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A narrative of our employment-challenged recovery is that many old jobs have been automated out of existence, and the ones that remain frequently offer fewer hours, less pay and a fraction of the security.
Consider that while America has finally replaced the number of jobs lost in the Great Recession, quality jobs are still hard to come by. Take this, from the Wall Street Journal earlier this month:
"The U.S. has 1.6 million fewer manufacturing jobs than when the recession began, but 941,000 more jobs in the accommodation and food-service sector. More than 40% of the jobs added in just the past year have come in generally lower-paying fields such as food service, retail and temporary help."
This is not a new story for investors. We've seen the charts showing a growing gap between productivity and wages. We've read the rehashing of (and rebuttals to) Thomas Piketty's missive on inequality. In fact, it seems like the only jobs that are in plentiful supply these days are those held by pundits who talk about employment trends.
Rather than waste words on employment and income — or get into the political ramifications of robots replacing humans — I'd rather focus on how to profit from this changing workforce dynamic. After all, if the manufacturing jobs are going away but the manufacturing work isn't, somebody in charge of the technological means of productions is bound to make a pretty penny.
Here's how you can invest in the rise of our new robot overlords.
IBM (IBM) is the godfather of the earliest forms of workplace automation, finding its roots in companies that made timecard-punching machines in the 1880s and automatic data tabulation during World War II. The march toward automation has continued in the decades since, and so has IBM's dominance in the industry.
In health care, Watson is working on diagnosing patients and helping with clinical research. In education, Watson can help create custom-learning plans for students and help teachers assess performance. In finance, Watson can help judge investment risks and may even be deployed in Brazil soon to help with the unique challenges of high growth and high inflation.
Heck, Watson can even argue with you if you want to question its logic.
Computers already have replaced many manufacturing jobs that require simple manual labor and killed office jobs that require menial data entry. It'd seem like evaluating a cancer patient, middle-schooler or prospective homeowner demands a human touch, but with the wealth of data and the sophistication of computers like Watson, there is clearly plenty of room for high-tech tools to help out.
IBM is on the cutting edge of that business.
While Watson has gotten a lot of the press, Google (GOOG) has the deep pockets and high-tech know-how to offer Big Blue a run for its money.
Google is famous for its experimental projects, which include the Google Glass spectacles and a much-publicized self-driving car. But while these projects have been making the biggest splash, the tech giant has been quietly investing in robots.
In the past several months, Google has snapped up a host of robotics and artificial-intelligence firms. There was Deep Mind, an artificial-intelligence firm it bought for $400 million that focuses on machine learning and not just computers that can sort data. There was also the purchase of robotics company Schaft, which won a recent Department of Defense competition that required humanoid robots to navigate disaster areas and carry out a series of relief tasks. Then there's Redwood Robotics, a company that focuses on robotic arms for manufacturing and other repetitive uses.
With roughly $60 billion in cash and investments on the books, and a history of ambitious acquisitions for both technology and talent, Google is agile enough to be seen as a serious competitor in almost any field of technology.
And judging by recent moves, the folks in Mountain View have bigger automation plans on their mind than just a self-driving car.
Amazon (AMZN) has run into trouble in 2014 as investors have soured on the retail giant's big spending on research and expansion at the cost of profits. And while I'm not convinced Amazon is the best short-term play, the long-term potential of Amazon stock looks pretty bright — and pretty robotic, too.
In 2012, Amazon bought robots company Kiva for $775 million, and the company has been investing heavily in cutting-edge fulfillment centers to expedite shipping. And, of course, there was that whole "60 Minutes" episode that unveiled CEO Jeff Bezos' plan for shipping via drones.
All this automation and technological streamlining is meant to speed up delivery and keep pricing cheap. Those aren't just parts of Amazon's business that consumers can get behind, but also investors, who are watching the profit potential of Amazon very closely.
It's not unrealistic to imagine a future where a customer clicks "order" on Amazon.com, and automated systems package it and put it on the back of a mail truck.
And if you want to share in that future, now may be a decent time to buy Amazon stock.
Germany-based Siemens (SIEGY) may not have the Silicon Valley real estate or the famous branding that others on this list do. However, with billions in automation sales worldwide each year, there could be no better way to play the robot revolution than via this established leader in the field.
Siemens automation technologies help Coca-Cola Enterprises (CCE) bottle the famous soft drink, help General Motors (GM) design and manufacture cars and have assisted NASA scientists explore Mars with the robotic rover Curiosity.
With over $5 billion a year in R&D spending on the next generation of automation technology, Siemens is doing everything it can to ensure it remains the leader in the field. Furthermore, the company is investing in robot operators and designers. Just consider its recent grant of over $1 billion to assist Virginia students.
This move isn't altruistic, of course. Siemens depends on the next generation of automation experts to improve and operate its technology.
We can moralize about the decline of manual jobs lately, but innovation and progress have long been improving production and efficiency — dating back to Henry Ford a century ago or even the steam-powered technologies of the 19th century. If you want to play this trend in your portfolio, Siemens is one of the purest and most proven ways to do so.
There's no way to know for sure where the future is headed and which single company will be the leader in 21st-century robotics. So one diversified way to play the rise of robots is via broad-based investment in automation leaders, such as the Robo-Stox Global Robotics and Automation Index ETF (ROBO).
This specialized fund is small, with about $100 million in assets under management. However, its flavor is unique in that the fund tracks companies mostly focused on automation.
Current holdings include the aforementioned Siemens and similar companies including Rockwell Automation (ROK) and Toshiba Machine. Other stakes are more specialized, like agricultural giant Deere & Co. (DE) or robotic-surgery player Intuitive Surgical (ISRG).
In addition, there are speculative plays that include 3D Systems (DDD), the famous 3D-printing stock that has flamed out painfully this year. So investors should expect a bit of volatility thanks to a handful of small-caps and start-ups on the list.
However, if you want a reasonably diversified way to play the rise of automation, consider a position in the ROBO ETF.