In this article, we will take a look at the 12 Best Automation Stocks to Buy According to Hedge Funds.
The rise of generative AI has skyrocketed automation, while robotics are disrupting industrial automation. On the other hand, supply chain automation has reshaped traditional operations from removing warehousing bottlenecks to inventory management, and demand forecasting. In inventory tracking, advanced warehouse management networks, powered by AI and ML algorithms, assist in optimizing inventory placement, resource allocation, route planning, and more.
Robotics a Key Segment to Automation
Professional service robot sales soared by 30% in 2023, according to the International Federation of Robotics (IFR). IFR’s statistics department data shows that over 205,000 robotics units were sold in 2023, with Asia-Pacific accounting for 80% of global robotics sales. Transportation and logistics service robots sales accounted for 113,000 units in 2023, a rise of 35% from 2022. In addition to that, Medical robots are in huge demand, and medical robot sales soared by 36% to nearly 6,100 units in 2023.
Apart from robotics, quantum computing is revolutionizing various industries. Other technologies including virtual reality (VR), augmented reality (AR), big data, data analytics, and 5G technology are key to driving automation across various segments.
Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ) and Robo Global Robotics and Automation Index ETF (NYSE:ROBO) have surged more than 11% and 8.50% over the last year, respectively. Considering the growing demand for automation systems and robotics, automation stocks hold much promise.
With that, let’s take a look at the 12 best automation stocks to buy according to hedge funds.
A warehouse automation system in operation, with robotic arms managing inventory efficiently.
Our Methodology
We used automation and robotics ETFs along with online rankings to shortlist an initial list of automation stocks. We then selected the 12 automation stocks that were the most widely held by hedge funds. The list is sorted in ascending order of the number of hedge fund holders, as of Q3 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
12 Best Automation Stocks To Buy According to Hedge Funds
12. Pegasystems Inc. (NASDAQ:PEGA)
No. of Hedge Fund Holders: 28
Pegasystems Inc. (NASDAQ:PEGA) develops and offers enterprise software solutions including AI-powered decision engines, automation tools, and customer engagement platforms. The company assists firms with AI decision-making and workflow automation. Many leading global businesses including Google, Verizon, RaboBank, and HCA Healthcare, rely on Pegasystems automation services.
On January 24, Wedbush analyst Daniel Ives upgraded the price target on PEGA shares from $100 to $125 and maintained an Outperform rating on the stock. Ives sees Pegasystems Inc. (NASDAQ:PEGA) as a growing AI company, assisting businesses to make the most of their AI investments by automating workflow, accelerating implementation, and enhancing sales cycles.
In the third quarter of 2024, Pegasystems Inc. (NASDAQ:PEGA) experienced a 14% year-over-year growth in annual contract value (ACV), with Pega Cloud soaring over 26% from a year ago. The company’s latest GenAI blueprint, which is a collaborative workspace that uses generative AI to design applications faster, is getting attention. The new features will boost the company’s contract value for current customers going forward.
11. UiPath Inc. (NYSE:PATH)
No. of Hedge Fund Holders: 34
UiPath Inc. (NYSE:PATH) is a leading robotics process automation (RPA) firm that offers software bots. The company assists businesses handle virtual tasks and acts as a virtual assistant to the human workforce. The company is a leader in its category with the latest innovation and agentic automation, combining AI agents, robots, and humans to work together to complete tasks.
The company is in a strong position to benefit from the rising demand for agentic AI needed to manage complex business workflows. On January 27, UiPath Inc. (NYSE:PATH) revealed findings from a new study that highlighted that 90% of IT executives have business operations that would require agentic AI. With AI agents becoming increasingly popular in workflow, the company already has a solution. The UiPath Platform is designed to accelerate the shift towards a new era of agentic automation. The company is focusing on data use and AI-powered customer engagement solutions, which will potentially drive new revenue opportunities and platform use cases.
During Q3 FY2024, UiPath Inc. (NYSE:PATH) showed robust performance with an annualized renewal run rate (ARR) of almost $1.61 billion, indicating a 17% rise from a year ago.
10. Cognex Corporation (NASDAQ:CGNX)
No. of Hedge Fund Holders: 34
Cognex Corporation (NASDAQ:CGNX) offers machine vision products that solve critical manufacturing and distribution challenges. The company operates through the machine vision technology segment. Cognex Corporation’s products assist businesses in automating the manufacturing and tracking of discrete items such as mobile phones, EV batteries, and e-commerce packages.
