[ad_1]
The ROBO World indices declined according to world equities in Q3 throughout the face of extreme inflation and jumbo value hikes to complete the quarter 42%-50% below their all-time highs in 2021. The Robotics & Automation Index (ticker: ROBO) misplaced 7%, the Artificial Intelligence Index (ticker: THNQ) dropped 4%, and the Healthcare Experience & Innovation Index (ticker: HTEC) declined 6%. Valuations have compressed successfully below long-term historic averages. On this report, we give attention to most important tendencies and big movers all through our portfolios.
Webinar Transcript:
Jeremie Capron:
Hello there everyone and welcome to ROBO World’s October 2022 investor identify. My determine is Jeremie Capron, I’m the director of study and I’m talking to you from New York. And with me at current my colleagues Bill Studebaker and Zeno Mercer. We’re going to start with a fast reminder of what we do at ROBO World after which we’ll share some concepts about what’s happening throughout the markets. After which we’ll take a extra in-depth check out each of the three index portfolios, ROBO, THNQ and HTEC. And naturally we’ll be taking your questions, so be at liberty to kind them into the Q and A area on the bottom of your show.
So let me start with this quick overview of ROBO World. We’re evaluation and funding advisory agency that’s focused on robotics, AI and healthcare utilized sciences. And we deal with three main index portfolios which will be tracked by nearly $3 billion in belongings. These are primarily in ETFs. And our first index portfolio is ROBO, that was the first robotics and automation index and it started almost 9 years previously in 2013. And the second is THNQ, T-H-N-Q, that is the artificial intelligence index. And the third one is HTEC, the healthcare know-how and innovation index. And you might even see proper right here the annualized returns since inception of each index as of the highest of September, 2022.
So these portfolios, they combine evaluation with the benefits of index investing throughout the ETF wrapper. They’re composed of biggest at college companies from throughout the globe. The small, mid and large caps that we evaluation and we score on quite a few metrics, and one of the best scoring shares make it into the portfolios. Then we rebalance every quarter and the result is portfolios which have a very low overlap with broad equity indices like DSNP 500 or the NASDAQ and completely different world equity indices.
Okay, so let’s talk about what we’re seeing throughout the markets. And the elephant throughout the room proper right here is that the world’s biggest companies on the forefront of robotics, of AI, of healthcare know-how as represented by the ROBO world indices, they’re now shopping for and promoting 40 to 50% below their 2021 highs. Positive, plenty of shares are on sale correct now. World equities are down larger than 25% this yr, nevertheless these often are usually not your frequent shares proper right here. As soon as extra, we’re talking regarding the know-how and market leaders. They’re companies which will be often very worthwhile and rising loads earlier than the financial system. In reality, as soon as we check out their steadiness sheets, we uncover {{that a}} majority of the companies throughout the ROBO, the AI and the healthcare tech index, they’ve more cash than debt. And so they even have a optimistic net cash place.
And additional importantly, lots of these companies are relative beneficiaries of the current setting. When you think about the problems that we face at current throughout the world financial system, we now have the labor shortages, we now have rising costs all through the board. The one clear and easy response from enterprise leaders is automation and enterprise leaders and companies are making it a excessive priority. In reality, and Bill will come once more to that shortly, demand for automation at current is at doc highs and rising and there is further demand for robots and automation that suppliers can present.
And on the an identical time, this down market in equities, we think about is giving merchants an opportunity to spend cash on these companies at a discount. In reality, the three portfolios are literally shopping for and promoting significantly below historic frequent valuations and we’ll come once more to that. So let’s check out robotics and automation first, and for that I’m going to maneuver it on to Bill Studebaker.
Bill Studebaker:
Good morning everyone. Thanks for the time and curiosity. Jeremie, thanks for the introduction. Merely to look at up on Jeremie’s suggestions, we truly know that the third quarter was a difficult interval for merchants. And September was a powerful illustration of merely how troublesome it could be to be focused on the long term horizons, considerably when the market is frequently being tripped up by a confluence of factors and events. And we understand that these are tough events. Concurrently Jeremie commented, the down market is giving merchants truly a welcome different to profit from deep reductions and spend cash on companies that we see they’re delivering on the obligatory automation utilized sciences.
And we think about, as Jeremie moreover commented, that this has created an setting, it’s kind of an excellent storm for merchants, to increase publicity to a supercycle for automation and demand for automation utilized sciences, as I’m going to comment shortly in further aspect, has in no way been larger and the issues which will be lowering equity prices that we’re all significantly acquainted with, the labor shortages, the compressed margins, the supply chain bottlenecks and the need to chop again working costs are significantly rising the need for adoption. And as we doubtlessly go proper right into a recessionary setting, we predict corporations are going to be very desirous to want to spend on effectivity and automation.
As you probably can see for the quarter, the ROBO index declined about 7%, which is the same decline for world equities, which has resulted in valuations which have compressed successfully below our historic averages. And the broad weak spot was represented in 10 of our 11 sub sectors that we invested that had confirmed losses. And importantly though, as we look into the fourth quarter previous, we see an excellent different for merchants to sharpen their pencil and add to this, what we think about, is inevitable automation theme. That’s on sale like loads of the market.
