HomeRoboticsThis autumn 2021 In Evaluate: ROBO International Innovation Indices

This autumn 2021 In Evaluate: ROBO International Innovation Indices


 

The Robotics & Automation Index (ROBO) weathered the sell-off in lots of disruptive know-how shares: It outperformed world equities and rose 9% in This autumn, to shut the yr 2021 up 16%. The Synthetic Intelligence Index (THNQ) was up 10% in 2021, and the Healthcare Know-how & Innovation Index (HTEC) was flat, after each indices rose greater than 66% in 2020. Whereas traders debate the near-term development and inflation outlook, we stay centered on the innovators and market leaders driving these know-how developments. On this report, we focus on key developments and massive movers throughout our innovation portfolios.

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Q4 2021 Performance Sheet

Webinar Transcript:

Jeremie Capron:

All proper. Good morning, all people, and welcome to ROBO International’s January 2022 Investor Name. My title is Jeremie Capron. I am the director of analysis. I am speaking to you from New York. And with me on the decision, my colleagues and analysts from the analysis group, Nina Deka and Zeno Mercer. So we just lately printed our annual developments analysis report, which yow will discover on our web site. It is at roboglobal.com. And right this moment we’re very excited to current a number of the key know-how developments that we’re watching on this new yr and the way they relate to our three innovation index portfolios. That is ROBO, the robotics and automation index, HTEC, H-T-E-C. That is the healthcare know-how and innovation index. And THNQ, that is T-H-N-Q, the synthetic intelligence index. And we might be taking your questions. So really feel totally free to kind them into the Q and a field.

Let me begin with just a few remarks available on the market and our outlook for this yr. Our view a couple of yr in the past that 2021 could be a increase yr that has largely performed out. In actual fact, the worldwide financial rebound has continued. There’s lots of momentum regardless of the renewed COVID-19 waves and flare ups within the US and the remainder of the world with new variants, however I believe extra importantly for traders in know-how, the pandemic has been a really robust catalyst for the digital of the financial system and our view that robotics AI, as a subsequent know-how revolution, this view has performed out at an accelerated tempo over the previous two years. So give it some thought. We have all needed to make adjustments to our lives. Our work lives, our private lives when it comes to how we work, how we store, how we examine, how we entertain ourselves. And most of those adjustments they have been about adopting extra digital know-how and extra automation. And from the standpoint of companies, corporations have additionally needed to adapt and the place have they been investing? They’re digitizing, they’re deploying automation and AI at a report tempo. And proper now the bottleneck is the scarcity of employees, which we will see throughout a lot of the Western world in China as nicely.

Within the US alone, we have seen the variety of unemployed employees again to the pre-COVID ranges of simply round six million. And within the meantime, we have seen job openings which are searched to greater than 11 million. That is an almost 50% enhance from the pre-COVID ranges. Regardless of the trigger is, the speedy reply from corporations is productiveness. And we imagine that this may proceed to supply a robust tail finish for automation and AI when it comes to the demand for options round that. After which ’21 was a yr of shortages. Not solely of employees, but in addition semiconductors. We have seen important disruptions in provide chains. So primarily you may have a constraint provide facet and on the similar time, you may have very robust client demand. And so inflation has change into a priority. We have seen inflation reaching multi-decade highs and that has triggered considerations round curiosity for charges.

And previously few months, traders have been nervous about doable hit to financial development in consequence from tighter financial situations, tighter fiscal coverage. And so we noticed very brutal transfer in a number of the most speculative areas of the fairness market in latest month. We have seen many shares which have had extraordinary returns within the restoration from the COVID lows, giving again loads, if not all of their video games. And I believe this consists of many so-called disruptive know-how shares. So for those who have a look at the NASDAQ, the NASDAQ is down about 8% from the excessive, however beneath the floor, there’s greater than a 3rd of the shares within the NASDAQ index which are down greater than 50%. They have been slicing half.

And I wish to transfer to the subsequent slide right here. The excellent news is that our innovation portfolios should not overly uncovered to such lengthy period shares. And by lengthy period, what I imply is corporations which are loss making, however anticipated to make important income a number of years out into the long run. And in reality, one of many key pillars of our funding technique right here at ROBO International is diversification. And so whereas we take the long-term view and we construct index portfolios with corporations which are positioned to learn from the know-how revolution within the long-term, the index development methodology relies on a really disciplined system. It is a self-discipline scoring system to pick the know-how and market leaders and likewise self-discipline weighting system that avoids focus. And focus will be very painful as we now have seen in latest month. So after we have a look at our index returns right here on the desk, we’re fairly happy with the efficiency of ROBO, and THNQ, and HTEC, and their resilience on this difficult market. In actual fact, for those who have a look at ROBO within the fourth quarter, the ultimate quarter of 2021, ROBO was up slightly below 9%. It closed the yr up greater than 16%. And over the previous three years, we’re 30% annualized returns. So fairly passable right here. And you’ll see on this steady that the three analysis pushed methods have largely outperformed world equities over the previous three and 5 years.