The coming is making use of AI to advance its automation abilities. On January 14, Cognex Corporation (NASDAQ:CGNX) revealed the DataMan 290 and 390 barcode readers. These barcode readers utilize AI technology to streamline barcode scanning processes and increase operational efficiency. “The DataMan 290 outperformed other competitive solutions we tested, successfully reading codes that others couldn’t,” said the CEO of MTS – Modern Technology Systems, Peter Laurinčík.
In Q3 2024, Cognex Corporation launched AI-assisted labeling and a new AI model in its VisionPro deep learning products, which significantly reduces the time required to train vision models. The company’s AI-driven strategy will potentially increase its revenue as businesses look for AI-automated solutions. Moreover, the company is also expanding its customer base through its emerging customer initiative, with its first cohort of sales bringing in more than $1 million per week.
Impax Global Environmental Markets Fund stated the following regarding Cognex Corporation (NASDAQ:CGNX) in its Q3 2024 investor letter:
“Cognex Corporation (NASDAQ:CGNX) (Industrial Energy Efficiency, U.S.) sold off in the third quarter following a negative market reaction to the release of Q2 results. The share price had been moving higher throughout most of 2024 in anticipation of a recovery from factory automation weakness, with green shoots indicating abating headwinds and earnings normalization. While Q2 earnings exceeded expectations, below consensus Q3 guidance, management’s shift to a more cautious tone, and concerns of a weaker macroeconomic backdrop for this shorter-cycle, economically sensitive business, all contributed to a sharp sell-off. Despite a potential interruption of sequential improvement in their recovery, the long-term thesis remains intact.”
9. Rockwell Automation, Inc. (NYSE:ROK)
No. of Hedge Fund Holders: 38
Rockwell Automation, Inc. (NYSE:ROK) is a leading industrial-grade technology firm that is well-positioned in the automation segment. The company’s flagship products such as Allen Bradley and FactoryTalk provide production monitoring and easy application of ML concepts to solve product quality problems while maximizing process integrity. The company offers industrial automation and information solutions through two segments: Architecture & Software and Control Products & Solutions.
Rockwell Automation, Inc.’s products and services serve a wide range of industries including, food and beverage companies, energy and chemical producers, and auto manufacturers. The company is working in collaboration with companies such as NVIDIA to advance process automation and offer live services to industrial clients while addressing workforce shortages.
On January 16, Stephens & Co. analyst Tommy Moll raised the price target on ROK shares from $275 to $350, upgrading the rating from Equal-weight to Overweight. Moll believes that it is a good time to buy Rockwell Automation, Inc. (NYSE:ROK), considering the rising visibility of sales and earnings returning to growth by the second half and initiating a reinvigorated cost-management and operational excellence program. The analyst also pointed out that stocks like Rockwell “rarely come cheap,” but ROK seems to outperform the market during the early phase of earnings recoveries.
8. Emerson Electric Co. (NYSE:EMR)
No. of Hedge Fund Holders: 38
Emerson Electric Co. (NYSE:EMR) is focused on process automation, processing liquids and materials including oil and gas, mining, and chemicals industries. The company’s large portion of revenue comes from factory automation and hybrid automation services. Emerson Electric has divested its climate control business and acquired automated test and measurement company NI. In addition to that, the company owns 55% of the industrial software company AspenTech and has recently announced that it will acquire the remaining minority stake in AspenTech for an all-cash deal of $7.2 billion.
Emerson’s exposure to automation has increased since the acquisition of NI. Moreover, the company’s core process automation business has notable growth drivers such as LNG, renewables, nuclear, carbon capture, hydrogen, and clean fuels, among other key technologies.
On December 12, Jefferies analyst Saree Boroditsky initiated a Buy rating on EMR shares, setting a price target of $160, which implies an upside of almost 25% from the current price level. Boroditsky points to the company’s portfolio transformation, which will potentially make Emerson an industrial technology leader with prospects for stronger growth and higher margins. The analyst also highlights that the company’s growth will be backed by cost synergies and a continued focus on operational excellence. This should be reflected in the company’s EBITDA margins, growing by 200 basis points through 2027.
7. PTC Inc. (NASDAQ:PTC)
No. of Hedge Fund Holders: 39
PTC Inc. (NASDAQ:PTC) is a leading software company that serves industrial and manufacturing companies to digitally manage how they manufacture, engineer, and service physical products. The company’s product lifecycle management (PLM) portfolio allows companies to transform product data and manage processes.