And we see an unlimited discrepancy because the place stock prices are, stock prices are 40, 50% off their all time highs whatever the sturdy fundamentals of automation that we’ll contact on shortly. And plenty of of our constituents truly are firing on all cylinders and may’t make enough to meet the demand. As you probably can see proper right here on the valuations, the PE is 12% cheaper than our historic frequent. And I do want to underscore that our valuation relies on PE, many alternative tech exposures are based mostly totally on value of product sales, and in a number of circumstances are arguably over owned and overvalued. I do want to make the comment that decrease than 3% of ROBO is throughout the S&P 500. So it’s a distinctive publicity that additionally might be very beneath owned and underappreciated by loads of the market and we predict that could be a probability.
Subsequent slide please. So from an EV to product sales standpoint, you probably can see that we’re shopping for and promoting pretty close to parity to historic valuations. So ROBO is shopping for and promoting spherical 2.7 events EV to product sales. As soon as extra, the context of the place know-how trades, I indicate, Adobe merely made a purchase order order of an AI asset for 40 events trailing EV to product sales. So that hopefully gives you some context that I won’t say that we’re hardly overvalued. Particularly, I really feel our valuation of our portfolio has superior pretty significantly by the years and has develop to be loads growthier, so that’s kind of skewed the valuation of the upside. So I would argue that even at 2.7 events relative to the earlier, our valuation is pretty low value.
And easily as a assemble on to that, what we now have seen proper right here out there available in the market, we now have had three consecutive quarter declines throughout the ROBO index and that’s truly kind of an unprecedented development since we launched the index once more in 2013. And it’s solely comparable to the once more verify going once more to ’08, ’09. And importantly though, earnings estimates, I do know that that’s maybe kind of the elephant throughout the room, that people suppose the earnings estimates are going to come back again down dramatically. We truly have not seen that however. For 2022 and 2023, earnings estimates have solely been decrease by about one to 3% of the ultimate three months and easily 6% over the previous yr. And this I really feel is a reflection of the facility and demand for automation utilized sciences and choices.
And truly importantly, the facility for ROBO companies to cope with rising costs and supply chain challenges. A lot of these companies have been spherical for a number of years and have had the power set to adapt to and deal with fully completely different monetary environments and to have the power to maneuver on and prices. And I really feel importantly, the earnings estimates have seen actually optimistic upgrades over the previous three and 12 months and degree to a few 12% product sales progress for 2022 and about 9% for 2023. Although the market is skeptical that estimates won’t come beneath further pressure, that to this point has been the report card.
Subsequent slide please. So as Jeremy kind of alluded to, ROBO is designed to be diversified, it’s designed to be invested in among the best of breed know-how companies globally all through the ecosystem of the know-how. So what makes the robotic or automation work? After which the features, the place is automation being deployed? Sadly, this drawdown, as everybody is aware of, has been significantly violent and extreme and has resulted in in all probability probably the most very important drawdown we now have seen. Even when 50% of the portfolio has what we see as an precise value, that being uncovered to industrial automation, logistics automation, healthcare. To not level out, as Jeremie alluded to, that roughly spherical 60% of portfolio has an internet cash place and no debt. So these companies are successfully positioned to local weather the storm, like they did all through Covid.
And this enterprise is importantly historically grown the very best line two to a couple events that of the market and we anticipate that to proceed. To not level out yr to this point, FX has been about an 800 basis degree headwind and the switch throughout the dollar truly has been significantly parabolic and we predict there’s susceptible to be a reversion of indicate and there could very properly be a superb tailwind as we begin to maneuver into 2023 and previous.
By means of the big stock strikes, we now have had a pair fortunes to the upside, not enough in reality, iRobot was up 57% throughout the quarter, as loads of you is likely to be aware, they are a frontrunner in shopper robotics and they also agreed to be acquired by Amazon in an all cash transaction for 1.7 billion. This does importantly signify the twenty eighth takeout since we launched ROBO once more in 2013. And whereas we won’t forecast what the MA setting’s going to look like, loads of our companies are, as soon as extra, leaders of their enterprise. And as asset prices come down, we predict that they really develop to be further favorable throughout the eyes of strategic and financial shoppers.
Luminar Experience moreover had an sincere switch to the upside. They are a frontrunner in lidar know-how for vehicles and automobiles. The stock was, I really feel the effectivity was significantly supported by the conviction of insiders. The CEO did purchase upwards of $6 million throughout the quarter. Nonetheless importantly what’s truly transferring the stock is their enterprise success with bulletins. They launched partnerships with Mercedes and Nissan, which intend to mix their know-how in most of their vehicles by 2023, or I’m sorry, 2030. So we do anticipate to see further progress proper right here on the enterprise entrance.