Okay. Now let’s speak about robotics and the developments that we’re watching. After which I will go it on to my colleagues to debate healthcare know-how and AI. However first, I wish to present this long-term efficiency chart of the index. And once more, that is an index that is greater than 84 corporations proper now. They’re the most effective in school robotics and automation corporations from all all over the world. And you’ll see right here the outperformance over time, which can be a reflection of this ongoing know-how revolution, the exponential development of automation and autonomous techniques in just about each sector of the financial system. On this subsequent slide, you may see that’s what we seize with index. The core enabling applied sciences on the left facet like sensing, and computing, and actuation. After which on the best hand facet, probably the most promising purposes. And that covers manufacturing unit automation to eCommerce logistics. You possibly can see healthcare, meals, and agriculture, and so forth.

So when it comes to particular developments that we’re taking note of this yr, I want to begin with robots coming to avoid wasting the availability chain. Everyone knows in regards to the pandemic associated provide chain disruptions, however one other actual vital issue right here is the dramatic rise in eCommerce volumes. And there is ever shorter supply occasions that customers now anticipate. And that is pushed explosive demand for logistics and warehouse automation. Orders have been exceeding provide capability for materials dealing with gear, autonomous cell robots, the observe and hint know-how inside the availability chain, the storage system, the retrieval techniques.

We expect that the logistics and warehouse automation market exceeded $70 billion final yr. And we predict it would develop to greater than 105 billion by 2025. So a number of the main beneficiaries in our portfolios are corporations like Daifuku in Japan, Zebra Applied sciences right here within the US, GXO Logistics that just lately went public. It has very robust presence within the UK. We’re AutoStore additionally just lately IPOed firm out of Norway, Cardex is in Switzerland. So you may see the breadth right here of corporations within the portfolio. And we predict that basically from a know-how perspective, it is the developments in laptop imaginative and prescient, in machine intelligence, in supplies, in sensors which have actually enabled robotics to make a considerable impression on the earth of logistics. As we speak, robotic choosing is changing into a actuality and we have seen robotic choosing speeds now exceeding 100 peaks an hour. And that compares to people efficiency simply round 60 to 80 peaks an hour. And so automation right here is relieving employees from assessments which are frankly uninteresting and exhausting and more and more tough to seek out employees for it.

And transferring on, I additionally wish to spotlight manufacturing unit automation the place we anticipate to see a surge this yr in 2022. In actual fact, the world’s main robotic corporations like FANUC, and Yaskawa, and ABB, and KUKA, they’re all ending the yr with very inflated order backlogs. They’ve a robust visibility into demand for 2022, and we anticipate that the put in base of commercial robots all over the world might be simply round 3.7 million. 3.7 million robots by the top of the yr. And but that may nonetheless signify lower than 1% of the variety of manufacturing employees all over the world factories.

So one of many greatest areas of focus proper now’s collaborative robots. We name them cobots they usually can work seamlessly with people. And there is an instance of that right here on the image within the higher proper nook. Cobots are right this moment lower than 5% of the market, however we anticipate the phase to develop by greater than 35% per yr. And meaning a market that might attain 15 billion by 2028. And the market chief right here is Teradyne. And Teradyne occurs to be top-of-the-line performing shares. Within the last quarter of 2021, the inventory was up 50%. Teradyne is basically a semiconductor testing corporations traditionally. Again in 2015, they acquired Common Robotic and made it the highest participant in collaborative robots. They’ve very robust options for the availability chain and warehouse automation. And the primary 9 months of the yr, Teradyne gross sales in Common Robotic, had been greater than 50% yr over yr.

I believe the third vital pattern I wish to spotlight right here when it comes to robotics is the rise of autonomous autos. And right here I am speaking in regards to the lengthy haul, but in addition the final mile supply. The applied sciences which are making autonomous autos doable are converging and the price are falling very quickly. You consider sensors, take into consideration AI and the compute energy and communication with 5G now accessible. That is driving down the price of items. We expect autonomous autos are very promising when it comes to potential to hurry up deliveries and enhance vitality effectivity and decrease emissions. So right this moment there’s only a small variety of autonomous automobiles and vans all over the world. There’s many extra autonomous cell robots inside factories and warehouses, however on the roads, we’re simply getting began. And in reality, Waymo was the primary firm within the US to launch a totally autonomous taxi service. And it launched in Arizona, however nonetheless had a driver up within the entrance seat. Now, Cruz has simply introduced that it’ll change into the primary firm within the US to have a full autonomous service with no driver. In order that’s changing into a actuality. We’re corporations like Tesla after all, but in addition Luminar, Nvidia, and Qualcomm that present the mandatory know-how to make these techniques doable. So Luminar is in lidars, Nvidia is in computing after all, Qualcomm within the umbrella as nicely. Umbrella that has video processing chips and make some nice headway within the auto trade.

Now, China can also be main the way in which there. And we just lately heard from Alibaba that they accomplished the one millionth eCommerce supply utilizing autonomous supply robots. And Baidu additionally acquired an approval in Beijing to launch a robotaxi service. So we’re seeing autonomous autos on the roads. We will see extra of them. The suppliers of the important thing applied sciences are going to learn. We’re additionally seeing autonomous autos on the water. Cargo ships. And just lately in Amsterdam, we noticed a full autonomous water taxi service begin. And likewise indoor whereas indoor drones piloting round that we predict that is an unlimited market alternative. So I believe with that, I’ll cease right here and go it on to my colleague, Nina. I might like to ask Nina to speak about healthcare applied sciences.