The modern-day industrial revolution is driven by a new age of integrated smart digital technologies that automate processes in real time. These technologies have a massive impact on the manufacturing industry, and PTC Inc.’s software plays a key role in them. For instance, a product is designed using PTC Inc.’s computer-aided design (CAD) software. The design then develops a manufacturing process using the company’s PLM software, which monitors and controls production.
On February 4, Rosenblatt analyst Blair Abernethy maintained a Buy rating on PTC shares with a price target of $204. The analyst is bullish on the stock with its sustained customer renewal rates and extended selling cycles. PTC Inc. has struggled in the last two years as manufacturers scaled back investment plans due to a sluggish economy. However, M&A activity is expected to gain momentum in 2025, which will potentially create a better business environment and add more clients to PTC’s customer base.
In addition to that, PTC Inc. (NASDAQ:PTC) continues to experience a double-digit growth in its annual run rate (ARR) and software as a service (SaaS). PTC Inc. is also focusing on its Application Lifecycle Management (ALM) solution’s performance, particularly in the automotive sector, including OEMS and supply chains.
6. Deere & Company (NYSE:DE)
No. of Hedge Fund Holders: 41
Deere & Company (NYSE:DE) is heavily investing in agriculture automation process systems. The company’s autonomous 8R tractors are widely used by farmers across the U.S. and globally. Due to a shortage of skilled workers and high labour costs, Deere & Company is making strides towards automating manual work, offering automation products, and transforming agriculture workflow.
Deere & Company (NYSE:DE) is using computer vision and ML to accelerate automation farming and has a goal of fully automated farming by 2030. The company is also working on AI to minimize the amount of herbicide needed to keep crops healthy. The company is focusing on allowing farmers the opportunity to be more productive and efficient by leveraging automation and AI. During the recent CES trade show in Las Vegas, the company unveiled its new tractors and industrial equipment, which can operate without humans driving the cab.
The company is expected to report earnings of $3.26 per share in Q1 2025. Deere & Company (NYSE:DE) has delivered an earnings surprise in the last seven quarters over the past two years. This shows that DE is making notable progress and the company’s goal of automating the farming industry is turning out to be profitable.
5. Teradyne, Inc. (NASDAQ:TER)
No. of Hedge Fund Holders: 43
Teradyne, Inc. (NASDAQ:TER) is a renowned supplier of automated test equipment and robotics solutions internationally. The company operates through four segments: Semiconductor Test, System Test, Wireless Test, and Robotics. The company’s robotics segment manufactures robotic arms, autonomous mobile robots, and advanced robotic control software.
The company’s autonomous mobile robot arm MiR is working in partnership with its Danish partner collaborative robot firm Universal Robots. In addition to that, the company also has a collaboration with NVIDIA to assist it with new AI capabilities for automation applications. Teradyne, Inc.’s MiR1200 Pallet Jack is a breakthrough product that runs on NVIDIA-powered AI. During Q4 2024, the company formed a strategic partnership with Infineon, Germany’s leading semiconductor manufacturer, to support its goal in the power semiconductor space, strengthening its position in the automotive and renewables market.
However, the company’s robotics business did not end up according to the expectations due to weak demand. On February 3, Baird reduced the price target on TER shares from $150 to $140, maintaining an Outperform rating on the stock. The drop in price target comes after mixed fourth-quarter 2024 results, mainly due to the weakness in the robotics segment.
Despite the robotics segment delivering lower-than-expected, Teradyne, Inc. (NASDAQ:TER) successfully diversified its customer base. The company has reduced its reliance on the mobile market after achieving a 50% market share in computing VIPs.
4. Honeywell International Inc. (NASDAQ:HON)
No. of Hedge Fund Holders: 55
Honeywell International Inc. (NASDAQ:HON) is a leading name in process and warehouse automation. The company provides automation services to a wide range of industries, including e-commerce, life science, metals and mining, petrochemicals, and oil and gas industries.
Honeywell International Inc. (NASDAQ:HON) is currently facing pressure from activist investor Elliott Management as the company has missed quarterly forecasts due to supply chain disruptions. After Elliott Management took the largest stake worth $5 billion in HON in November 2024, the investor has suggested splitting into two separate entities: Honeywell Aerospace and Honeywell Automation.
