Is it time to invest in robot manufacturers? (Q&A)

They vacuum our floors and help fight our wars, but robots always seem to be just over the horizon. They're never as commonplace as we expected.

Still, that hasn't stopped prognosticators from predicting that robots will be the automobile of the 21st century, or that robots makers are now where Microsoft was in the late 1970s. The markets for industrial and service robots are already worth billions of dollars each, according to the International Federation of Robotics (IFR) data.

Robotkind certainly got a major boost this week when electronics giant Foxconn, which makes everything from iPads to LCD TVs, announced that it's replacing some of its human workers, which number more than 900,000, with more than a million robots.

Of course, we all wish we'd bought shares in Microsoft and Google early on. That's the kind of thinking that led Frank Tobe, author of The Robot Report blog, to look into the sector and try to identify publicly traded robot makers that have growth potential.

In a recent critique of a list of 10 robot makers that appeared on the Nasdaq Web site, the Report's sub-blog, Everything Robotic, noted that some of the world's biggest robot companies, such as Japanese industrial robot makers Yaskawa and Fanuc, were not included.

Tobe also pointed out that Nasdaq missed rising stars like Intuitive Surgical, which produces the da Vinci surgery system, and Adept Technology, which makes automation systems.

Intrigued, we asked Tobe, a former political consultant, why he thinks now might be a good time to invest in our robotic future.

Q: Robots are far from mainstream. Why should anyone consider robot makers as an investment?
It's true that robotics is a niche market at present. Industrial robotics has been a steady $5 billion industry but service robotics has been rapidly increasing and is estimated to hit $20 billion by 2020. Combined with an estimated $10 billion for industrial robots, that takes it from niche to a new status.

Microsoft's Xbox Kinect device is a good example of an unintended consequence helping the robotics industry by radically cutting costs for vision systems. iPads and tablets are another example helping cut the learning curve by using familiar devices as front-end controllers. Hence the need to pay attention and track the progress of all that is robotics-related. An investor doesn't want to be left behind when the market takes off.

Why did you put together this stock list, and how did you do it?
As an investor and wanna-be futurist, I thought the robotics industry was ready to take off. So I called my broker and asked for a list of stocks to buy. He could only come up with only two. I tried a quick look at Bloomberg and found the same problem.

The IFR does an annual statistical analysis of the industry and includes company names (but not whether they are publicly traded or privately held) nor whether they are a division within a larger company or totally dedicated to robotics. And you have to pay thousands of dollars for their reports.

So, since I couldn't really find the kind of information I needed, I decided it would be fun to compile the list myself.

I harvested every article I could find on robotics, went to the Web sites of the companies mentioned, and added them to my database. I supplemented that information with member lists from global robotic associations. Then I filed the companies [by category]: industrial, service for government and corporate use, service for individual and personal use, ancillary businesses, and research facilities and educational institutions. It turns out that less 20 percent are publicly traded and 60 percent are foreign companies.

I thought it would be interesting to make a Web site dedicated to tracking the business of robotics and share the knowledge I was gathering and the database I was compiling. Hence, The Robot Report.

What are the most promising sectors within robotics--for instance, military versus medical?
War, security, defense, and first-responder robotics are a big and growing market. But it's a marketplace dominated by aerospace conglomerates who gobble up start-ups and control the pace of development to what the government is willing to buy. Even though overall defense budgets are being pruned, robotics is steadily increasing. The U.S. does things differently than most of the rest of the world. DARPA, NASA, and the Department of Defense drive research funding in the U.S. and their focus is on space, military, and defense.

Commercial applications trickle down. The best example is Robonaut 2, a NASA-driven effort to provide in-space astronauts with a robotic assistant. General Motors was solicited to be a partner and the resulting two-armed robot is now in the lab aboard the International Space Station. GM has begun to transition their Robonaut 2 knowledge into practical uses in GM factories.

America just recently set up the National Robotics Initiative and the Advanced Manufacturing Partnership to do the same. I agree with the concept that manufacturing is necessary. An untapped and quite large marketplace in manufacturing is that of factory assistant--a trainable, safe robotic helper--to increase productivity and augment capabilities of skilled factory workers.

Heartland Robotics' privately funded endeavor has a greater chance of breaking into this market than the big robot manufacturers because Heartland is starting fresh, has a specific business focus, and has a price goal that makes sense and is affordable to small businesses that manufacture things.

So, to answer your question, small- and medium-size business robotic factory assistants and continued defense/security robotics are the two big marketplaces where I see near-term breakthroughs and meaningful robotic sales. Health care and home personal assistance robots are farther down the road.

If one does decide to invest in robot makers, what's your recommendation for a weighting as a proportion of the average tech portfolio?
Fidelity Investments suggests that technology stocks represent 30 percent of an aggressive equity portfolio. They were, of course, thinking of Amazon, Google, Apple, and Salesforce when they thought of "technology." Robotics has yet to have its own place in that formula. The big robotic companies are all foreign-owned and many don't trade on U.S. exchanges.

Nevertheless, some robotic stocks are good prospects for growth and I think that 20 percent of technology stocks should be robotic.

What are your favorite robot stocks now?
Even though the aerospace/defense industry is likely to be a steady beneficiary of robotic development, and two or three should take a position in a robotics portfolio, I have a bias to not invest in that sector. This limits my personal portfolio to non-defense stocks like American robot manufacturers Adept and iRobot, Fanuc, American health care robotic device makers Intuitive Surgical and Mako Surgical, and ancillary businesses to the robotics industry like haptics provider Immersion.

Down the road, look for Caterpillar and John Deere to emerge as big players in robotics--John Deere with their new line of lawnmowers and both companies with driverless agricultural and construction equipment.