 

Nina Deka:

Proper. Thanks, Jeremie. And thanks everybody for becoming a member of the webinar right this moment. We actually respect your curiosity in ROBO International. So HTEC is our healthcare know-how and innovation index. We focus completely on healthcare tech. And this can be a portfolio of corporations which are mainly offering traders with publicity to all of the disruption that is taking place in healthcare, the excessive development corporations over the subsequent 5 to 10 years. So a very thrilling time to be concerned on this house. Though this chart could not essentially point out so within the shorter time period on condition that within the full yr 2021, the efficiency … the index returned about 0.4%, however for those who have a look at the long run intervals, for instance, over a 3 yr interval, a again check would present that the index has returned over 30%.

So this can be a nice long-term alternative, but in addition a very attention-grabbing time to get entangled in case you are not but concerned or wanting so as to add positions as a result of proper now the index is buying and selling at about 6.4 occasions ahead EV gross sales, which is a reasonably discounted a number of given the place it has been traditionally. For instance, final yr, it was extra within the seven occasions vary. So a very thrilling time to get in there. And let me dig in slightly bit about what occurred final yr. In order we’re all conscious, 2021, a key theme that resonated all year long was simply uncertainty. Not figuring out what was going to occur with the financial system, with the pandemic. There was a degree the place folks thought that we had been popping out of it and that 2022 be normalized after which Delta occurred. And in consequence, largely of the Delta variant when it comes to healthcare, procedural volumes had been impacted. Individuals who had been ready to get their knees changed for instance, as soon as once more put that on maintain. And so there was already a backlog of people that probably would’ve had procedures in 2020 which will have gotten them in 2021 that received additional delayed. So this impacted lots of healthcare corporations.

Along with that, there’s the brand new healthcare employee disaster, which is healthcare employee shortages. In the course of the pandemic, over 100,000 healthcare employees lives have been misplaced globally. And within the US alone, over half 1,000,000 folks have left their jobs attributable to numerous pandemic associated causes since February of 2020. So all of us already had a healthcare employee staffing scarcity that was rising. It’s going to proceed to develop the hole between folks coming into the healthcare employee workforce. It appears to be rising as a result of extra individuals are retiring out than individuals are coming in. In the meantime, individuals are dwelling longer. So the demand for healthcare employees within the subsequent 10 years will not be going to be enough for the variety of folks say over age 85 who’re dwelling longer to obtain the care that they want. That dynamic was accelerated within the final yr or two because of the pandemic.

So now as we look ahead to 2022, we’re fascinated with what are some areas which are actually going to assist this subject, which is actually a disaster. When folks speak about healthcare capability, it is now not about variety of beds. There are aren’t sufficient beds accessible. That is not the problem. That is a 2020 drawback. In 2021 and now bleeding into 2022 with the Omicron variant, there’s not sufficient healthcare employees to take care of the quantity of people that want the care. So if we zoom in actually fast to This autumn, HTEC was down 4% and it was to those indicators that I simply talked about. The Delta variant, procedural volumes being lowered, additionally considerations round inflation and or rising rates of interest. So all these items have impacted tech. And when issues impression tech after which issues additionally impression healthcare, HTEC will see each the confluence of each of those elements. Like I stated, nice entry level for many who have an interest.

I do wish to spotlight two corporations that basically had an important efficiency in This autumn of final yr. Vocera was up 34%. This can be a firm that gives a palms free wearable system that’s voice operated. As you may see, it is this badge that is worn on the clothes of the 2 healthcare employees. This firm received lots of consideration in the course of the pandemic as a result of it enabled folks to speak with their colleagues, their different healthcare employees exterior of the affected person’s isolation room with out having to depart the room, take off the PPE, come again, placed on new PPE. So Vocera actually helps clean effectivity and that is only one side of what they do. Additionally they provide software program that helps combine all of the medical gadgets within the hospital. And on that well being handhold system, a doctor or a nurse can get all of the updates with out having to go to the affected person bedside.

So given their skill to combine and have this underlying software program that form of ties collectively the entire gadgets within the hospital. We not solely noticed this as a lovely funding alternative, Vocera is a member of not simply HTEC, but in addition of ROBO. It was simply introduced just a few weeks in the past that Striker, one other firm in HTEC, plans to accumulate Vocera. And this can be a fairly engaging valuation right here. It was about 10 occasions subsequent yr’s gross sales, which is a premium given, however it was warranted given the sophistication of this firm’s analytics and integration capabilities. We anticipate to see the funding developments towards healthcare, knowledge analytics, and integration capabilities. That is simply early days. Healthcare simply went digital within the final 10 years. There’s nonetheless a serious alternative for lots of disruption right here. So this is only one instance of why, though healthcare tech seems to be prefer it took slightly little bit of a backseat, there’s nonetheless a lot right here that’s going to be ahead lots of upside when it comes to valuation and a number of growth.

One other thrilling firm in This autumn is Codexis. Codexis returned 34% within the quarter. They usually reported a rise 242% income within the earlier quarter attributable to 29 million in gross sales from their partnership with Pfizer. It has been extensively reported that Pfizer has an antiviral treatment for coronavirus for COVID 19. And so Codexis is an organization within the HTEC index that Pfizer partnered with to supply the proprietary enzyme used to make the drug. So I wish to spotlight right here that this is only one firm of many within the index which are enabling lots of know-how and healthcare to maneuver ahead. These enabling corporations are ones that not lots of people have heard about. There’s different examples of it like Moderna and J&J each partnered with Catalent to get their vaccines out the door. And Lonza. Catalent, Lonza, Codexis are all examples of corporations which are third occasion producers of medicine. They usually present very subtle stage of producing capabilities. Take into consideration mRNA. No person had ever heard about it, nicely, exterior of the science group till final yr or the yr earlier than. And now it is a multi-billion greenback enterprise. And it requires a stage of subtle to have the ability to manufacture that at scale, and Catalent rose to that event.