Then in the case of the sectors that we truly keep extraordinarily convicted on, one house to give attention to is industrial automation. And an earlier contact upon that Jeremie moreover did is that industrial automation truly is firing on all cylinders to meet demand. And Yaskawa, which is an enormous industrial robotic producer, merely launched these days that their orders had been up 34% yr over yr. Fanuc, which is crucial industrial robotic producer, has been pretty vocal about their backlog, which now might be in further of 1 yr. Importantly, Teradyne, which moreover performs a key place in industrial automation, has remaining quarter talked about their industrial automation progress was up 29% yr over yr. We anticipate that to proceed as soon as they announce their outcomes shortly. They’re considered one of many largest producers of collaborative robots by means of their purchase of Frequent Robots, which is a Dutch agency. That enterprise has moreover truly been firing on all cylinders. That enterprise remaining quarter observed robotic product sales actually up 30% on a 55% comp.
So enterprise truly stays pretty strong and healthful. These asset prices are literally pretty attention-grabbing for merchants to attempt. And normal, within the occasion you check out robotic density, and so that’s attempting on the number of robotic installations per 100 people, think about it or not, the worldwide frequent is just one.2 robots per 100 employees. And so we now have an prolonged strategy to go in the case of the place penetration costs are going. Merely to put that in context, the US has roughly 2.5 robots per 100 employees. China may also be 2.5, nevertheless they’ve grown from 0.5 to 2.5 in 5 years. So pretty excellent progress there. Japan’s about 4, Germany’s 4 and Korea is 9.
So this all is throughout the context of a world setting the place world manufacturing employs about 500 million people globally. So if robots are stealing our jobs, they aren’t doing a superb job of it and we predict there’s very important progress throughout the years ahead. That’s it for my prepared marks. I suppose I’m going to maneuver it on to-
Moderator:
Thanks Bill. Hey Bill, sooner than we switch on, we now have a selected question to ROBO from the viewers spherical why we embrace Nvidia nevertheless not Micron or Intel or STM. Might you talk to that?
Zeno Mercer:
Optimistic. Hi there. Hey everyone. Zeno proper right here masking THNQ at current. And okay, may you repeat that question? It was spherical possession?
Moderator:
Positive. So that they are asking throughout the ROBO Index, we embrace Nvidia nevertheless not Micron or Intel or STM. So may you talk about regarding the distinction between ROBO and THNQ and the place these companies would fall?
Zeno Mercer:
Correct, okay. I really feel one of the best ways we check out it is not solely, certain, these are all involved in components of kind of modern society, robotics, AI, nevertheless we’re looking out for companies which have possibly in all probability probably the most funding or publicity to these areas. And I’m actually going to cowl in a video later, nevertheless I would say some points now, at their newest AI day, they’re carefully invested not solely throughout the chips nevertheless the software program program side of points. And at the moment we keep in mind them further of an AI and robotics play. I indicate, they’ve software program program significantly for it and we merely have stronger conviction spherical it going forward. Clearly companies like Micron are making big investments and are important to society, nevertheless we’re trying to get publicity to explicit areas and by no means merely make investments usually companies throughout the space. I indicate, we’re in a position to cowl further later as soon as I talk about further about Nvidia for a bit.
Yeah, we’re in a position to go to the next slide. Reflecting on the quarter, the THNQ index was down 4%, actually outperforming world indices and the S&P, and we’re down 47% since November 2021 extreme. So the AI space has been underperforming even whereas fundamentals have been bettering in some methods. And I’m going to get to that. From a valuation standpoint, Ford EV product sales are persevering with downward and they also’re actually on the quarter end, they’re at 4.6, which is below March 2020 lows. Even whereas adoption progress, digitization and loads of big tendencies and tailwinds are coming, not solely now nevertheless 2023 and previous. And we’ll cowl that. And some of the massive points that occurred is we had earnings deceleration this yr all the way in which right down to 11.2%. So normal our companies grew, nevertheless this was down from 27.9% in 2021. Clearly it was a very big yr for earnings.
And the current forecast correct now might be a stronger rebound once more throughout the low twenties for 2023, 2024. So correct now, I indicate, this has been a difficult yr. Of us have been kind of reorganizing and figuring out what strikes they will make, nevertheless certain areas of the financial system are seeing and have big backing for continued funding over the next plenty of years and quarters. So I really feel it’s important to suppose and know that AI is becoming an rising share of firm authorities spend and additionally it is an enabler of GDP progress and worth monetary financial savings. So there’s every progress components and deflationary components which will be involved proper right here and we’ll cowl that.
Subsequent slide. Yeah, so we actually had, whatever the index being down, we had outperformance, we had 79% beat excessive line expectations and 85% beat earnings. And I really feel spherical 87% are anticipated to be worthwhile subsequent yr. So within the occasion you are obsessed with these companies, we now have extreme pricing vitality, they’re important avid gamers to the financial system, whether or not or not it’s funding spend from the Fortune 500 in search of to digitize their merchandise or make new merchandise and even merely uncover value monetary financial savings all through present chain, operations, points like that. And even merely using AI as a core product and to increase the product development, whether or not or not precise world world merchandise or digital merchandise, choices. So there’s developer operations, cybersecurity, loads of angles there.
