The S&P/TSX Index fell over 150 points on April 2. The TSX has now declined 6.1% in 2018 so far, and U.S. indexes have also slipped into correction territory. Even the red-hot cannabis market has sharply tapered off in Canada, leaving investors to seek other options. Investors will not welcome the return of volatility with enthusiasm, but they should be ready to dive into markets and industries that are poised to chart explosive growth in the long term. In late 2017, The McKinsey Global Institute projected that automation could push over 350 million people worldwide into new jobs. PricewaterhouseCoopers…
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The S&P/TSX Index fell over 150 points on April 2. The TSX has now declined 6.1% in 2018 so far, and U.S. indexes have also slipped into correction territory. Even the red-hot cannabis market has sharply tapered off in Canada, leaving investors to seek other options. Investors will not welcome the return of volatility with enthusiasm, but they should be ready to dive into markets and industries that are poised to chart explosive growth in the long term.
In late 2017, The McKinsey Global Institute projected that automation could push over 350 million people worldwide into new jobs. PricewaterhouseCoopers predicted that automation would hit us in three waves: the algorithm wave, the augmentation wave, and the autonomy wave. No other technological trend possesses the disruptive economic power that automation boasts as we look ahead to the 2020s.
With that in mind, let’s look at three stocks to own for the long term, as investors prepare to react to these developments.
ATS Automation Tooling Systems Inc. (TSX:ATA)
ATS Automation is a Cambridge-based company that designs and builds custom engineered turn-key automated manufacturing and test systems. According to Statista, a market research and business intelligence portal, worldwide factory automation is expected to post compound annual growth of 3% into 2020. ATS Automation stock has climbed 13.6% in 2018 as of close on April 2 and has increased 30.2% year over year.
ATS Automation released its fiscal 2018 third-quarter results on February 7. It saw revenues jump 17% year over year to $277.6 million, and EBITDA remained largely flat at $24.3 million. Order bookings increased 10% from the prior year to $311 million.
Kinaxis Inc. (TSX:KXS)
Kinaxis is an Ottawa-based company that offers subscription software and provides supply chain solutions to its global customer base. Kinaxis stock fell 1.99% on April 2 but has increased 5.7% in 2018 thus far. In 2017, Kinaxis saw revenue rise 15% to $133.3 million and profit surge 90% to $20.4 million. It made up for the loss of a major Asia-based client in Q2 2017 by being chosen by Toyota Motor Corp. to manage its supply chain.
Kinaxis has commented extensively on the impact that automation will have on supply chain planning going forward. Through its software, Kinaxis is able to simulate a wide range of possibilities that will be invaluable for companies implementing large-scale automation efforts. Kinaxis predicts a future in which automation will cover repeatable and necessary processes, while a smaller proportion of planners will plan business decisions.
Kinaxis is a stock to watch as this transformation gets underway. Investors should look for an entry point as the broader stock market experiences volatility.
Metro, Inc. (TSX:MRU)
Metro stock has increased 0.87% in 2018 in spite of the major challenges faced by Canadian grocers to begin the year. The entry of Amazon.com, Inc. into grocery retail with its purchase of Whole Foods set off major concerns for the old guard. Metro has already implemented online shopping options for its Quebec customers.
In response to minimum wage hikes in Ontario, Metro has also announced an increase in automation, and other grocers are following suit. Metro has already rolled out 30 self-scanning checkouts in 30 outlets in Ontario and will add seven more by the end of the summer of 2018. The company estimated that minimum wage costs would cost $35 million in 2018, and with another hike on the way in 2019, expect Metro and other grocers to ramp up automation efforts looking ahead.
He isn't alone in his investment strategy - fellow billionaire Elon Musk has also bet well over a hundred million in the exact same space.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. The Motley Fool owns shares of Amazon. Kinaxis is a recommendation of Stock Advisor Canada.