Merryn's Blog

How to profit as the machines take over

A hospital in Scotland is planning to use robots to do its dirtiest jobs. It's yet another reason why you should be looking at investing in the sector.

A new NHS hospital is to use a fleet of robots to take care of some of its most boring and dirty jobs. It sounds like something out of Doctor Who. But while it's the first British hospital to do so, they're already used in the US, France and, of course, Japan.

And it's another clear signal to investors that robotics is much more than just another 'jam tomorrow' tech story.

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The machines at Forth Valley Royal Hospital in Scotland will be used to clean, carry clinical waste and dispense pills. The advantages for the hospital are clear. The clinical waste robots will be isolated from the 'clean' task robots, which should help infection control by cutting the risk of cross contamination (in most hospitals, human staff do both 'clean' and 'dirty' jobs). There is also of course, no chance of the machines becoming infected by the waste themselves.

The robots being used are not particularly sophisticated or interesting machines. The interest in this story is that businesses, in this case Serco (LSE: SRP) the public services company that manages the hospital, are cottoning on to the potential of robots.

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As a general trend the rise of the robot is pretty assured stuff. As processors become increasingly powerful and their cost (relative to performance) falls, robot technology becomes increasingly commercially viable across a range of industries. This theory has been borne out by steady increase in robot sales during the last decade.

So far, so good. But as most investors know, recognising a trend is one thing, making a profit from it is another. Within the industry there are different types of machines, each with different investment stories.

Industrial robots, often found in assembly lines, are currently the largest robotics market but have the lowest growth rates. Professional service robotics, such as the hospital machines, is the second-most valuable market and is expected to have grown by 80% between 2009 and 2012. Household robotics, which range from games to lawnmowers, is the smallest market but also predicted to grow the most rapidly.

There are plenty of stocks involved to a greater or lesser extent in the industry now, but which should you choose? I had a look at the best bets in a recent MoneyWeek cover story including a great 'picks and shovels' play on the industry. You can read all about it here: Cash in on the robot revolution. (If you're not already a subscriber, subscribe to MoneyWeek magazine.)


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