" instead of worrying about financial growth and returns for shareholders.
Read Also: Nancy Pelosi Among ‘Best Of The Best’ In Stock Trading: New Congress Trading ETF Coming From Creator Of Anti-Cathie Wood, Jim Cramer Funds
Self Defense ETF Also Launches: Tuttle Capital also launched the Spinnaker ETF Series Tuttle Capital Self Defense Index ETF G Tuesday.
The fund invests in companies that are engaged in self-defense, with a belief that the United States is becoming less safe.
The ETF invests in companies that manufacture, service, supply and distribute personal and law enforcement defense equipment and protection services. The fund tracks the AJN Self Defense U.S. Equity Index.
"Americans feel less safe and feel there is more crime in the country now than last year. Many Americans are taking self defense into their own hands," Tuttle said.
Tuttle added that shares of gun manufacturers have also risen after the assassination attempt on former President Donald Trump.
"Gun sales have rebounded after nearly three years of continuous decline and firearms manufacturers world wide have seen their stock surge after the terrorist attack on Israel and the Trump assassination attempt."
As of Sept. 9, the following were the top holdings in the GUNZ ETF:
Read Next:
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
In a recent exclusive interview with Benzinga, Paul Eitelman, chief investment strategist for North America at Russell Investments, provided insights into the sectors of small-cap stocks that stand out amidst economic uncertainty.
While small-caps as a whole face some macroeconomic risks, Eitelman highlights several specific sectors that could offer substantial opportunities.
Where Small-Cap Managers Are Finding Opportunities
Eitelman notes that “dedicated small-cap managers are finding opportunities to tilt their portfolio strategies toward banks, technology and select highly indebted companies that are likely to benefit from lower interest rates going forward.” These sectors are positioned to thrive, especially as interest rates begin to decline.
Technology continues to dominate market discussions, and small-cap tech companies could be key beneficiaries of economic shifts, particularly those aligned with innovative growth areas like AI and data services.
The Russell 2000 index is one of the more popular indices tracking small cap U.S. equity. ETFs that track this index include the iShares Russell 2000 ETF , the Vanguard Russell 2000 ETF and the Avantis US Small Cap Equity ETF . The Invesco S&P SmallCap Information Technology ETF is a lesser-known but technology-focused ETF tracking small cap companies. The top 3 holdings of this ETF are Fabrinet , SPS Commerce, Inc. and Badger Meter Inc. .
Read Also: Small-Cap AI Stocks On The Rise: 3 Hidden Gems You Shouldn’t Miss
Stock Selection: Primary Driver Of Risk, Return
However, Eitelman cautions that given the high macroeconomic uncertainty, broad sector bets are risky. He recommends a more refined approach: "Our preference into high macro uncertainty is to target only modest sector tilts and let stock selection shine as the primary driver of risk and return."
This focus on stock selection over aggressive sector rotation makes sense in an environment where not all companies are equally positioned to navigate fluctuating interest rates or economic slowdowns.
Banks, for example, are likely to benefit from a soft landing scenario, while indebted companies could see relief as rates fall. Tech remains a favorite sector due to its long-term growth prospects, even amid near-term uncertainty.
Overall, Eitelman's strategy emphasizes precision and caution, advising investors to prioritize stock-picking and avoid broad over-exposure in the small-cap space.
Read Next:
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
The Computer and Technology group has plenty of great stocks, but investors should always be looking for companies that are outperforming their peers. Has American Superconductor been one of those stocks this year? A quick glance at the company's year-to-date performance in comparison to the rest of the Computer and Technology sector should help us answer this question.
American Superconductor is one of 617 companies in the Computer and Technology group. The Computer and Technology group currently sits at #8 within the Zacks Sector Rank. The Zacks Sector Rank includes 16 different groups and is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors.
The Zacks Rank is a proven model that highlights a variety of stocks with the right characteristics to outperform the market over the next one to three months. The system emphasizes earnings estimate revisions and favors companies with improving earnings outlooks. American Superconductor is currently sporting a Zacks Rank of #1 (Strong Buy).
Over the past 90 days, the Zacks Consensus Estimate for AMSC's full-year earnings has moved 477.8% higher. This is a sign of improving analyst sentiment and a positive earnings outlook trend.
Based on the latest available data, AMSC has gained about 77.7% so far this year. At the same time, Computer and Technology stocks have gained an average of 20.6%. As we can see, American Superconductor is performing better than its sector in the calendar year.
One other Computer and Technology stock that has outperformed the sector so far this year is Amphenol . The stock is up 34.8% year-to-date.
For Amphenol, the consensus EPS estimate for the current year has increased 4.2% over the past three months. The stock currently has a Zacks Rank #2 (Buy).
Looking more specifically, American Superconductor belongs to the Electronics - Miscellaneous Components industry, which includes 28 individual stocks and currently sits at #72 in the Zacks Industry Rank. This group has gained an average of 6.2% so far this year, so AMSC is performing better in this area.
In contrast, Amphenol falls under the Electronics - Connectors industry. Currently, this industry has 2 stocks and is ranked #95. Since the beginning of the year, the industry has moved +33.7%.
American Superconductor and Amphenol could continue their solid performance, so investors interested in Computer and Technology stocks should continue to pay close attention to these stocks.
Zacks Investment Research
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The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.
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