Companies have been transitioning their manufacturing jobs to machines for years, but we’re about to see it on a much broader scale, forecasts Sean Brodrick, a leading growth stock expert and editor of Wealth Megatrends.

Robots already perform an estimated 10% of manufacturing functions, and this share is going to go much higher. Oxford Economics estimates that the number of manufacturing jobs replaced by machines could swell up to 20 million by 2030.

The robotics industry is constantly expanding, and the market for both industrial and nonindustrial robots is forecast to grow an average of 26% per year between 2018 and 2025. In 2020, robotics was a $100 billion market. By 2025, it will likely be $209 billion.

Automotive and electronics industries have led the way in use of industrial robots over the past decade, but many more will soon follow. Companies are always trying to maximize production while minimizing costs.

Robots are the perfect way to achieve this because their costs are mostly fixed. Especially during times of economic turmoil, corporations must innovate to provide the most for their shareholders.

COVID-19 has accelerated a reliance on robots to take care of manufacturing because of social-distancing and remote-working requirements as well as supply-chain issues.

Now, we’ll see the same effects as in the past with companies desperately trying to become leaner. They’ve decided that the upfront investment is worth the savings in the long run.

Cognex Corp. (CGNX), which optimizes automation in the workplace for manufacturing and logistics, is well positioned for this surge of demand.

Cognex provides sensors and software that help automate aspects of production, from identifying parts and guiding assembly to providing quality assurance. Its products utilize state-of-theart machine-vision technology to streamline production.

Machine-vision equipment ensures that producers are able to quickly make products to exact specifications. Cognex’s machine vision products include sensors, 3D laser profilers and 3D area-scanning cameras.

It’s the world’s leading provider of this technology, having installed almost a million systems for powerhouse companies like Apple (AAPL), Lockheed Martin (LMT) and Ford Motor Co. (F).

By taking the human element out of manufacturing, Cognex is able to guarantee lower production costs, fewer errors and faster assembly. Cognex has a strong earnings history, beating earnings per share (EPS) expectations by 45% or more in each of the first three quarters of 2020.

That trend stalled in the fourth quarter, though adjusted EPS of 39 cents did beat the consensus by 34%. And management also reported companyrecord fourth-quarter and full-year 2020 revenue figures. Cognex is yielding a modest 0.3% at recent prices.

That’s significant. What’s even more significant is management’s commitment to dividend growth; the regular payout is forecast to grow by 8% over the next several years.

The company just paid a special dividend of $2 per share in December. This is a great signal regarding management’s outlook, and we could see more payments like this in the future as the automation megatrend accelerates.

My biggest concern is a potentially stretched valuation, with a price-to-earnings ratio of 83.7 times. However, with the robotics industry poised to explode and COVID-19 accelerating manufacturing automation, it’s a premium I’m happy to pay.

Let’s take a look at CGNX’s weekly chart …

cognex

As you can see, the stock has been trending in an upward channel for the last several months. After a brief correction in January, CGNX has just broken through overhead resistance.

I see CGNX challenging $100 per share in the short term, and it could reach $120 soon after. Our proprietary force index is positive, signaling that momentum is on our side.

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