Many companies even have raised steering throughout the index resembling Samsara, which actually raised 3 instances this yr no matter their very personal present chain points. That’s excessive line and bottom line. From big information and analytics, we actually observed a standout from companies like Alter X, which is seeing 50% yr over yr progress and 90% gross margins. And no matter everyone being afraid of, oh, what’s going on to happen with spend, and the place money goes is shifting this yr, I really feel we’re all seeing that. And Alter X is seeing their largest pipeline in historic previous for digitization automation of bringing in information and figuring out what to do with it and discovering strategies to streamline capabilities with elevated labor value, inflation.
So these companies current very extreme ROI and that’s the reason as soon as we’re establishing and reevaluating the index and rebalances, we’re having a look at what companies are enablers correct now. And that’s every the infrastructure side and the exact software program side which will be actually getting used at current. It’s the availability and demand. And likewise you wouldn’t assemble semi chips, there’s not a trigger, and I’m going to get to this subsequent, regarding the CHIPS Act, if there weren’t an important side coming down the highway for that. And most of those chips, the chips being produced there aren’t going to be coming on-line until 2025 and previous.
So we’re in a position to actually go to the next slide now. I suppose I already lined the outperformance proper right here, however it was, no matter factors throughout the financial system, it was a very strong quarter and we observed pretty sturdy reassuring steering from many areas. I really feel one of many very important troubled areas is on shopper, although our shopper index or the patron sub sector and e-commerce had been among the best performing this remaining quarter, they’d oversold in Q2.
So within the occasion you are kind of looking out for 1 / 4, I indicate you’re going to have shifts there, nevertheless that’s the reason we even have publicity and make allocations of these fully completely different areas. Going to talk about Semi precise quick, I really feel considered one of many largest points that occurred was two points. A, we handed the CHIPS Act and we moreover had US commerce restrictions, Semi effectivity whatever the CHIPS Act being handed, no matter Europe moreover declaring they want to double manufacturing of Semi chip functionality themselves, getting away from Asia manufacturing space, our Semi index was down 12%.
Part of it is falling in lockstep with the financial system and the whole thing else. Part of it is kind of overblown fears spherical what’s happening with the China commerce restrictions and likewise spherical shopper, PCs, Cell. Apple launched that they’re going to not improve manufacturing of the iPhone 14. And we now have some publicity there, nevertheless normal that’s PC and personal. If you’re talking about cloud, AI, automotive and connectivity, which is the place we actually try and allocate further publicity to on that side of points, on the infrastructure side, we’re actually seeing strong demand and forecast. For instance, Qualcomm, which is anxious in a number of, they’ve I really feel $7 billion enterprise fashions. They’ve seen their automotive pipeline go from 19 billion to 40 billion in a single quarter. So the inflation low cost act, all these things individuals are making, we would not have full EVs however, at least throughout the sense that they aren’t all over the place.
I indicate, within the occasion you check out share of vehicles on the freeway, it’s 0%, 0.001. Nonetheless, intelligent wise vehicles that require further processing, you’ve got purchased EVs, they require further semiconductor chips and processing connectivity and in addition you are seeing an enormous improve in demand spike there. So whereas we’re seeing a oversaturation in that part, we’re seeing big progress. After which there shall be one different enhance cycle for wearables and points like that, that that’ll come once more on-line. Nonetheless it is kind of smoothing out the tactic proper right here. And that moreover contains components, sensors and laptop computer imaginative and prescient.
By means of cloud demand, we’re seeing big pull by means of nonetheless. Arista, which makes networking switches and software program program for these big cloud center deployments from the big tech companies and enterprise and others. They equipped very sturdy steering in 2023 at their remaining identify. So within the occasion you are attempting by means of the noise and seeing what’s an indicator of points to come back again, it’s continued funding on this space. And we now have received plenty of hundred billion dollar plus tailwinds coming by means of 2023 and previous. And it couldn’t be further obvious how important it is than for those who get to the commerce restrictions.
Nonetheless the CHIPS Act, merely to current everyone an occasion of how we check out the infrastructure space, they should make the semiconductors themselves, so you’ll have Nvidia, Intel, Samsung, avid gamers like that. You even have companies like LAMB Evaluation and ASML, which make essential components to that. To make tiny three nanometer components, you need very expensive, very refined gear. I indicate, it’s a few of probably the most spectacular tech we now have on the planet correct now. Each of these devices though have a number of years pre-order, there’s a backlog, and they also run $180 million per pop for ASML as an illustration, it’s a Dutch primarily based agency.
As a share of spend, okay, as an illustration there’s a $50 billion Chips Act and an entire bunch of billions coming on-line in manufacturing throughout the US as an illustration, not even talking regarding the EU, one $17 billion plant in Texas, $10 billion of that is going to semi manufacturing gear. So merely to current you a scale, and I don’t suppose the market’s truly reflecting that, semi’s ineffective, prolonged reside semi, individuals are like, “Oh, PC, gaming,” there’s loads approaching board. I really feel that’s one factor to recollect for those who’re sitting proper right here obsessed with what’s comfortable and what’s actually going to get money throughout the subsequent couple of years.
