I’ve been cautious on Japanese automation vendors, given uncertain strength in the Chinese demand rebound and weakness elsewhere, but moreso because of the market’s rush to bid up the stocks in expectation of a robust and sustained recovery. Since my last article on Fanuc (OTCPK:FANUY), the shares are up a bit, but they’ve lagged the broader industrial space, and there are still a lot of unsettling trends in end-user demand.
I’m not worried about the eventual recovery – I believe the entire sector is bottoming, and I believe the trend towards factory automation around the world is unstoppable. Where it concerns Fanuc, though, I remain concerned that the company has let rivals in China and Korea close the gap on their existing offerings without themselves raising the bar and introducing compelling new products. While I do still see tailwinds from lower capex and operating leverage on that recovery, and the shares are not pricey on a ROE-driven valuation basis, the recent muted performance seems fair.
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