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The investment opportunity in robotics. Plus, 10 stock picks with yields still above 5% and fractional share purchasing comes to Canada – The Globe and Mail

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I’ve always been skeptical about the ‘robots are taking our jobs’ sentiment because globalization has had a much bigger employment-displacing effect in developed countries. Recent trends, however, have me considering robotics providers as a long-term investment opportunity.

Citi’s monthly Global Theme Machine report, which monitors over 80 investment trends for performance and attractiveness, identified manufacturing onshoring as the most attractive global investment trend. This involves the moving of production facilities from lower wage developing nations back to home countries. Citi’s global product head Alex Miller emphasizes that automation is a big part of this trend.

The current labour shortage as major economies re-open has been well documented. Managers surveyed by the U.S. Institute of Supply Management were in near-panic mode in the most recent results when it came to searching for workers.

The pandemic has caused severe disruption in global supply chains. The ongoing global shortage of semiconductors, for instance, has resulted in shut-downs for major auto manufacturers and millions of gamers are still awaiting the chance to buy PlayStation 5s.

Onshoring will help alleviate supply chain concerns, reducing complexity, but major manufacturers will be reluctant to let higher wage costs – that’s if they can find workers – push profit margins lower. The answer seems to be a big jump in process automation and robotics investment.

The performance of major automation and robotics stocks has been mixed year to date, which implies that it’s still early for a potential investment in the sector. Switzerland-based ABB Ltd. has jumped 31.5 per cent year to date in U.S. dollar terms which is great, but Japan’s Fanuc Corp. and Wisconsin-based Rockwell Automation Inc. have only climbed 11.6 per cent and 18.0 per cent, respectively.

These are not thoughts I’m going to act on right away in my portfolio but I will be following relevant data closely in the coming months.

For readers looking for a more comprehensive look at the global automation trend, Citi has helpfully made “TECHNOLOGY AT WORK v6.0: The Coming of the Post-Production Society” publicly available here

— Scott Barlow, Globe and Mail market strategist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

Mobile TeleSystems Public Joint Stock Co. (MBT-N) As stock markets continue to make new highs, it has become exceedingly difficult for The Contra Guys – read “cheap” – to find stocks to add to their portfolios. Their latest purchase took them well around the globe to Moscow. They look at why they recently purchased this telecom stock.

The Rundown

Doubting the commodity supercycle? It’s now a cheaper bet

Commodity prices have been struggling in recent weeks, pausing this year’s remarkable run on materials stocks and raising the question of whether the opportunity for investors has ended. But some observers remain convinced that a commodities “supercycle” – an extended period of strong demand for raw materials – is continuing, offering a buying opportunity for anyone who missed the first stage of the rally. David Berman reports

Top dividend ETFs for yield-hungry investors

Even after a huge run-up, you can still nail a dividend yield of about 2.5 per cent by investing in a broad-based Canadian equity ETF. But you can do better, yield-wise, by looking at exchange-traded funds that hold exclusively Canadian dividend-paying stocks. These products differ widely in their approach to portfolio building, which means yields vary by a surprising amount. Rob Carrick tells us about some of his top picks.

Ten recommended stocks with dividend yields that are still over 5%

When the stock market is rising, it’s always nice to open your monthly portfolio statement and see how much your net worth has increased. But for income investors there are two sides to this coin. While share values have risen, yields in most cases have dropped. What’s the solution? One possibility is to move some of your assets from lower yielding securities into higher yielding ones. Gordon Pape looks at 10 of his recommended stocks that are still yielding 5 per cent or more.

Wealthsimple Trade becomes first broker to offer fractional share purchases in both Canada and U.S. companies

Wealthsimple Trade is now offering its clients the ability to buy fractional shares in certain Canadian and U.S. companies, putting some of the market’s most highly priced stocks more easily within reach of newer investors. Irene Galea reports.