China restrictions, Nvidia, Nvidia’s had a tricky yr, gaming’s down after which the China commerce restrictions have come on board. They aren’t set to begin out for a while until subsequent yr, 3Q subsequent yr. And it actually leaves them with some wiggle room. So it’s not basically they can’t promote into China, they solely can’t promote explicit chips and points. Really rumors are saying that they’re actually getting plenty of orders and individuals are stockpiling correct now. So take that as you will. Nonetheless I really feel ultimately it merely reveals how important these are and that there’s going to be elevated emphasis and funding proper right here.
One different issue I wanted to talk about briefly is the Tesla robotic. That was a pretty big deal for lots of, throughout the sense that it launched consideration to the world. Elon has that influence. He focused on EVs, he primarily made the EV market. Robots though are already an enormous market, clearly that’s the reason you guys are all proper right here is trying to know and take heed to that and from our angle. So what I really feel goes to happen proper right here is A, shopper robots have very low penetration. In reality, it’s primarily null. You do have further automation in semi and automative and manufacturing, however it is one different market that really just isn’t being appreciated is the robotic space and AI space with the power to visualise and primarily, they should operate throughout the digital world to have the power to operate throughout the bodily world. That’s going to take elevated computation and funding in cloud, AI, connectivity.
So I really feel that’s the takeaway there. I don’t truly want to make a projection on when will Tesla robotic be in people’s properties if it ought to, et cetera. Nonetheless I really feel it’s merely one factor to recollect.
Yeah. So speaking of latest points, we now have received a model new addition. We added CrowdStrike this quarter. So CrowdStrike for a lot of who have no idea, is an American cybersecurity agency that was based mostly in 2011. That that they had their first product in 2013. They’ve been on a roll proper right here. Now we have been watching them for some time and they also’ve truly confirmed resilient. And as soon as we’re obsessed with making an addition to an index, we check out numerous points, We check out their market and know-how administration and we moreover check out what are they investing in, have they received a pipeline of merchandise which will be going to proceed to make them obtain market share and improve their addressable market.
Correct now they’ve been rising, their 5 yr progress value is 94% anticipated to hit 1.5 billion this yr and a few.2 billion subsequent yr. So their AI enabled cybersecurity choices are trusted worldwide, with a TAM addressed estimated to be $75 billion and that’s rising to 125 billion with new merchandise. They’ve a 97% retention value and they also turned worthwhile in 2021. So this isn’t just some progress story. Their EPS is projected to develop 50% over the next plenty of years. Going once more to funding, they’ve 25% of their earnings investing throughout the R&D and in merges and acquisitions. They’re making wise acquisitions, they’re investing, we’re very assured that they’re going to proceed to be a frontrunner in AI enabled cybersecurity.
At this degree, I’m going to maneuver it on to Jeremie to debate our healthcare index.
Jeremie Capron:
Okay, thanks Zeno. So HTEC is the healthcare know-how innovation index that we launched in 2019. And in the previous few years we now have seen the convergence of robotics, AI and life sciences that has enabled some breakthrough advances. And we think about that healthcare is the one big monetary sector that’s going to be profoundly reworked by know-how over the approaching decade. And so we assemble the HTEC index using an an identical recipe to the ROBO index. Which means the index portfolio consists of among the best at college companies from across the globe which will be transforming the healthcare enterprise all through 90 areas you may see on this pie chart. So there’s robotics, which is about robots throughout the working room, throughout the pharmacy, in hospitals and so forth.
And you have got information analytics, which is about companies using software program program to derive insights from the data that we now collect spherical victims. The knowledge from medical trials, the data from medical imagery and AI is an increasing number of utilized in diagnostics and drug evaluation and automating, or it’s further about augmenting the work of clinicians, augmenting the tempo and accuracy of a diagnostic. After which you’ll have telehealth, which is about decentralized treatment, like distant doctor affected individual visits that we’re now all acquainted with, however it is moreover about wearable devices for the monitoring of glucose ranges or cardiac train and so forth.
You’ve got genomics in reality with companies providing the devices to decode the genome and companies creating early most cancers detection choices. You’ve got companies with gene enhancing know-how and even synthetic biology the place we create synthetic genes. After which lastly you’ll have a bunch of medical and surgical units like 3D printed implants, you’ll have coronary coronary heart pumps, miniature coronary coronary heart pumps, neurovascular devices and so forth. So it’s a pretty quite a few basket of presently 78 companies, big and small.
In reality, nearly half of the companies throughout the portfolio are small and mid caps, nevertheless they’ve one consider frequent, which is know-how and market administration of their respective sectors. And on the next slide you probably can see that the portfolio carried out very successfully in 2019, 2020 and 2021 sooner than that kind of indiscriminate selling mainly decrease in half. And so the HTEC index has now declined 50% from its extreme of February 2021. And throughout the meantime, the earnings has grown by larger than 30%. So earnings grew by 22% remaining yr. And this yr we will see an extra 12% and subsequent yr we’re having a look at 10% product sales progress, 2023. So HTEC is now shopping for and promoting on 3.9 events forward enterprise value to product sales. That’s on the median for the basket. And that compares to the extreme yr of seven.2 events and the low throughout the Covid lockdown panic, that was 4 events. So we are literally below the Covid lows in the case of valuations and I really feel that could be a very important degree to recollect.
