StockRank Movers - March 31st: Investing in the Singularity

In his fascinating book, The Singularity, Ray Kurzweil predicts that by 2045, artificial intelligence will become so advanced that humans will have no choice but to augment their minds and bodies with genetic alterations, nanotechnology, and artificial intelligence. This might sound like science-fiction, but many people agree with Kurzweil's thesis. In China, a fully robot-staffed restaurant has already been running for several years. According to research by Gartner, one in three jobs will be replaced by some kind of software, robot or smart machine over the next decade.

Should we be scared? Apparently, it is possible to make money from this technological process. The fund manager, Jim Mellon, has written a book, Fast Forward, where he analyses some of the companies that are already producing technologies that can automate manufacturing processes. Are these companies good investments? Let's find out by using the StockRanks to analyse some of the stocks he mentions.

Hansen Medical (HNSN)

Hansen Medical - a US-quoted manufacturer of medical robotics - saw its share price spike back in January. The firm reported that the first procedure using its Magellan Robotic System had been completed in Australia. The Magellan System can be used by physicians to navigate blood vessels during endovascular surgeries. Back in January, the Australian doctors used the Magellan System to complete a chemotherapeutic procedure to treat liver tumour. One advantage of this system is that it enables physicians to perform medical procedures while seated at a remote physician console, away from radiation.

Nevertheless, the StockRanks suggest that Hansen Medical could just be a story stock. It produces state-of-the-art medical equipment, but unfortunately fails to generate any money. Earnings per share figures have indeed been negative since 2009. The company has a Piotroski F-Score of just 2 out of 9, partly because its capacity to service debt is decreasing and its pricing power is deteriorating. Furthermore, its Altman Z-Score suggests that the company has a high risk of bankruptcy. Its overall StockRank is 1. The MomentumRank has fallen to 16 out of 100, while the QualityRank has fallen to 1 out of 100.

Kuka AG (KU2)

Kuka AG is a Germany-based company focused on automating manufacturing process using robots. The company has a strong MomentumRank (86). Indeed, Kuka's annual report proudly announces that 'of the fifty companies listed on the German MDAX [index] Kuka's stock was the top performer during the first nine months of 2014. The share price accelerated by nearly 41%. In comparison, the share price performance of Kuka's peer group (automotive suppliers) was between -15% and 10%.' The company has indeed beaten the market by a massive 71% over the last 12 months.

What is driving the share price higher? Earnings have grown at an annual compounded growth rate of over 30% during the last three years. This was supported by growing demand for automated equipment. Furthermore, Kuka is exposed to economic growth in China - where car sales reached 13 million units in the first three quarters of 2014, almost 13% more than during the same period last year. Kuka has been well positioned to take advantage of this trend, as the company supplies German car manufacturers with automated equipment.

Brokers expect earnings to grow by another 35% in 2015. Why are they so optimistic? Back in September, Kuga announced its planned acquisition of Swisslog. Kuga believes that 'after acquiring Swisslog [their] general industry sales will expand 30% to 50% and our global presence will be stronger.' They also insist that 'Swiss log will give [Kuka] access to very attractive growth markets in the field of automations, such as warehouse logistics and the healthcare industry.'

But can Kuga AG still be bought at bargain prices? The company currently trades on a stellar PE ratio of 36. The overall ValueRank for the company is 25 - suggesting that Kuga could be in the most expensive quartile of the market. The company's QualityRank has fallen to 53, while the MomentumRank has fallen to 86.

Conclusions

It would be easy to write a book about companies like these. Unfortunately, stories don't always work when it comes to the stock market. It is best to check that stories can be backed up by statistics. These days, with the growing availability of good quality financial information on the web, it's much easier to ensure that companies have a genuine financial history, and Stockopedia's StockRanks provides possibly the best X-Ray into stock fundamentals available on the web.

If you are interested in other US shares like Hansen Medical, you might want to check out our free ebook, Getting Started in US Shares, which can be downloaded here. We explain why the States may be the perfect hunting ground for stock market investors and also offer guidance on how to find an appropriate stockbroker to trade US markets. Also bear in mind that Stockopedia subscribers can filter the US markets for good quality companies trading at bargain prices by using our GuruScreens and other powerful screening tools. As always - these are not share tips and should not be read as investment advice. Please do your own research before investing.

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