Wall Street charges ahead but some option traders hedge against sharp pullback

Even with U.S. stocks scaling record highs day after day and Wall Street’s “fear gauge” showing a low level of worry, some corners of the options market indicate investors are growing much more fearful of a sharp pullback than they have been in months. Saqib Iqbal Ahmed of Reuters reports.

Others

These 11 growing companies from the S&P 500 are becoming increasingly attractive

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

Tuesday’s Insider Report: CEO buys shares of this stock as it falls into correction territory

BlackRock CEO does not see inflation as transitory

ARK Invest’s Cathie Wood looks past rising consumer prices to focus on deflation

Globe Advisor

Why emerging markets are betting on green infrastructure

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation – a powerful tool to help you manage your clients’’ portfolios.

Ask Globe Investor

Question: When ETF companies publish performance data for their funds, are the returns before or after fees? And do they include dividends?

Answer: Exchange-traded funds and mutual funds report their returns after fees, with all distributions assumed to have been reinvested in additional units. Similarly, when a fund company provides a benchmark return for comparison – such as the S&P/TSX Composite Index – it is a total return with dividends reinvested. Standardizing returns in this way allows for apples-to-apples comparisons between funds and with indexes.

Unfortunately, not all ETF companies thoroughly explain what their returns measure, which leads to confusion. Bank of Montreal and Vanguard Canada, for instance, refer to the change in “NAV” (net asset value) or “market price” of their ETFs, which may lead some readers to believe, incorrectly, that dividends are not included.

BlackRock Canada does a better job with its iShares ETFs. Its ETF performance tables include a clickable information button that brings up the following text: “Total return represents changes to the NAV and accounts for distributions from the fund.”

–John Heinzl

What’s up in the days ahead

Stelco shares are on a roll as the steel industry booms, and special dividends could be on the way. Brenda Bouw will take a look at why analysts are so bullish on the stock right now.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

Compiled by Globe Investor Staff

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CPP Investments appoints new head of private equity – Investment Executive

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Former Google CFO joins Wealthsimple’s board

Patrick Pichette is a partner with Inovia Capital, which participated in Wealthsimple’s latest fundraising round

  • By: IE Staff
  • July 27, 2021
    July 27, 2021
  • 11:13

Bank of Canada names new deputy governor

Sharon Kozicki will take on the role on Aug. 2

Mark Carney says climate commitments preclude running for Liberals in fall election

The former governor of the Bank of Canada and the Bank of England said he’s focused on the UN climate conference

SLC Management appoints global head of ESG

Anna Murray will oversee ESG investment strategies for the firm’s institutional clients

  • By: IE Staff
  • July 20, 2021
    July 20, 2021
  • 11:37

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European Investment Fund puts $30M in Fabric Ventures’ new $130M digital assets fund – TechCrunch

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Despite their rich engineering talent, Blockchain entrepreneurs in the EU often struggle to find backing due to the dearth of large funds and investment expertise in the space. But a big move takes place at an EU level today, as the European Investment Fund makes a significant investment into a blockchain and digital assets venture fund.

Fabric Ventures, a Luxembourg-based VC billed as backing the “Open Economy” has closed $130 million for its 2021 fund, $30 million of which is coming from the European Investment Fund (EIF). Other backers of the new fund include 33 founders, partners, and executives from Ethereum, (Transfer)Wise, PayPal, Square, Google, PayU, Ledger, Raisin, Ebury, PPRO, NEAR, Felix Capital, LocalGlobe, Earlybird, Accelerator Ventures, Aztec Protocol, Raisin, Aragon, Orchid, MySQL, Verifone, OpenOcean, Claret Capital, and more. 

This makes it the first EIF-backed fund mandated to invest in digital assets and blockchain technology.

EIF Chief Executive Alain Godard said:  “We are very pleased to be partnering with Fabric Ventures to bring to the European market this fund specializing in Blockchain technologies… This partnership seeks to address the need [in Europe] and unlock financing opportunities for entrepreneurs active in the field of blockchain technologies – a field of particular strategic importance for the EU and our competitiveness on the global stage.”

