“Selling shovels in a gold rush” is one of the oldest and most profitable investing strategies there is.
So, why is it that so few investors pay attention?
The allure of “easy money.”
Most would rather risk everything they own in search of the next “best” thing when the next “sure” investment is always far more profitable.
I’d like to share a new recommendation with a $50 billion company that most investors have never heard of to get your 2018 started with a bang… and lots of profit potential, too!
But first, let me give you an example to drive my point home.
It’s a story with roots beyond living memory, yet it remains critically important to your money today.
Lured by the prospect of easy money, hundreds of thousands of people sold everything they had in 1849, threw their goods in covered wagons or shipping trunks, and headed to California’s gold fields. Most died penniless in the hills. Those who didn’t moved on… never to recover the wealth they’d given up to make the journey.
A precious few, though, made out like kings and became fabulously wealthy because they understood that selling “must-have” goods and services that their customers could not live without was the surer path to profits – just as we do today.
Levi Strauss, for example, made durable pants for miners who needed tough clothing. Today, Levi Strauss & Co. is a multibillion-dollar company.
Merchant Sam Brannan sold shovels and supplies to miners en-route from San Francisco to California’s gold fields. He reportedly made $150,000 a month at just one of his stores… roughly $4 million in today’s money.
Faxon Dean Atherton and Thomas Larkin financed ships inbound with critical supplies. The two men served as bankers, middlemen, and merchants by purchasing entire ship cargos upon arrival in San Francisco and reselling it all at hugely inflated profits to fortune hunters hoping to strike it rich. They reportedly doubled their capital every few months.
A biographer would later write that Atherton and Larkin, in particular, became two of the state’s richest men because they understood that it was far more profitable to follow a strategy “built on essential elements” than it was to sell.
Back then, that meant “foodstuffs, dependable commodities, and investment in land,” according to his diary, which was later published by the California Historical Society in 1964. Today, there’s another “gold rush” at hand.
McKinsey research suggests that big tech companies invested $20 billion into artificial intelligence last year alone, and that worldwide AI-related revenue will top $46 billion less than two years from now. Robotics spending, a closely related industry, will top $188 billion over the same timeframe, according to IDC. That’s a combined total of $234 billion in just the next 24 months.
What gets my attention, though, is a far more impressive number: revenue from artificial intelligence – of which robotics is a closely related critical part – is expected to grow by 50% a year. That’s a double every two years and enough to turn every $10,000 invested into a staggering $576,650 in only a decade.
Which brings me to Fanuc Corp. (OTCMKTS: FANUY).
Most investors have never heard the name despite the fact that it just may be the single most important robotics company on earth.
The company is notoriously private and extraordinarily secretive. So much so that Fortune magazine once compared its founder, Seiuemon Inaba, to a James Bond villain.
I’m not sure I’d go that far, but I can certainly see the similarities.
The company’s campus is set on the shoulders of Mt. Fuji in a heavily wooded area, Inaba-san, planted specifically to protect its activities from outsiders. Like many analysts, I tried to get in once years ago, but couldn’t.
Everything is yellow, from the company’s robots to the uniforms employees wear, to its factories and offices. Bond’s archnemesis, 1960s supervillain Ernst Stavro Blofeld, would identify with his penchant for uniform classification.
The one exception is a newly emerging family of robots like the green CR-35iA, which is billed as the world’s strongest collaborative robot… as in the robot works with humans rather than replacing them.
I’ve looked at a lot of robotics companies over the years, and Fanuc is very different.
The company could care less about what its customers make and much less about what they’re trying to sell… as long as the customer is using a Fanuc robot to do it.
There is no doubt in my mind that Strauss, Brannan, Atherton, and Larkin would recognize the opportunity.
Fanuc robots sort, paint, fill, and count everything from trucks to medicine to ketchup for customers like General Motors Co. (NYSE: GM) and Motion Controls Robotics, a reseller of its own solutions. The company is also a key Apple Inc. (Nasdaq: AAPL) supplier, making the machines Apple uses to mill the iPhone and other ultra-high-quality Apple devices.
Chances are good that you’ve got something Fanuc “made” in your house or your pocket right now.
The company presently has 261 locations in 45 countries, with corresponding maintenance services, parts warehouses, and repairs available immediately.
FY2017 Q2 sales reached 179.1 billion yen ($1.59 billion) – up a jaw-dropping 38.3% from the same period a year prior – and more than 6.3% from the immediate quarter prior.
Broken down, more than 35.4% and 17.5% of those sales can be attributed to the company’s ROBOT and ROBOMACHINE Divisions, respectively.
Tapped into Lucrative Growth Potential in Asian Markets
I am particularly interested in Fanuc given what’s happening in China at the moment.
China’s expected to account for 38% of global growth starting this year, much of which will be achieved through manufacturing excellence that Chinese companies don’t yet have but desperately need in every conceivable industry.
For instance, Xiaomi, Huawei Technologies, and Vivo are falling all over themselves to compete with Apple, BAIC Group, BYD, and the Beijing Automotive Group, who would love to field vehicles on par with Audi, BMW, and GM. Sany, Zoomlion, and XCMG want to take on Caterpillar Inc. (NYSE: CAT), Komatsu, and Deere & Co. (NYSE: DE). Fanuc equipment is already selling well in China, and I think production destined for the Red Dragon doubles over the next five years as demand accelerates there.
Case in point, China installed 90,000 new industrial robots in 2016, which represents 30% growth and more than a third of all robots worldwide, according to the International Federation of Robotics.
Many investors are surprised that this kind of technology doesn’t exist in China yet, at which point I remind them that production lines there are still very “human.” In fact, there were just 49 robots per 10,000 workers as of 2015, versus 176 per 10,000 in the United States, and a whopping 531 per 10,000 in South Korea, according to Bloomberg and the International Federation of Robotics.
China could triple the number of robots and still not have enough to meet anticipated industrial growth and export demands, despite the fact that it is already the world’s largest robotics market.
The situation reminds me very much of Japan in the 1950s, just before that nation’s industrial output exploded into global markets, never to look back.
Shares are available directly on the Tokyo exchange, where Fanuc’s ticker is 6954, but I recommend buying them via the U.S. over-the-counter market, where Fanuc’s ADR trades under the ticker FANUY for just $25.80.
— Keith Fitz-Gerald
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Source: Money Morning