Honeywell International Inc. (NASDAQ:HON) confirmed on Thursday that its board has completed the portfolio evaluation related to the separation and plans to separate its Automation and Aerospace Technologies businesses into two distinct publicly traded companies. The company will also spin off its Advanced Materials business into a separate publicly traded company, according to the plan announced in October 2024. The separation will be tax-free to the company’s shareholders and is expected to be completed by the second half of 2026.
3. Stryker Corporation (NYSE:SYK)
No. of Hedge Fund Holders: 55
Stryker Corporation (NYSE:SYK) is a leading medical technology company that provides products and services in Medical and Surgical, Neurotechnology, Orthopedics, and Spine. The company has its robotic arm, Mako, which makes spinal and knee devices, among other medical devices. The company specializes in soft tissue fixation products and delivers AI-assisted virtual care workflows. Stryker also assists surgeons in visualizing and reviewing patients via Apple Vision Pro.
The demand for Stryker Corporation’s (NYSE:SYK) Mako robotic-assisted surgery systems continues to increase, with record installations in the U.S. and globally during Q4 2024. The company posted notable organic sales growth, surpassing 10% year-over-year for both Q4 and the full-year 2024. The company recorded a 16% year-over-year increase in adjusted EPS for Q4 and 15% earnings growth for the full year compared to 2023. The company completed seven acquisitions in 2024, strengthening its market position and adding to its strong financial performance. The acquisition of Inari Medical expands Stryker’s presence in the fast-growing peripheral vascular market.
Stryker Corporation (NYSE:SYK) continues strengthening its market position in medical automation. For FY2025, the company projects its organic sales to grow between 8% and 9% from 2024 and expects adjusted earnings between $13.45 to $13.70 per share, compared to adjusted EPS of $12.19 in 2024.
2. Intuitive Surgical, Inc. (NASDAQ:ISRG)
No. of Hedge Fund Holders: 82
Intuitive Surgical, Inc. (NASDAQ:ISRG) designs and builds cutting-edge robotic-assisted surgical systems. The company uses AI to enhance its robotic systems and assist surgeons to carry out minimally invasive surgeries with higher precision. The company has a strong competitive moat, supported by its da Vinci Surgical System.
On January 24, JPMorgan analyst Robbie Marcus raised the price target on ISRG shares from $575 to $675, keeping an Overweight rating on the shares. The analyst expects the company to continue its strong momentum with the da Vinci 5 Surgical System in 2025. The company’s improved profitability makes it a strong candidate among the few major players in the industry.
With other medical device companies, such as Abbott, ending 2024 on a flat side, Intuitive Surgical, Inc. (NASDAQ:ISRG) shares closed the year 52.6% higher. Baron Health Care Fund stated the following regarding Intuitive Surgical, Inc. (NASDAQ:ISRG) in its Q2 2024 investor letter:
“Intuitive Surgical, Inc. (NASDAQ:ISRG) manufactures the da Vinci Surgical System, a robotic surgical system used for minimally invasive procedures. The stock performed well due to excitement about the company’s new robotic surgical system, the da Vinci 5, which offers enhanced imaging, force feedback, and other improvements. We continue to believe Intuitive has durable competitive advantages and will remain the market leader in robotic surgery. We think the company has a long runway for growth as more procedures are performed with the company’s equipment.”
1. NVIDIA Corporation (NASDAQ:NVDA)
No. of Hedge Fund Holders: 193
NVIDIA Corporation (NASDAQ:NVDA) is the leading GPU manufacturer and produces high-end units widely used in AI. The chipmaker has entered the robotics segment with continuous development of its Isaac™ robotics platform. This platform supports application in research, development, and production of the next generation of Al-enabled autonomous machines and robots. Companies such as BYD Electronics, Siemens, Teradyne Robotics, and Intrinsic, are using the NVIDIA Isaac Robotics Platform for autonomous robot arms, humanoids, and mobile robots.
On January 28, Morgan Stanley analyst Joseph Moore lowered its price target on NVDA shares from $166 to $152, maintaining an Overweight rating. Moore pointed out that DeepSeek’s R1 AI model could introduce cost-reducing innovations in AI, which may impact NVIDIA. Although analysts have lowered the price target on NVDA, they are still optimistic about the company’s strong position in the semiconductor market and its dominance in the AI sector.
In the long term, NVIDIA remains a top stock and can be a good buy considering the drop in its price. The rising demand for data centers and AI will continue to push the demand for NVIDIA’s GPUs. However, the demand for NVDA’s high-end units may drop if DeepSeek’s AI model sustains its hype in the long run.
While we acknowledge the potential of NVDA to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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