The subtext here is that the EIF wants some exposure to these new, decentralized platforms, potentially as a bulwark against the centralized platforms coming out of the US and China.

And yes, while the price of Bitcoin has yo-yo’d, there is now $100 billion invested in the decentralized finance sector and $1.5 billion market in the NFT market. This technology is going nowhere.

Fabric hasn’t just come from nowhere, either. Various Fabric Ventures team members have been involved in Orchestream, the Honeycomb Project at Sun Microsystems, Tideway, RPX, Automic, Yoyo Wallet, and Orchid.

Richard Muirhead is Managing Partner, and is joined by partners Max Mersch and Anil Hansjee. Hansjee becomes General Partner after leaving PayPal’s Venture Fund, which he led for EMEA. The team has experience in token design, market infrastructure, and community governance.

The same team started the Firestartr fund in 2012, backing Tray.io, Verse, Railsbank, Wagestream, Bitstamp, and others.

Muirhead said: “It is now well acknowledged that there is a need for a web that is user-owned and, consequently, more human-centric. There are astonishing people crafting this digital fabric for the benefit of all. We are excited to support those people with our latest fund.”

On a call with TechCrunch Muirhead added: “The thing to note here is that there’s a recognition at European Commission level, that this area is one of geopolitical significance for the EU bloc. On the one hand, you have the ‘wild west’ approach of North America, and, arguably, on the other is the surveillance state of the Chinese Communist Party.”

He said: “The European Commission, I think, believes that there is a third way for the individual, and to use this new wave of technology for the individual. Also for businesses. So we can have networks and marketplaces of individuals sharing their data for their own benefit, and businesses in supply chains sharing data for their own mutual benefits. So that’s the driving view.”

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Video Game Industry Sets More Investment, M&A Records In Second Quarter – Forbes

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Dealmaking in the video game business continued at a record level in the second quarter, with $18.2 billion in mergers & acquisitions, and another $7.4 billion in investments, according to the latest quarterly update to the DDM Game Investment Review.

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The hot market continues a year and a half of heavy investor interest in the booming game sector, estimated to be worth more than $160 billion worldwide. The combined first two quarters of 2021 have already doubled the full-year record set in 2020 for M&A and nearly doubled the 2020 total for investments, according to Digital Development Management, the consultancy that created the review and which tracks game-specific dealmaking in Western markets.

Nearly 70 mergers and acquisitions populated the quarter, for a disclosed value of more than $18.2 billion. Though the volume of deals was only 87 percent the level of Q1, the value involved nearly doubled first quarter totals, and was the biggest quarter in DDM’s decade of data. More than half the deals were of game developers and publishers.

The biggest deals were reverse mergers that brought IronSource and PlayStudios into the public sector, as well as Electronic Arts

EA
big purchase of Glu Mobile

GLUU
, and Embracer Group’s acquisition of high-profile game developer Gearbox Software. Those deals comprised $15.7 billion, 86 percent of the M&A total for the quarter.

The biggest investment of the quarter was Epic Games’ $1 billion late-stage round, held just as the company was headed into an antitrust trial against Apple

AAPL
over App Store policies. The raise valued Epic, which makes Fortnite and the Unreal game engine used in production by many game and even Hollywood studios, at $28.7 billion.

That single deal comprised 15 percent of DDM’s estimated investment totals for the quarter, and was bigger than the next nine largest deals combined. The DDM totals include an estimated $700 million in undisclosed investments. The company said it estimates the undisclosed deal amounts based on historic patterns and data from a decade of tracking the industry.

Seed-round investments were most common in the quarter, 43 of the total, as startups successfully found backers. The most common sectors getting money were grouped under mobile and tech/other (that included the Epic investment).

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The game business has boomed in just about every sector during the pandemic, from mobile to PC, though some esports organizations were hit financially by the loss early on of live events that were a crucial part of their business models. The business also has boomed with the rise of virtual-reality gaming, and the launch of new consoles from Microsoft and Sony, as well as the launch of cloud-based gaming services.

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