So these are simply examples of whenever you see one thing actually cool taking place in healthcare within the information, chances are high these corporations in all probability needed to associate with different corporations. And so there’s lots of alternative for funding upside right here. And so actually that is the place for those who’re keen on capturing all that upside potential, a diversified portfolio is likely to be a superb technique for you. And so that is what HTEC gives. In order we glance ahead now into 2022, I discussed that what we’ll be-

 

Erin:

Nina?

 

Nina Deka:

… maintaining a tally of.

 

Erin:

Apologies. Can I interrupt you simply actually fast? As a result of we now have a query to elucidate the massive underperformance of HTEC in comparison with world healthcare index. So earlier than you progress into the ahead wanting, may you form of handle that basically fast?

 

Nina Deka:

Oh, completely. Thanks for the query, Erin. So primarily, as I discussed, when healthcare and tech take a success, that may impression healthcare HTEC slightly bit greater than the worldwide healthcare index. So for those who had been to have a look at … And really we now have a slide that describes this space with the horizontal bars. Should you had been to have a look at the worldwide healthcare indices, the big ones like S&P, what you will discover is that they are much extra closely weighed in giant cap prescription drugs and hospitals, medical insurance corporations. The rationale why is as a result of these portfolios are cap pushed. They’re comprised largely of enormous cap corporations. And the biggest cap corporations in healthcare are giant cap pharma and medical insurance corporations. And that could be a very completely different funding technique.

Now we have lower than one-fifth overlap with these forms of portfolios. So throughout a time of uncertainty when individuals are involved about issues like inflation or rising rates of interest, they have a tendency emigrate in direction of a number of the extra worth funding alternatives corporations with rising dividends and firms with optimistic earnings, optimistic cashflow whereas stable funding alternatives are usually rising within the single digits. And like I stated, that is a really completely different funding alternative. Should you have a look at the inexperienced bar, the inexperienced horizontal bar, that is the HTEC. In order you may see, HTEC is slightly bit extra … very way more diversified throughout these different areas that we imagine signify all that technological development and disruption that I used to be simply describing to you. So corporations which are serving to to fabricate mRNA, corporations which are serving to to combine all of the medical gadgets in a hospital, 3D printing, surgical robotics, genomics, diagnostics. Should you look searching for extra diversified portfolio that is going to cowl these elements of healthcare, like I stated, that is what HTEC has extra comprised of. Nevertheless, in an surroundings the place folks had been extra involved about excessive development tech names corporations which may not have optimistic earnings, however anticipate you within the subsequent couple of years, these shares over the past yr mainly took a success. And so HTEC noticed the confluence of that.

After which I discussed earlier the extent of pleasure we now have round corporations offering knowledge, that is knowledge analytics and AI. There’s lots of dysfunction taking place in healthcare proper now. So for those who had been to consider why ought to I spend money on healthcare innovation proper now? I believe one motive to not make investments is for those who suppose healthcare is ok the way in which it’s. If there isn’t any healthcare employee scarcity, if the whole lot’s advantageous, if there is not any treatment associated errors, the whole lot’s going easily, then there’s not lots of room for disruption, however we all know that that is not the case. And so a technique that we’re going to have the ability to remedy all these issues is thru knowledge analytics and additional integration.

One other actually attention-grabbing firm known as Well being Catalyst within the HTEC portfolio. That is one other knowledge analytics firm that is built-in with a whole lot of software program applications all through a hospital system. They usually can analyze a inhabitants in an space and supply knowledge to the hospital and say, “Look, we see an space the place individuals are prone to being hospitalized due to their excessive threat well being scenario.” Well being catalyst will assist seek the advice of with the hospital to supply a plan to be proactive and go after the excessive threat inhabitants. And in doing so in a single explicit hospital, they had been capable of assist save $32 million and decrease affected person admissions as a result of simply from figuring out forward of time utilizing analytics and AI to see which of the inhabitants they will serve and assist maintain wholesome and forestall the sickness to start with.

One other actually thrilling space that we’re following as I discussed is robotics. Once I speak about how there is a healthcare employee scarcity, one of many ways in which we’re going to have the ability to strategy this and transfer ahead is thru automation and firms offering healthcare robotics proper now are actually on hearth. There’s one within the HTEC and ROBO portfolio referred to as Omnicell. Omnicell gives robots to pharmacists and to hospitals to assist automate the pharmacy course of. If you consider pharmacies right this moment, you’ve got received a pharmacist placing capsules in bottles after which doing a ton of administrative work. And but 90% of pharmacists point out in a survey they can not discover sufficient assist to do all of the work that is wanted. In the meantime, treatment error is the third main reason behind loss of life in the USA. So we have got a difficulty right here and an enormous alternative for automation. And Omnicell is a very attention-grabbing firm proper now, and they’re additionally rising and did very nicely final yr.