So I want to contact on a number of of the firms proper right here so that you simply get a larger sense of what’s throughout the portfolio. And I will start with a number of of the excessive performers all through the quarter. You probably can see Butterfly Neighborhood’s proper right here, that was up over 50% before now three months. So Butterfly’s in our diagnostic sector and it has developed the IQ ultrasound decision, that’s an ultrasound system that is 80% cheaper than standard devices. It’s small, it actually works with smartphones and tablets and has a software program program platform that is subscription primarily based. So that they are growing entry to ultrasound primarily based evaluation dramatically. And it’s rising very fast, about 30% per yr, with margins above 50% on the gross stage. So Butterfly has $300 million throughout the monetary establishment, so a great deal of room to proceed to scale and ultimately we predict it’s a very in all probability acquisition aim.
After which Penumbra proper right here, Penumbra is a company in our medical machine sector. They’ve developed very revolutionary surgical units for neuro and vascular conditions. So it’s about stroke remedy and eradicating clots and thrombectomy and coiling strategies. And Penumbra’s tech is superior to the conventional stent technique, so that they’re moreover rising fast, like 15, 20% a yr. And they also have increased than anticipated margins as soon as they reported and they also’re talking about accelerating progress and procedures into the remainder of the yr. They’re making aggressive constructive points. Moreover they’ve fairly a number of merchandise growing over the next 18 months.
And AxoGen, you probably can see proper right here, which was up larger than 40%, that’s in a regenerative treatment sector. AxoGen has developed a solution to revive the bodily damage to nerves, peripheral nerves. And so they additionally’re able to restore feeling and efficiency of nerves. Principally it’s a nerve graft and it’s the one off the shelf human nerve allograph within the market. And AxoGen moreover had increased than anticipated earnings remaining quarter. And the administration commented that they anticipate the product sales progress to return to mid youngsters by the highest of the yr.
And finally, I wanted to the contact a bit bit on genomics and precision treatment, which collectively account for a few quarter of the portfolio. And you might even see on this slide some examples of companies in HTEC, a number of of the know-how and market leaders which will be truly powering the genomics enterprise. And we predict genomics is completely a revolution and it’s happening now. It’s a revolution on account of genomics permits a really new technique to treatment and the early detection of sickness. It is not solely hereditary sickness however moreover persistent sickness like most cancers. And because it moreover permits custom-made treatment, custom-made treatment which suggests individualized treatment versus the current model of big pharma the place you’ll have a one dimension fits all kind of molecule that value billions of {{dollars}} to ship to market. Proper right here we’re talking about therapies which will be tailored to the individual.
And the rationale why this revolution is happening now might be on account of we now have fairly priced gene sequencing know-how and the value of sequencing the human genome is declined dramatically from billions of {{dollars}} with the first human genome enterprise a very long time previously to now beneath $1000. And if there’s one agency that’s been most important the price in the case of driving down the value of gene sequencing, that is Illumina, which is the market chief. They’ve larger than 20,000 machines put in worldwide. They’ve larger than 75% market share globally. And remaining yr they grew earnings by 40%. And about two weeks previously they launched the model new NovaSeq X, which is the model new sequencing platform that may take sequencing costs down by larger than half to only some hundred {{dollars}}. And the ultimate time we observed such an enormous value decline, that drove fivefold improve out there available in the market dimension for genomic sequencing.
And that’s what permits genomics testing. And I mentioned the early detection of the illnesses like most cancers. So Natera as an illustration, is the market chief in prenatal DNA testing. They’ve a non-invasive verify for abnormalities and Natera is now pushing into most cancers screening and implant rejection testing as successfully. Veracyte, that’s one different agency that’s transforming the diagnostic of most cancers using DNA know-how. They’re working in thyroid and lungs and breast most cancers testing. They’re rising the accuracy of diagnostic and avoiding pointless surgical procedures for victims.
And I moreover highlight Twist Bioscience proper right here. Twist is the chief in DNA writing. So it’s the synthesis of genes which they do with a silicon chip to manufacture huge number of synthetic DNA at a low value. They now have 1000’s of shoppers along with pharma companies, along with evaluation amenities, however moreover industrial companies, chemical companies, agricultural companies.
And finally I want to contact on Alnylam. Alnylam is an efficient occasion of precision treatment and individualized treatment. They pioneered the RNA interference therapeutics, we identify that RNAI. And they also merely obtained their fifth approval in decrease than 4 years for the remedy of polyneuropathy sickness often called ATTR. And this remedy that they’re growing with may attain billions of {{dollars}} in product sales. So for those who study that to the market cap of Alnylam at current, there’s I really feel attention-grabbing discrepancy.
