First Amazon, Now Walgreens Goes "All-In" on Automation

Lou Basenese

Thursday, March 31, 2022

As I’ve been telling you for the better part of a year, like it or not, it’s time to get comfortable with a new normal.

Specifically, that our future will be autonomous.

Autonomous cars, autonomous factory workers, autonomous package-deliveries… and now, autonomous prescription-drug fulfillment.

In case you missed the news, the $39 billion Walgreens Boots Alliance, Inc. (WBA) plans to open robot-powered prescription fulfillment centers across the U.S.

Here’s the significance of the news… how it underscores the urgency of this trillion-dollar-plus trend I’ve been pounding the table on for months… and of course, the smartest and safest way to invest in this trend.

Rise of the Robots

Ever since Amazon started replacing humans with robots in fulfillment centers, I predicted that automation would keep moving closer to home.

And it doesn’t get any closer and more personal than making sure we receive and take our meds, right?

Well, we’re about to get one big step closer to Amazon’s at-home robot Astro scootering into our bedroom to make sure we don’t miss a dose.

I say that because Walgreens isn’t just piloting robot pharmacists… it’s rolling them out across 22 micro-fulfillment centers.

For some perspective, that’s roughly the same footprint of full-sized fulfillment centers that the company presently operates. So we’re talking about a scale that’s capable of servicing literally thousands of the company’s retail stores, if not all of them.

And it’s easy to see why the company is choosing robot pickers over human ones.

Each robot will be able to fill 300 prescriptions an hour. That’s the same number it takes a human pharmacist to fill in a day.

So we’re talking about boosting productivity by 24x. After all, robots don’t need sleep, breaks, small talk, or anything except electricity. So they can truly work 24/7/365.

All told, Walgreens expects this robot army to handle up to half its fulfillment volume inside of three years.

If you ask me, this represents a huge no-brainer investment for Walgreens, because it instantly boosts productivity and it cuts costs.

The key thing to understand here, though, is that this development represents yet another prime example of how quickly and significantly robots will overtake life’s most menial tasks.

Or more simply, it demonstrates that this trend is rapidly accelerating, and still nowhere close to peaking, which means we’d be foolish not to invest in it.

Remember the Alamo Data!

As I shared earlier in the month, the number of robots sold in North America rose 28% in 2021, according to the latest data from the Association for Advancing Automation (A3).

This isn’t simply a byproduct of Covid. To the contrary, as the pandemic subsided, robot sales kept accelerating. In fact, sales in the fourth quarter hit a record high.

I suspect that, once the data is released for the current quarter, we’ll be in record territory again.

In other words, there are way more robots coming. And not just at Walgreens!

Now, don’t let that statement scare you about a Robot Apocalypse…

Don’t fall into the trap of debating how many human jobs are going to be lost…

And certainly don’t wait for additional confirmation that we’re witnessing a runaway growth trend!

The market dynamics are such that machines can now complete menial tasks more efficiently, safely, and affordably than humans. And that means the robot takeover is happening, no matter how little (or much) you like it or agree with it.

So the only choice we truly have is to embrace new reality — and then invest in it!

Three Smart Ways to Play a $50+ Billion Opportunity

Sure, you could buy Amazon (AMZN) to get some token exposure to this trend. But here are three smarter options that I recommend:

  • Pure-play companies that generate the majority of their revenue from the sale of robots that perform specific tasks. Generally, these companies specialize in the “brains” of a robot — what it does, how it reacts to situations, and how it interacts with humans. The investment thesis for pure-play robot companies is the easiest to understand… but the hardest to get right. Some companies will design robots that nobody wants; others will simply fail at executing their business plans. But those who succeed tend to do so on a big scale. Examples of such companies include iRobot (IRBT), Intuitive Surgical, Inc. (ISRG), ReWalk Robotics (RWLK), and AeroVironment (AVAV).
  • Component firms that make the technologies (i.e., chips) that are the “senses” of robots, or the tools that robots use to accomplish tasks. Most often, robotic components are an extension of a company’s existing business line. Examples of such companies include Ambarella, Inc. (AMBA), Trimble Navigation (TRMB), and Microchip Technology (MCHP).

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Ahead of the tape,
Lou Basenese
Lou Basenese

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