After which one other space we’re actually enthusiastic about is spatial biology. So that is one thing that we predict goes to be the subsequent frontier in genomic science. Subsequent gen sequencing was a very huge deal within the mid 2000s onward. We noticed an enormous inflection level there once they began being manufactured and we imagine that that is going to be taking place, spatial biology. We anticipate to hit an inflection level equally within the subsequent yr. And if you’d like extra particulars on spatial biology, completely satisfied to speak about that additional. And we even have particulars about that within the report. I will simply say in a short time that what spatial biology does is it lets you have a snapshot of what is going on on, for instance, contained in the physique, like inside a tumor at extra element than for those who had been to only merely sequence … do the gene sequencing.

Should you had been to consider a map, image a map with no streets and no addresses. What spatial biology does is it mainly places the addresses, and the areas, and the constructing numbers on the pattern. And so if you consider that in a tissue pattern, it is providing you with simply much more element than you’d’ve in any other case had. And with this, individuals are going to have the ability to develop higher therapies and likewise diagnose most cancers higher and different diseases. With that, I’ll pause and truly go it over to Zeno who’s going to speak to you about THNQ, our AI portfolio.

 

Zeno Mercer:

Thanks, Nina, for overlaying HTEC. Hey, everybody. As we speak I’ll be overlaying our THNQ index. That is T-H-N-Q. And inside THNQ, we primarily try to seize the universe of synthetic intelligence from software to infrastructure from the bottom up. So throughout purposes, we have got cloud supplier, community safety, semiconductor. So these are the platforms which are … and {hardware} which are offering the manufacturers for the purposes that we now take as a right primarily to even work collectively. And on the appliance facet, we see thrilling corporations throughout client dealing with eCommerce particularly more and more within the final yr healthcare and enterprise processes is we see cloud adoption throughout corporations. Loads of it induced from the COVID pandemic. And moreover, we additionally see manufacturing unit automation. So the suppose index had a … we’ll admit it had a tough quarter for the This autumn. It was up 2.39% and up 26% on an annualized base since inception. So there was a mixture of elements that contributed to this efficiency. And a few of it being simply fears round tapering and the rate of interest surroundings impacting a number of the greater development shares. However that being stated, we’re seeing the demand for AI and adoption from the community stage, from the appliance stage has by no means been greater.

So we have got knowledge coming in from autonomous autos, augmented actuality, all these new platforms which are being deployed in the true world really with actual enterprise features. We have got rising the price and vitality. There is a huge demand for sustaining vitality prices, each on the knowledge heart stage and micro system stage, that could possibly be laptops to large knowledge facilities offering AI for drug discovery. After which we have got the financial advantages. That it is one factor to think about. The AI is altering each trade. There is not a choice made at a Fortune 500 firm now that is not pushed now with knowledge and evaluation. After which moreover, that’s getting down into the merchandise which are being deployed to clients, each enterprise is and client. Actual fast. May you go to the purposes and infrastructure web page? Yeah.

So I simply wish to spotlight additional on efficiency. So Semiconductor community safety had an important quarter. Nvidia and A&D each noticed barely over 40% inventory returns. There have been lots of considerations across the skill of those corporations to ship. And a couple of yr in the past, everybody was form of involved, will they be capable to sustain demand? Will they’ve provide chain points that stop them from making a living? And the reply is sure. They delivered on all of the above and demand has by no means been greater as elevated purposes and firms preparing for 2022 and past are using these platforms. Healthcare know-how corporations and massive knowledge analytics, as we already mentioned, noticed slightly little bit of a laggard and enormous deployments noticed some pushback. As soon as once more, that is within the 2022. So this impacted. These firm will not be semiconductor. After which lastly, excessive development FinTech, which is a portfolio, part of our portfolio that we’ll speak about slightly additional on, was hit arduous as comparable considerations round inflation and rising rates of interest. However in the long run outlook, we see large continued adoption right here.

Now onto the corporate spotlight right here, Arista networks led by CEO, Jayshree Ullal, is a cloud networking supplier that’s powering giant knowledge facilities from Microsoft, Google, Amazon. And primarily they supply these networking switches that permit them to speak and run quicker at extra vitality environment friendly. These knowledge facilities devour lots of energy, lot of compute. This can be a platform that will not be within the information for client product or something. They’re essential, very highly effective. As I discussed, it was as much as 67%. It is a robust cloud surroundings. They usually raised their expectations to 30% and development in 2022 even with continued provide chain points. So as soon as that subsides, you are going to see much more tailwinds there. After which New Relic, an organization I am certain most of you might be in all probability not acquainted with as a result of it is principally builders and cybersecurity consultants using this, however it gives full stack evaluation for each the infrastructure and software, which is essential as a result of lots of gamers on the market simply have a look at one or not the opposite, and you actually require each of them working on the similar time to have the ability to function. Firms like Uber. Simply any firm on the market that depends on large knowledge units and realtime evaluation and options wants this sort of evaluation.

