Ways to profit from factories getting more efficient

What is industrial automation? Just as automation is focused on using technology to reduce labor intensity, and improve productivity and efficiency, industrial automation aims all that effort at machine- and manufacturing-based processes. Recent innovation, rising competition, and demanding shareholders have all driven an accelerated adoption of industrial automation.

Some of the most well-known examples of industrial automation are in metal fabrication – that’s machining, welding, and cutting – in places like car manufacturing plants; food and drinks processing in breweries and sausage-making factories; and packaging handling in places like warehouses.

It’s safe to say, in fact, that it’s now a key element of all major companies’ strategies. The ultimate goal for any such company would be fully automated supply chains and manufacturing processes that can work 24-7, earning money round the clock. ⚙️

It’s no surprise, then, that there’s a lot of money being spent on trying to achieve that dream – which means there are investment opportunities aplenty. Indeed, Allied Market Research predicts the global market for factory automation will grow an average of 9% a year until 2025. By comparison, the International Monetary Fund forecasts the global economy will only grow 3.5% each year in the medium term.

Where can I find investment opportunities? Investing in stocks is risky business, so one way to avoid putting all your eggs into a single industrial automation basket is to look at exchange-traded funds (ETFs). These let you invest in several companies at once, meaning you can benefit from their share price rises without losing out too much if something goes wrong at a single firm. There are several to choose from, each with different focuses and fees, but the biggest out there is Global X Robotics & Artificial Intelligence Thematic ETF.

If you do want to look at individual companies, however, you may want to start by looking at the universe of global industrial giants such as Emerson Electric, Honeywell, Siemens, ABB, Mitsubishi Electric, and Rockwell Automation. Some things to look out for might include the level of spending on research and development relative to sales (a higher ratio could suggest more spending on automation), sales and earnings growth (since you’ll want to buy into a growing, rather than shrinking business), and the amount of cash the company has on hand. 💡