So in complete there are 18 companies in our genomics and precision treatment part and they also account for spherical 25% of the HTEC portfolio. And I hope you understand that there our portfolio constructing course of proper right here is admittedly about diversification, providing publicity not solely to small areas like genomics, precision treatment, nevertheless to all areas of the healthcare enterprise the place know-how is making a distinction.
All correct, so I will pause proper right here. I really feel we now have lined plenty of flooring, I truly want to take a number of of your questions and I see we now have a question about earnings trajectory for our portfolios. What is the anticipated earnings progress for this yr and subsequent? And I really feel we’re in a position to start with ROBO. I’m going to the touch upon ROBO after which Bill and Zeno can contact upon the alternative portfolios. Nonetheless mainly we predict we’ll shut 2022 with about 15% EPS progress for ROBO. So remaining yr we had larger than 40% EPS progress. This yr we’re nonetheless having a look at 15, which is significantly ahead of what you’d anticipate for the S&P 500, considerably within the occasion you exclude the facility sector from the S&P 500. We’re primarily having a look at a compression in EPS for this yr for the broad market. For ROBO, it’s 15%. And for subsequent yr, we’re having a look at concerning the an identical, so 15 to 17% is the anticipated EPS for ROBO in combination for subsequent yr. Zeno, do you want to contact upon AI?
Zeno Mercer:
Positive, Hi there. Yeah, so in the case of EPS progress for the THNQ index and its members, I’m going to kind of break up it into software program and firms and the infrastructure half. Infrastructure has been a bit smoother this yr and we observed 29% EPS progress in 2021, this yr we now have seen and projecting for the full yr, 22%. So a slight pull down. On the flip side on software program and firms, we observed 29% remaining yr and 7.9% this yr, with eCommerce and shopper being the biggest laggards. Nonetheless that’s anticipated to rebound throughout the following yr respectively, shopper and e-commerce to 25% and 64%.
And I really feel attempting 2023 and previous, the projections are having a look at 11.6 this yr. Common THNQ index is in search of to get once more into the twenties progress for EPS, so 20.4 after which even larger clip in 2024 and previous. I really feel a number of of the standouts inside that could be neighborhood and security, which is rising at 49% this yr and anticipated to nonetheless hold increased twenties, low thirties subsequent yr. So that you simply’re seeing some rebound in some areas and others are merely going to see continued energy for EPS.
Bill Studebaker:
Jeremie, merely to fall on to your suggestions, maybe almost revenues for ROBO, I really feel importantly, that’s kind of the elephant throughout the room, everyone thinks there’s going to be a reasonably dramatic low cost in estimates. Clearly we now have not seen that happen. That might be a risk. Revenue progress ROBO is definitely anticipated to be about 13% this yr and subsequent yr a bit over 8%, which is according to its historic averages. So even when there’s pressure from the broader markets, we do anticipate our indices to often develop two to a couple events to that of the market, which historically they’ve. So we actually really feel pretty good concerning the place these corporations are positioned as we go into 2023 and previous.
Jeremie Capron:
Okay, thanks Bill and Zeno. And I see we now have a question about potential ESG factors with the genome oriented companies, significantly governance issues. So proper right here at ROBO World, we take ESG very severely. We launched our ESG protection in 2017, so taking place 5 years now. And we now have improved the protection persistently by the years, primarily given the pool that we had from a number of of our European merchants. And so the protection at current is awfully full and yow will uncover all the details on the internet web site and it’s truly focused on excluding companies that fail certain necessities that we now have established according to the Febelfin necessities over in Europe. It’s considered one of many strictest necessities. So we check out environmental effectivity, governance and social factors in reality. We use our private inside evaluation to guage every agency that’s in our funding universe, nevertheless we moreover use exterior help from keep analytics that helps us flag any potential factors or controversies as they arrive up.
Now in the case of question throughout the genome, I really feel it’s an house the place we’re seeing plenty of debate, whereas is not any debate is spherical using genomics for early detection of sickness on account of the concept proper right here is that you’ll select up a sickness sooner than it turns into an infinite draw back in the case of your capability to therapy, in reality, and your probability of survival, however moreover in the case of the value to the healthcare system. And so there seem like unanimous view all through the enterprise and protection makers spherical the reality that genomics in diagnostics is a no brainer. And so we don’t anticipate any factors there. The place some factors may doubtlessly come up I really feel is spherical gene enhancing on account of proper right here we’re making changes into the human DNA. In a number of circumstances we’re making changes into cells so that it could probably produce explicit proteins and proteins that may help battle in direction of a sickness.
And it is nonetheless very early days. Within the current day there is no FDA accepted gene enhancing primarily based treatment. Nonetheless in 2020 we observed the first dosing of a human affected individual with such an technique and we had some fairly promising outcomes with that and that’s the reason you’ve got seen the gene enhancing shares perform slightly properly in 2020 and first half of ’21. Now they’ve come down a good way, nevertheless I really feel that’s the place we now have to pay a bit further consideration.