Take into consideration how your automotive runs. That is only a single surroundings with sensors. We’re not even speaking about autonomous autos right here. It wants to grasp how the oil, the fuel and all these items are operating. This mainly gives that, however it goes past that for a lot greater purposes. One of many causes for his or her large development within the fourth quarter was they not solely simply beat expectations, however additionally they introduced that they scored a $3.5 billion new buyer, which is among the largest ever. They usually introduced two new merchandise that ought to enhance the acceleration. And now I’ll cowl some developments that we’re enthusiastic about going ahead in 2022 and past. So AI machine studying driving the multi-cloud adoption. So what does that imply? As I discussed, whereas front-end purposes get lots of the eye, multi-cloud environments are that center and again layer that empower this transition to the digital world. The aim is to make these interactions as seamless and dependable as doable, regardless of the state of affairs throughout autonomous autos, the metaverse, any autonomous. So if the rising tide is the demand for these companies, then the water actually, the ballot is … that is enabling that is the multi-cloud networking environments. So in the end what you need to take away from that is the flexibility to securely share knowledge and retailer knowledge throughout completely different platforms, after which analyze it with completely different companies is paramount as we get into more and more complicated situations.

Gartner really expects the worldwide cloud market to develop to 402 billion in 2022, which is 35% greater from 2021. So we’re seeing large development spend right here. And index numbers similar to JFrog, Arista Networks which I simply talked about, MongoDB, and CloudFlare massively profit from this pattern.

Subsequent matter and pattern that I wish to cowl is subsequent technology banking. So banking and finance, as we all know, is remodeling. Applied sciences throughout blockchain, digital property, using know-how similar to voice recognition, higher identification, and cybersecurity are serving to automate each backend and client expertise processes. So that is going to supply an enormous transformation to banking companies and get rid of some overhead, however it’s actually doable attributable to machine studying enabling extra correct predictions threat administration, enabling higher client interactions. So that is going to cowl insurance coverage, fraud, mortgages, cashless funds, digital insurance coverage. There’s actually not an space this is not going to the touch ultimately. And this is not simply theoretical. These are being deployed and utilized proper now out with each personal and publicly traded corporations, similar to THNQ index members, Lemonade, Upstart, Honest Isaac, and Block, which for those who aren’t acquainted it’s Sq. simply rebranded this previous yr to mirror extra emphasis on blockchain. These are all leaders in digital banking that we’re excited to see develop in 2022 and past.

The final pattern I wish to cowl is form of a mixed a metaverse and immersive expertise. Now this actually impacts all of our indices, however AI is the crux of this. Certain. You would possibly consider simply placing on a headset will not be actually AI, however you’ve got received to have the ability to quickly analyze the info coming with laptop imaginative and prescient and sensors. It’s a must to ship that knowledge off someplace utilizing 5G the place it is synthesized and analyzed to supply you actual time content material. So I believe lots of people marvel what is going to metaverse contact and impression. I believe it is what will not it contact? What is going to it substitute? Would you somewhat have a cellular phone or augmented actuality contact lenses or glasses? Moreover philosophical areas, I believe we will all agree we have spent an excessive amount of time wanting down at a cellphone and touching. So some purposes that we’re and enthusiastic about are training, healthcare, teaching, video games. These are a number of the extra client centered. On the opposite facet and equally as vital, we’re manufacturing, and manufacturing, and new forms of merchandise which are extra vitality environment friendly, sustainable, and simply general higher, and safer for the surroundings. This real-time suggestions and personalised expertise requires immense knowledge units and evaluation and throughput. So index members and semiconductor corporations like Nvidia, Taiwan Semiconductor, AMD are offering lots of the uncooked horsepower right here. However this additionally requires lots of design and purposes.

Now we have to primarily recreate the digital or the bodily world within the digital world right here to have the ability to perceive it. And so corporations like Adobe, Dassault, Autodesk are powering lots of the innovation right here. For instance, the Dassault is working in a lot of completely different fashions, digital digital twins that signify your individual physique. So this can be utilized throughout healthcare, throughout simply self-analysis and wellness developments, issues like that to present you a greater snapshot and truly construct software layers on prime of that. One other one, for those who have a look at the underside proper nook, you will see a man carrying a headset, and that is a collaboration between two THNQ members, Microsoft and Trimble. They usually’re working to supply frontline employees with a useful helmet with an augmented actuality overlay to get actual time info and communications with out having to make use of one other system. Think about they’re up in a constructing. They do not must be coping with that. It is a seamless overlay. And this can be a reside product now getting deployed, which is unbelievable. In order that being stated, I believe we’ll transfer on to Q&A. Be at liberty to ask any questions round something we have lined.

 

Jeremie Capron:

Okay. Thanks very a lot, Nina and Zeno. I see we now have fairly just a few questions coming via the field right here. I wish to remind all people be at liberty to kind your questions in and we’ll attempt to handle as many as doable. I wish to kick off with a number of the questions I’ve seen round investing in corporations with no earnings within the present surroundings. I believe that is an excellent query. It is actually vital given the change out there regime that we have witnessed over the previous a few quarters as inflation began creeping up. We’re beginning to see what sort of form the financial coverage responses goes to have. As I stated in This autumn, This autumn was brutal for a lot of so-called disruptive know-how shares, however for those who look below the duvet, you have a look at what shares have come down or come crashing down in lots of instances. These are the shares that I might qualify as a number of the extra speculative names on the market, corporations which have very formidable plans, and guarantees of earnings which are very far out into the long run. And within the meantime, they’re burning money they usually’re scaling. The excellent news is that within the ROBO International portfolios, you aren’t going to seek out excessive publicity to these names.

