This automation company, whom you may have never heard of, has been building robots since the 1970s. The company pays a semi-annual dividend, with a yield of 1.63%.
Fanuc Corporation (FANUY)
From Cabot Stock of the Week
While you have seen a multitude of stories about the rise of robots in manufacturing as well as everyday life, you may not be aware of Fanuc, a Japanese blue chip with zero debt, a sterling reputation, and a storied past. Headquartered in the shadow of Mount Fuji, Fanuc is the world’s leading manufacturer of computerized numerical control (CNC) devices that are used in machine tools and also serve as the brains of industrial robots. Fanuc claims to be the only company that uses robots to make robots.
Fanuc, whose name is an acronym for Fuji Automatic Numerical Control, has been a world leader in robotics since the early 1970s. It was founded as a wholly owned subsidiary of Fujitsu in 1955 after that electronics giant decided to enter the factory automation business. Today, Fanuc is as global as it gets with over 240 joint ventures and offices in over 46 countries and a commanding 65% share of its world market. For example, industrial robot manufacturer Shanghai-Fanuc Robotics Co. Ltd. has a plant in Shanghai’s Baoshan district.
Fanuc should benefit from robust demand from developed markets as well as China as its manufacturing costs continue to increase and manufacturers look to robots to increase productivity. You can find Fanuc robots at Amazon warehouses as well as the shop floor of General Motors.
The question of whether robots will replace manufacturing workers is a common one at cocktail parties these days (well, maybe not these days, but back when cocktail parties were allowed before this global pandemic hit). But it shouldn’t be a question. The fact is, they already are. The use of industrial robots has allowed companies like Panasonic to run factories that produce 2 million plasma television sets a month with just 25 people.
Much of the company’s sales are channeled through GE Fanuc, a 50-50 automated machinery joint venture with General Electric Company. Fanuc does most of its manufacturing in Japan, and is building a new factory near Tokyo to double its domestic output capacity of machine tools to produce parts of smartphones.
I have been following Fanuc’s stock for some time, but it always seemed expensive. With the pullback in the market however, we now have a great entry point as the stock is trading just over 13, the lowest point in a decade, and well off its 52-week high of 19.Fanuc offers investors a pristine balance sheet with zero debt and a whopping $7 billion in cash. Profit margins are impressive, and Fanuc also bought back 72 million shares last month. In short, Fanuc is a high-quality play on what seems to be an unstoppable trend.
Timothy Lutts, Cabot Stock of the Week, cabotwealth.com, 978-745-5532, April 20, 2020