And the ultimate comment I would make spherical that is that clearly we now have seen a change throughout the trajectory on the FDA in the case of how briskly they’ve been approving gene therapies and cell therapies. So for a really very long time until I’d say spherical 2019 or so, there was reluctance by the FDA to fast monitor this evaluation. Nonetheless at current it has been a clear acceleration and whereas there’s solely a handful of gene and cell therapies accepted out there available in the market at current, there’s a backlog of plenty of an entire bunch of those presently in medical trials. And so we anticipate the raft of approvals over the next plenty of years.
So I will stop proper right here as soon as extra, for those who want to ship up any questions, please kind them into the Q and A area. There’s a question regarding the autonomous system, sub sector, I really feel Bill, you may want to take that. It’s presently at 0%, was significantly larger than that, Bill, you want to give some coloration.
Bill Studebaker:
Yeah, that’s correct, it is 0% correct now. And we did have one constituent in there, which was iRobot, clearly taken out. And just because a company is far from an index, we don’t mechanically merely put one factor in, as Jeremie talked about throughout the earlier part of the presentation, we’re in search of to determine companies that we predict are leaders of their enterprise, companies which have a technological mode spherical their enterprise, have dominant market shares. So that’s a really important requirements for what we’re looking out for.
And we do anticipate the patron sector to begin to evolve. Clearly we’re pretty obsessed with Tesla’s ambitions proper right here and I really feel as the worth elements come down, as a result of the use circumstances broaden, I really feel we’ll see a pure evolution throughout the shopper sector, nevertheless we now have not had plenty of progress there however. With regard to your question, I suppose you had been commenting about Group Gorge and one different entity in Spain. As soon as extra, I really feel the important attribute about what we’re trying to do at ROBO is put in leaders throughout the enterprise. Whereas these companies might need some ambitions in robotics, they’re clearly not getting there however. Group Gorge in France significantly, not solely would we question their market share in technological administration, there is a liquidity problem for companies to go in our index, they should have a minimal market cap and minimal liquidity per day. And every of those companies would fail these screens. So I don’t, Jeremie, another concepts, nevertheless that’s.
Jeremie Capron:
Bill, there’s one different question about FX attribution for ROBO yr to this point. I do know you touched on that earlier. Do you want to repeat that?
Bill Studebaker:
Yeah, clearly it has been an enormous headwind. It has been spherical 800 basis elements since we launched yr to this point, it’s almost definitely about 12, 1300 basis elements since we launched in 2013. So we now have actually absorbed that fairly successfully, we truly would hope that that will develop to be a tailwind. There have been years the place FX has been a tailwind and whereas we won’t anticipate that, we truly don’t hedge for it. And we predict over time there is a reversion in indicate that often happens in foreign exchange markets. And provided that one of the best ways the index is constructed, we’re trying to determine companies that we’re indifferent to the place they’re located. It just so happens about 45% of our index is in North America and about 55% internationally. And as soon as extra, essential attribute for us is defining who the market leaders are, enterprise leaders, know-how leaders, and we’re indifferent to what we space they’re in.
Jeremie Capron:
Okay. Now we have now one remaining question regarding the turnover that we see throughout the index. I will take that. So mainly the turnover comes primarily from the quarterly rebalancing. The index itself is pretty safe in the case of the constituents. Now in reality the weightings can change on the margin as a result of the scoring evolves, so we score every agency in our evaluation universe and the score drives a legibility into the portfolio and to some extent the place dimension.
Scores evolve each time the evaluation crew interacts with the company or there’s a firm movement, there’s new particulars about market administration or know-how administration. Moreover the earnings publicity to the problems that we’re going after, the scores will switch, nevertheless the foremost driver of turnover is admittedly the rebalance when every quarter we return to that score pushed weighting. And so that drives about 25 to 35% turnover in a typical yr, so 4 rebalances per yr. Nonetheless the changes in the case of constituents truly often are usually not that vital. In reality, every quarter you’ll often see one or two new inclusions or exclusions on the basket of about 80 companies. That’s the place the turnover comes from.
Zeno Mercer:
I’m going so as to add one factor to the THNQ index precise quick. Contemplating by means of THNQ, we now have 71 index members and this earlier quarter we had 4 takeouts, one addition. Last yr we had 5 or 6 takeouts from M&A alone. And considered one of many takeouts was iRobot, which was moreover throughout the THNQ index. There’s not that loads overlap, nevertheless that was one, it was in AI and ROBO play. So I merely wanted in order so as to add that we’re making strikes there. And I really feel what we now have considered fairly a bit presently is just because your complete market is down, we’re attempting to confirm we seize the companies which will be sturdy and by no means merely following in tandem, nevertheless we’ll make it potential for they will develop market share, have invested accurately, have resilient administration going forward and to the next quarter and previous. So. Yeah.
Jeremie Capron:
All correct. Successfully, I really feel we’re taking place the hour, so I want to thank everybody for changing into a member of us at current and remind you you may be part of a biweekly e-newsletter on the internet web site roboglobal.com, the place we share a number of of our evaluation and insights into companies and sectors, robotics, AI, and healthcare know-how. And we very loads look forward to chatting with you as soon as extra sooner. Thanks.
[ad_2]