Even as businesses open back up and people go back to work, disruption from the coronavirus pandemic continues to unfold. According to a Thomas survey in April of this year, 64% of almost 900 North American manufacturing and industrial sector professionals are “likely to bring manufacturing production and sourcing back to North America.”

This is not surprising at all given Trump’s push to bring back U.S. manufacturing over the last three years and all the supply chain issues related to the pandemic. Companies from toymaker Hasbro Inc. (NASDAQ: HAS) to L Brands Inc. (NYSE: LB) have outlined plans to substantially reduce their dependence on Chinese manufacturing in the next few years.

This isn’t just logistics; it’s an investing opportunity for those who know where to look.

One major deal that caught my eye back in May was Apple Inc. (NASDAQ: AAPL) supplier Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) announcing a plan to build a $12 billion chip factory in the United States.

This factory would not only manufacture some of the most advanced semiconductors right here in America, but potentially create over 1,500 jobs.

This all sounds great for companies like Prologis Inc. (NYSE: PLD), a California-based logistics real estate provider operating in the e-commerce space that I’ve talked about here on Money Morning. With manufacturing moving back to the United States and e-commerce continuing to grow exponentially, small and large businesses will need to increase their warehouse capacity and make sure they have logistics in place to ship out billions of products. The growth potential here is exciting too. Just look at Shopify Inc. (NYSE: SHOP), Etsy Inc. (NASDAQ: ETSY), or Amazon.com Inc. (NASDAQ: AMZN), three e-commerce companies that have had a meteoric rise since March lows.

But it’s not as simple as building U.S. factories.

With manufacturing moving back to the United States, one of the biggest problems that companies are faced with is the increased cost. Manufacturing overseas can sometimes be a fraction of the cost due to lower labor costs and fewer restrictions. As companies come back to the United States, they are looking to solve this problem. While the U.S. may not be able to compete on labor costs, technology has been the key.

And one company is offering the technology to do just that, including automation and AI. It’s our favorite way to profit from this new manufacturing trend right now…

This Tech Stock Is Streamlining U.S. Manufacturing

This is why I am looking at Cognex Corp. (NASDAQ: CGNX), an American manufacturer of machine vision systems, software, and sensors used in automated manufacturing. These tools inspect and identify parts, detect defects, verify product assembly, and guide assembly robots.

As the largest and most recognized global player in industrial machine vision, Cognex can help companies bring down manufacturing costs as they come back to the states or just help improve current factories.

As a key enabling technology to automation, both in factories and logistics warehouses, machine vision is one of the most attractive long-term industrial sectors. In fact, MarketsandMarkets estimates that industrial control and the factory automation market is expected to reach $229.3 billion in 2025 from $151.8 billion in 2020. That is a CAGR of 8.6%. Given the current state of the economy, that number could end up being even bigger as large corporations that move manufacturing back the United States look to cut costs in the long run.

That is quite a big industry for Cognex, which is an $11 billion market cap company with revenue of $725.6 billion in 2019. While revenue declined 4% over last year due to the pandemic, the company did fare better than others on healthy demand for consumer electronic and logistics services. The automotive sector, which was hit badly, had an impact on its earnings as it was the company’s largest end-market last year. But as the world recovers from the pandemic, business should return to normal.

While the automotive market has slowed down, one of its other largest markets, logistics, has improved. E-commerce sales have accelerated as a result of COVID-related restrictions. And as a leader in machine vision and barcode reading for e-commerce, Cognex is well-positioned here.

Even with the slowdown in business, Cognex is introducing new products. It recently announced a new embedded vision system, the In-Sight D900, which features its ViDi deep learning software inside a smart camera.

Cognex’s ViDi deep learning software is what really excites me about this company. Sophisticated manufacturers are increasingly turning to deep learning vision to solve inspections that are too complicated, time-consuming, or costly, and that is where ViDi is needed. The best part about it is that it can be used across a range of industries including automotive, consumer electronics, medical devices, and even food and beverage.

Ending the first quarter with $845 million in cash and investments and no debt put Cognex in a position to grow either through R&D or acquisition. Unlike many companies taking out loans during the pandemic, it has shown consistent cash flow generation and even repurchased 1.2 million shares during the quarter with a further $200 million authorization to the repurchase program. As factories get smarter, Cognex could be a key benefactor of this trend.

— Alex Kagin

Source: Strategic Tech Investor