In late July, equity markets finally reached the point where institutions with a lot of influence called B.S. on the artificial intelligence hype-cycle. The idea that a company should pick-up five multiple turns because the management said “A.I.” 47 times on their quarterly conference appears to have run its course. Even the mighty AAPL saw its stock drop -11.6% by quarter-end. In addition to the “Magnificent 7,” whose bloom now seems to have come off the rose, profitless tech and emerging growth stocks were also hard hit as the quarter unfolded.
Despite the carnage, there were some positive points to highlight in the sphere of robotics and automation. Helix Energy Solutions (HLX), a leading provider of sub-sea robotic solutions to the offshore oil and gas industry, was up nearly 31% in Q3.
The shares of AeroVironment (AVAV), a UAV industry leader, saw its stock advance by over 9% during the quarter.
Another top contributor to performance this period was Mobileye Global (MBLY). The designer of advanced driver assistance and autonomous driving technologies and solutions saw its shares gain by 8% over the period.
On the other hand, some stocks that we like had significant performance issues during the quarter. For instance, SoundHound (SOUN) gave back all of its Q2 gains during the past three months.
Omnicell (OMCL) gave up its entire YTD upside contribution.
Finally, there was Fanuc (6954 JP), a casualty of the unwinding of the Yen carry-trade. As result of extreme dislocations in the FX markets concerning the Japanese Yen, the company’s stock lost a quarter of its value.
We view the latest bought of volatility as temporary. Again, all of these companies are fundamentally sound leaders within their industries.
We think that investing in leading robotics and automation businesses where the fundamentals are sound, the end-markets are growing, and the adoption rates are accelerating. This approach has been time-tested among technology and innovation-oriented investors through the past century, and we believe it is the best possible path to follow in order to maximize long-term value for investors.
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