Automation is what companies buy when they are tired of paying more for the same output.
Even if growth slows, the urge to reduce downtime, labor intensity, and waste does not disappear.
In 2026, the story is less about flashy robots doing backflips and more about boring wins: fewer breakdowns, smoother production, and software that makes the whole operation less chaotic.
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Why To Watch This Theme
Theme: Productivity Capex, Do More With Less
Automation is one of the cleanest ways to turn uncertainty into control. If you cannot control demand, you at least try to control costs and reliability.
Here is the chain reaction:
Labor stays tight or expensive → productivity becomes priority
Productivity priority → automation upgrades get funded
Upgrades get funded → software and services attach rates rise
Services rise → recurring revenue improves visibility
Visibility improves → the market pays up for steadier margins
This theme matters because automation spending is often defensive. Companies do not always upgrade because they are optimistic.
They upgrade because downtime is costly, quality issues are costly, and the number of people who want to work the night shift is not exactly overflowing.
The other advantage is mix. Many leaders now have a stronger software and services component. That shifts the story from one-time equipment sales to recurring value.
We like that. It is the difference between selling a treadmill and selling the monthly membership that guilts you into using it.
What we want to see to stay bullish
Bookings stabilizing and backlog converting into revenue
Software and services mix expanding
Customers prioritizing modernization and reliability projects
Margin discipline despite uneven demand
Deal cycles not stretching into infinity
What can ruin the party
If manufacturing demand deteriorates, projects get delayed, and customers pause large capital programs, automation stocks can get hit.
Competitive pricing can also pick up if vendors start fighting for share. Finally, execution matters. Complex projects do not forgive sloppy delivery.
Rockwell Automation (ROK)
What it does: Factory automation hardware, software, and controls that help manufacturers run production lines more efficiently.
Why it fits: Rockwell is a core name in discrete manufacturing automation. If companies keep upgrading plants to improve efficiency, it stays in the conversation.
The upside comes when orders stabilize and software and services continue gaining weight.
What could go right:
Bookings improve as customers resume modernization projects
Software and services mix lifts margins and visibility
Better backlog conversion supports steadier results
Productivity theme stays intact even if growth is uneven
What to watch next: Order trends, backlog conversion, and any signals that customers are moving from wait-and-see to approve-and-install.
Risk: Cyclicality. If manufacturing slows further, orders can get pushed out.
Emerson (EMR)
What it does: Industrial automation and process control, helping run complex systems in energy, chemicals, and industrial environments.
Why it fits: Process automation tends to be durable. These customers care about reliability and uptime, and they invest to reduce risk and improve efficiency.
Emerson can benefit when process industries keep funding modernization.
What could go right:
Strong backlog provides multi-quarter visibility
Services and software components support margin stability
Customers prioritize reliability upgrades even in choppy demand
Execution stays consistent and boring, in a good way
What to watch next: Backlog conversion, margin trajectory, and demand commentary in process end markets.
Risk: Large projects can be lumpy. Timing shifts can move quarters around.
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Schneider Electric (SBGSY)
What it does: Energy management and automation solutions across industrial and infrastructure settings.
Why it fits: Schneider sits at the intersection of efficiency and reliability. If companies invest in smart factories and more resilient systems, Schneider can benefit from broad exposure and strong product depth.
What could go right:
Continued demand for efficiency upgrades and digital automation
Strong execution supports steady margin progress
Broad end-market exposure reduces single-sector risk
Mix improves as software and digitization expand
What to watch next: Organic growth trends, margin performance, and demand across industrial and infrastructure customers.
Risk: Global exposure means more currency and macro noise. The fundamentals can be fine while the tape is annoying.
ABB (ABB)
What it does: Automation, electrification, and robotics solutions used across industries to improve productivity and reliability.
Why it fits: ABB offers both the efficiency story and the automation hardware angle. If capex shifts toward productivity and modernization, ABB can participate across multiple categories.
What could go right:
Robotics and automation demand stabilizes and improves
Better mix supports margins
Execution stays strong as customers upgrade systems
Broad exposure benefits from multiple modernization waves
What to watch next: Order growth trends, margin stability, and any signals of improving demand in automation and robotics.
Risk: Robotics can be more cyclical. If demand stays soft, the market can focus on the weaker segments.
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Honeywell (HON)
What it does: Industrial technology exposure across automation, controls, and productivity-related solutions, with diversified segments.
Why it fits: Honeywell is a steadier way to play automation themes. It has productivity exposure without being a pure single-industry bet, which can be useful when the macro tape is messy.
What could go right:
Stable segment performance supports resilient earnings
Automation and controls demand stays durable
Execution and cost discipline drive margin stability
Portfolio breadth helps offset pockets of weakness
What to watch next: Segment-level growth, margin trends, and management tone around industrial demand.
Risk: Diversification can dilute the pure automation torque. It may move less on a sharp rebound.
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Automation is not a luxury purchase anymore. It is the new cost cutting.
When companies feel uncertain, they invest in anything that makes operations smoother, leaner, and less dependent on perfect labor conditions.
Watch order stabilization, backlog conversion, and the software and services mix.
If those stay healthy, these five names can keep benefitting in 2026, even if manufacturing growth is more speed limit than drag race.
If projects get delayed, we stay selective and focus on the operators with the best visibility and the least need for heroic demand assumptions.
Best Regards,
— Adam Garcia
Elite Trade Club
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