On Our Radar: This Unlikely Industry Will Be the Next to Embrace Robotics

We've seen some huge milestones from the world's most innovative companies in recent years. Tesla (NASDAQ: TSLA) has hit its ambitious production targets and is now rolling out more than 5,000 of its Model 3 electric vehicles every week. Amazon (NASDAQ: AMZN) has won the love of its customers, and Prime now has more than 100 million paying members. Apple (NASDAQ: AAPL) continues to create demand for its flagship smartphones and now ships more than 200 million iPhones every year.

But there is an unsung hero behind each of these headlines: the robotic technology that makes these accomplishments possible. Tesla's autonomous robots are assembling the vehicles on its manufacturing lines, Amazon's Kiva robots are tirelessly pulling items in warehouses to provide for two-day shipping, and Apple's suppliers are using machine vision to perfectly manufacture each of its smartphones to precise specifications.

These developments aren't groundbreaking news. Automotives, distribution, and tech hardware have used robots for years now. But the next industry set to embrace robotics might surprise you.

Planting the seeds for future growth

America has more than 2 million farms, which collectively produce nearly $140 billion worth of agricultural goods every year. But aside from the mechanical plow and the tractor, this industry hasn't been known for game-changing innovations.

But robotics might soon change that. Brian Gahsman, the portfolio manager of the AlphaCentric Global Innovations Fund, believes that agricultural robots could be a significant development for the entire industry. He sees large-equipment providers, such as Deere & Company (NYSE: DE) and AGCO (NYSE: AGCO), plowing big money into automated machinery, and several farms are investing in robotics and navigation systems to improve efficiency and lower overall costs.

In the following interview, Gahsman explains where robots are being used in agriculture and names several companies that investors should consider. A partial transcript of the conversation is included below.

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Partial Transcript

Motley Fool Explorer lead advisor Simon Erickson: Okay, perfect. And then just last question for you, Brian, as we're wrapping up here. Our audience is individual investors, very interested in the robotic space. Are there a few things that you would recommend other than just generally rising sales and more adoption, broader-based things, was there anything more specific that you would suggest investors should be watching in robotics and automation?

AlphaCentric Global Innovations Fund portfolio manager Brian Gahsman: Well, besides, obviously, the advancement in AI which are enabling these robotics and automation systems to work much more efficiently, there are always underfollowed areas that people aren't really looking at. Agricultural robotics, for instance. There's really no pure plays in that space, but there are a great deal of companies that are putting a lot of money into automating farming and agriculture, whether it be autonomous tractors to companies that are completely programming navigation systems that are retrofittable to current farm equipment that a farmer can actually, on an iPad, program its whole field, operations of how it works to go and facilitate that and we are running out of land in this world to feed all of the increasing amounts of mouths that we have to feed.

And so, I think the next really large mover or subgroup in this robotics and automation space is going to be agricultural robotics and automation. A couple companies to look at, maybe Raven Industries, they do what I was explaining with the retrofittable GPS automation for current farm equipment. Obviously, John Deere's putting a lot of money into this space, AGCO... So, that's definitely something on the horizon I would keep a very close eye on and, on top of that, I think that's actually happening right now, whether it's on the radar or not, is warehouse automation.

Warehouse automation, we have the largest distribution facilities. Let's use Amazon for an example. Their regional distribution facilities. We have companies such as KUKA and FANUC that are making strategic partnerships right now, just to completely automate those facilities. If you were to look at a company called Kardex, it trades in Switzerland, and look at some of the systems that they have in place that are sizable to an entire distribution facility. So, orders come in, the whole facility inside is completely closed off and sealed and there's automated picking, sorting, packaging, and the package gets pushed out the back. The automated warehouse or the smart warehouse, if you will, is probably one of the largest advancements. Very, very impressive that it's just slipped under the radar in the past year and that is spreading throughout the world to warehouses and manufacturing facilities.

Simon Erickson: Well, it definitely sounds like some underfollowed opportunities in agriculture and then also warehouse automation. Again, my guest this morning, Brian Gahsman, the portfolio manager of the AlphaCentric Global Innovations Fund. The ticker on that fund, if you're interested: GNXIX. Brian, thanks again for the time this morning.

Brian Gahsman: Thank you for having me.

Simon Erickson: Thanks again for tuning in. Until next time.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Simon Erickson owns shares of Amazon, Apple, and Tesla. The Motley Fool owns shares of and recommends Amazon, Apple, and Tesla. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.