We recently published a list of 10 cheap robotics stocks to buy. In this article, we take a look at how Illumina, Inc. (NASDAQ:ILMN) compares to other cheap robotics stocks.

The progress of Western civilization is based on industrialization. In the late 19th and mid-20th centuries, the role of machines in factories was consolidated, leading to enormous increases in production and cost advantages that benefited society in the form of high-quality, mass-produced goods.

Today, the 21st century is the information age, thanks to the Internet. In developed countries, the service and tertiary sectors dominate, as human intellect is valued more highly than the ability to perform routine work. However, that does not mean that companies are not focusing on industrial production. In fact, estimates from the International Federation of Robotics (IFR) show that the number of industrial robots installed in America more than doubled in the decade between 2008 and 2018. In 2008, 15,170 industrial robots were installed in the United States, while in 2018 that number almost tripled, reaching 40,373.

This growth is important because most major American consumer electronics companies moved their manufacturing and production to China in the 1990s to take advantage of its low costs. In fact, the importance of robots to manufacturing is highlighted by the fact that 80% of industrial robot installations in America in 2018 were in the manufacturing sector.

But America’s tens of thousands of robots installed by 2018 doesn’t mean the rest of the world is “idle.” According to the IFR, America wasn’t among the top three countries with the highest number of installed industrial robots in 2017. That title went to China, which had installed 501,185 industrial robots by 2017 and added another 154,032 units the following year. Japan and South Korea came in second and third, with 297,215 and 273,146 installed industrial robots, respectively. But the highest number of installed robots worldwide is only one side of the picture. Like people, robot productivity is highest in groups, and South Korea, Singapore and Germany were the three countries with the highest robot density in 2017.

The most important factor for the growth of industrial robots is lower costs. Cathie Wood’s Ark Invest. In its study, the company points out that the cost of industrial robots has dropped by 50% every time their production has doubled. However, this cost reduction does not mean that robot quality is declining, because according to Ark’s data, robot performance has improved “33 times in seven years.” Ark concludes that the time from click to delivery in the warehouse decreased by 78% after Jeff Bezos’ e-commerce company installed the Kiva mobile robots.

But what about the added value that robots create? After all, a company’s main motive is profit, and if the robotics industry is to thrive, it must create economic value. In this regard, data shows that industrial robots across industries worldwide, from agriculture to construction, mining, and utilities, added a whopping $211.7 trillion in value in 2017. Metal and electronics manufacturing, construction, and chemical manufacturing benefited the most. In these industries, industrial robots added $2.2 trillion, $1.3 trillion, and $1.2 trillion, respectively.

Diving deeper, the automotive industry is an industry that has seen a lot of hype when it comes to robots, especially humanoid robots. This is largely due to Elon Musk’s belief that his car company can become a humanoid robot company in the future that generates a trillion dollars a year in revenue. We’ve covered this in detail as part of our coverage of . $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan StanleySo you should check it out as it provides a detailed introduction to the humanoid robotics industry.

But while Musk and MS are optimistic about humanoid robots, a critical analysis of their estimates naturally raises the question of whether demand for automobiles is also driving general demand for industrial robots. Looking at the data, it is a mixed picture across the years. For example, in 2017, 2018 and 2019, the automotive industry installed 125,700, 125,581 and 105,379 new robots, respectively. In the same years, electronics manufacturing installed 121,955, 105,153 and 87,712 new robots, respectively. So before the coronavirus pandemic, the automotive industry was the world’s largest customer of industrial robots. But in 2020, this picture changed, as in 2020, 2021 and 2023, the number of new robots demanded by the automotive industry was 79,849, 119,405 and 136,130 new robots, respectively. On the other hand, the electronics industry required 109,315, 136,670 and 156,936 new robots, respectively.

This was a historic shift that displaced the automotive industry’s dominance in the industrial robotics industry that had been prevalent since 1961. According to IFR, this was to some extent due to the automotive industry’s halt in production during the pandemic, as production halts led to delayed investments. However, between 2015 and 2020, industrial robot installations in the automotive industry declined by a compound annual growth rate (CAGR) of 4% per year. On the other hand, demand for consumer electronics boomed during the pandemic due to lockdowns and the shift to remote working. This, coupled with social distancing regulations in the manufacturing sector, triggered a historic shift.

Our methodology

To create our list of cheap robotics stocks to buy, we first sorted the holdings of the largest robotics ETFs by their average analyst price appreciation. This was chosen instead of P/E because many companies are unprofitable. We then selected the stocks with the lowest P/E ratios and further refined these to include only those stocks with an average analyst rating of “Buy” or better.

With these stocks, we also mentioned the number of hedge fund investors. Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (Further details can be found here).

A research facility with medical professionals surrounded by diagnostic equipment.

Illumina, Inc. (NASDAQ:ILMN)

Number of hedge fund holders in Q1 2024: 48

Price increase: 21%

Average price target: $145.84

Illumina, Inc. (NASDAQ:ILMN) is a large medical diagnostics and research company based in San Diego, California. It targets the demand for automation and robotic products in the healthcare industry, with products such as DNA library preparation kits for gene sequencing and robot control software. While these products alone give Illumina, Inc. (NASDAQ:ILMN) a limited competitive advantage, the company has a rapidly growing market due to its strong position in the gene sequencing industry, where it dominates more than a quarter of the global gene sequencing industry. This dominant market share means that Illumina, Inc. (NASDAQ:ILMN) can quickly learn from customer experiences with its automation products and maintain and expand its competitive advantage in the industry. In addition, its business model is based on expensive products sold for long-term use, which means that Illumina, Inc. (NASDAQ:ILMN) also has the potential to generate recurring revenue.

Patient Capital Management mentioned Illumina, Inc. (NASDAQ:ILMN) in its second quarter 2024 investor letter. Here is what the company said:

“Illumina Inc. (ILMN) is a good example. We added the name to the company late last year when the company’s stock price began trading at a 5-year low. The company is a leader in genome sequencing, but made an ill-advised acquisition of Grail, a blood-based product for early detection of several cancers, in 2021 for $8 billion. Grail was an annualized drain on profitability of approximately $600 million, weighing on financials at a time when competition was increasing and the overall demand environment was weakening. Despite increasing competition in the genome sequencing space, Illumina continues to lead with approximately 80% market share. With the successful spin-off of Grail Inc. (GRAL) in June, Illumina has now returned to being a pure-play sequencing company. As the company returns to historical profitability following the Grail spin-off and the post-COVID demand environment normalizes, we believe you can buy a market leader in a secularly growing industry for less than a market multiple.”

ILMN total 9th place on our list of cheap robot stocks to buy. While we recognize ILMN’s potential as an investment, we believe some AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than ILMN but trades at less than 5x earnings, read our report on the cheapest AI stock.

READ MORE: $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan Stanley And According to Jim Cramer, NVIDIA has “become a wasteland”.

Disclosure: None. This article was originally published on Insider Monkey.