We do personal in these industries some corporations that don’t have any earnings right this moment, however they’re the exception somewhat than the norm. In actual fact, and is one thing that we quoted within the annual index evaluate report that we simply printed yesterday, for those who have a look at ROBO, the variety of shares which have an EV to gross sales a number of above 10 occasions is round 15. So there’s 15 shares out of a complete 84 that commerce on a excessive income a number of, and that is indicative of little or no to no earnings. And in order that’s about 20% of the portfolio, however on the similar time, there’s one other 10 shares which are buying and selling on an EV to gross sales a number of of much less one time. And so that ought to actually assist you to perceive that the diversification that we now have in our portfolios. And that is a very vital pillar of our funding methods for all three thematic indices. And so ROBO really outperformed world equities in This autumn as a result of the hit it took in a number of the greater a number of names was largely offset by the rotation into the extra cyclical and the extra worth areas out there. So in terms of robotics automation, these worth or cyclical areas are sometimes present in manufacturing unit automation. These are extra cyclical names. It are usually capital items forms of corporations.

Loads of them are in Japan. And the Japan piece of ROBO portfolio is essentially underperformed within the first a part of final yr and it is beginning to catch up. In actual fact, in 2021, our Japanese holdings had been flat yr over yr when the index itself was up 16%. We’re not overly involved about what’s taking place when it comes to the rotation within the fairness market now. We expect the indices must be comparatively resilient. I believe Nina can touch upon the variety of corporations that aren’t worthwhile right this moment in a healthcare know-how and innovation in that gives you additionally a superb sense of that. Nina, can you are taking over right here?

 

Nina Deka:

Completely. Yeah. So about 33% of the businesses in HTEC should not but worthwhile, however after we analyze corporations, we’re searching for a transparent path to profitability or some type of clear path to income. Should you have a look at the HTEC portfolio, a lot of the corporations commerce on a a number of of EV to gross sales or perhaps a a number of of EBIDA. So we’re both there primarily the funding alternative there’s in development or additionally in some type of clear path towards money move, which we imagine EBIDA could be the illustration of that. Yeah. The overwhelming majority of the businesses do have earnings. And so we do really feel that that’s pretty de-risked from a know-how and innovation basket standpoint.

 

Jeremie Capron:

Thanks, Nina. I see lots of questions associated to the index and portfolio development methodology, the rebalancing technique and the weighting of constituent. So I’ll begin off right here and ask Nina and Zeno to remark as nicely. However primarily what we do right here is we mix the advantages of lively analysis when it comes to deciding on greatest in school corporations to precise our bullish view on the themes. That is the primary a part of the work. And it implies lots of evaluation and scoring of each firm in our universe. After which we mix that with the advantages of index investing, the varied funding autos that may observe indices when it comes to the chance administration, when it comes to having a quarterly rebalancing to take care of that changed equal weighting throughout the portfolio all through the time and never for a protracted time frame.

So the result’s that you’ve got diversified portfolios as a result of the weightings for every constituents are sometimes someplace between 0.8% on the low finish all the way in which as much as 1.8%. And since we stability each quarter, we reset the weights to that rating pushed weighting. And that signifies that the index will promote the most important winners on the finish of the quarter or in direction of the top of the quarter and can purchase the most important losers, assuming that these corporations proceed to attain very excessive on our methodology and that we wish to personal them for the long run. In order that form of embedded threat administration course of actually allows us to keep away from a number of the greatest pitfalls in disruptive know-how investing. And as we noticed in latest month, this may be very painful if you end up overly concentrated in a handful of names or in a single very explicit subset of the theme.

I believe an important instance of that’s what occurred with gene enhancing and genomics generally. I believe Nina can touch upon that. We have had a very phenomenal yr for genomics in 2020 with some huge developments and primarily confirming the feasibility of utilizing the CRISPR know-how, for instance. After which final yr, these genomic socks and CRISPR specifically got here to earth when it comes to for reconnecting with the worth of the underlying fundamentals. So Nina, why do not you touch upon the gene enhancing and precision drugs generally? I see we now have just a few questions round that too.

 

Nina Deka:

Certain. So I did not really see what the questions had been. I wish to ensure that I do to them. So if I do not reply them, be at liberty to reprompt me once more, however primarily final yr or the yr earlier than, I discussed earlier mRNA as a chance. We have solely now seen one kind of mRNA therapeutic come to market and change into commercialized. There are such a lot of others at the moment within the pipeline. In actual fact, Moderna, one other firm within the HTEC portfolio, had over 20 completely different therapies within the pipeline earlier than the pandemic even occurred. And what we have seen traditionally is when a brand new therapeutic modality has success, then adjoining corporations or different candidates which are in medical trials or pre-clinical, we are inclined to see optimistic motion adjacencies to these shares as nicely. However we significantly like Moderna as a result of they had been the lead when it comes to the variety of different candidates in medical trials.

So earlier than the pandemic, they had been engaged on a vaccine for HIV, for Zika, for CMV, which continues to progress. It is in section three proper now. And now that one has come to market, that complete modality has been de-risked. And so that could be a optimistic catalyst for mainly each different mRNA remedy that individuals are engaged on proper now. I additionally wish to level out from Moderna that they are very quickly engaged on a flu vaccine and this could possibly be recreation altering. They wish to rapidly convey one to market by type of following standard methodology, bringing mainly a traditional flu vaccine to market. What meaning is that yearly the WHO gives a listing of what they imagine the subsequent yr’s flu strains are going to be. And pharma corporations want eight, 9 plus months to fabricate this drug and convey it to scale in time for the flu season for every hemisphere. Nicely, that is a protracted lead time. And infrequently, the strains which are predicted to be the dominant strains of the flu season do not wind up being the case. And that is why we do not see a ton of efficacy round flu.

Moderna is engaged on mainly a recreation changer possibly within the subsequent couple of years. They wish to have one as a result of it solely takes them a few months to get a drug via medical trials or not less than to show that it really works. And so if they will get a flu vaccine authorised that solely wants a few month lead time, then they will really develop one nearer to flu season and it may need a lot greater efficacy. This could possibly be recreation altering for the entire healthcare trade for the entire world often because a whole lot of 1000’s of individuals die from the flu. And ultimately they plan to mix that with COVID and have a mixed vaccine and possibly even embrace RSV, one other vaccine that they are engaged on, however tons of different issues are taking place.

I discussed earlier spatial biology. Precision drugs is an space the place therapies are being developed to deal with very particular genetic mutations. And for those who can establish, “Okay. This is the gene the that is inflicting this most cancers.” You possibly can provide you with a remedy to deal with that very particular most cancers. With spatial biology, you may as well decide how efficient a drug will be as a result of you may see different genes close by which may intervene with a drug’s skill to be efficient and truly provide you with an much more personalised components, if you’ll, or a extra personalised remedy. This will even be recreation altering as we glance to the long run and anticipate medication to get an increasing number of personalised. That is going to be enabled by corporations like Roche and different firm in our portfolio with all of their developments. After which there is a ton occurring when it comes to early most cancers detection. Over 10 billions of {dollars} have been invested in M&A for early most cancers de detection in liquid biopsy within the final couple of years. So a very thrilling house there. The market is predicted to be nicely over $30 billion and other people could have the chance sooner or later to probably detect most cancers before they in any other case would’ve been. And an estimated a 100,000 lives per yr within the US alone could possibly be saved with earlier most cancers detection and far better all over the world.

 

Jeremie Capron:

Thanks, Nina. I see we now have just a few questions on AI. So I’ll invite Zeno to talk one or two and handle them.

 

Zeno Mercer:

Hello, Everybody. Yeah. I noticed a pair questions round … a pair questions and feedback. Somebody commented, “Any person predicted this again within the day.” You’ve got received questions like, “Why hasn’t AI or metaverse predictions … why have they didn’t materialize?” And one of many issues that I wish to level out right here is there is a saying, folks are inclined to overestimate what will be achieved in a yr and underestimate what will be achieved or 5 and 10 years. And I believe what we’re seeing right here is that individuals noticed the imaginative and prescient of lots of these items. As soon as computer systems had been round, as soon as folks realized that there could possibly be one thing that may additionally suppose and make actions and selections, folks theorized that we’d be getting up to now. Perhaps not precisely how, or when, or all these issues, however there’s all the time predictions. And we’re really seeing lots of these items come to gentle proper now, as I discussed. We have the metaverse, we had Google glasses, I neglect, over a decade in the past now at this level for a pair little purposes manufacturing, it wasn’t there but. Loads of the, we’ll name it the weakest hyperlinks. The flexibility to supply smaller pixels, extra clear screens. There there is a confluence of supplies, {hardware}, vitality effectivity, which is big. The chip and vitality effectivity for the shape issue.

Loads of that is simply progress by progress. Every incremental innovation stacks on to supply an innovation some place else. A extra vitality environment friendly battery permits a drone that usually could not have flown round, to be a client drone to examine issues round. That is all of the sudden possible. And so switching again to the metaverse and the purposes, we’re on the tipping level now. 2022 as we predict it to pattern, it is taking place. Now, it is going to begin extra in greater threat greater areas simply form of within the movie trade. The movie trade, they historically filmed aerial views with helicopters. So the primary place to undertake drones was the movie trade as a result of there was an apparent worth with the low threat of adoption. And in order that being stated, we’re seeing that now the identical factor, manufacturing. Different excessive threat areas which have an enormous drawback to resolve, however it’s trickling down. You’ve got received Fb, AKA, Meta. Their glass is to report your occasions in your life. And in order we get to every stage, you are going to have heads up shows that nearly anybody can have.

College students may need glasses that the lecturers monitor and as a substitute of separating bodily training and training itself, you would possibly be capable to having them work together, and visualizing, and taking part and you will get extra personalised expertise in training for teenagers across the globe. You do not have to be within the classroom anymore when you may have that immersive expertise. So we’re simply going to see this large transformation and funding into these areas.

Any person additionally requested about geographies. Even on our portfolio, lots of our portfolio weighting is in the USA. There is no query. Many of the innovation throughout all of our portfolio indices are popping out of the US. A numerous analysis comes out of universities, corporations, it trickles up. Clearly although robotics and AI, we’re Japan, and China, and different areas as nicely. Nice concepts innovation come from anyplace, however we’re nonetheless closely weighted within the US for that.

 

Jeremie Capron:

Okay. Thanks very a lot, Zeno. And I’ll thank all people for becoming a member of. We’re operating on the hour simply now. So we’ll wrap it up. Thanks very a lot in your curiosity in ROBO International. You possibly can go to our web site, roboglobal.com if you wish to join biweekly publication during which we share a few of our analysis from corporations, and developments, and the indices that we construct. And with that, I want all people an excellent day. And we look ahead to speaking to you once more very quickly. Goodbye.



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