By now you’ve likely heard the latest tech buzzphrase “Internet of Things” at least a time or two. And even if you’ve managed to avoid it so far, there’s a good chance you’ve taken part in the IoT trend without even realizing it.
See, Internet of Things is the term used to describe the fact that more and more devices (read: things) are being connected to the Internet (hence: Internet of Things). The stat you’ve likely heard floated around is this one: There will be 28 billion ‘things’ connected by 2026. Those things include the more obvious ones — like, say, your smartphone — along with some less obvious — like sensors on public transportation or your refrigerator.
If you ask me, that’s a pretty hard data point to wrap one’s head around … but it’s not hard to understand the sentiment behind the numbers: This is a big deal. Heck, in case you weren’t already convinced, Business Insider conveyed a very similar sentiment with this very subtle headline: The ‘Internet of Things’ Will Be The World’s Most Massive Device Market And Save Companies Billions Of Dollars.
So how can you try to cash in on this massive market and mega-trend? Here are the best ways to play the internet of things.
Wearable Makers
The most obvious way to play the Internet of Things mega-trend is to invest in the most obvious example of the “things.” From a consumer standpoint, wearable technology is the most obvious — things like smartwatches are a perfect example of something that used to be a standalone device, but that now thrives on being connected to the Internet.
And the number of companies making wearables is only increasing. The question is: Which is the best play on the Internet of Things?
Apple (AAPL), which has created quite a bit of chatter with its highly anticipated iWatch, is a prime example of a potential IoT target in this regard. Plus, Apple’s smartphones are increasingly diverse devices — wearables in themselves when you consider some of the kinds of tracking they can do. So with a play like Tim Cook’s company, you’re hitting the Internet of Things from a few angles.
Security Kings
Let’s move beyond the obvious IoT investment, though. Another thing to consider is that the Internet of Things isn’t all rainbows and unicorns. Connecting lots and lots of devices to the Internet is great … but also dangerous.
You’ve surely heard the horror stories about hacked smart fridges by now, no? Well, imagine that on an even larger scale — like say, someone hacking into some kind of sensors that regulate public transit.
There’s a silver lining in this security concern, of course — you could invest in the security companies that will swoop in to save the day. And the even better news is that it’s not like you have to pick the very best IoT security play — even someone with just a small slice of the pie can get some big returns. Just consider this quote from Anders Bylund of The Motley Fool when discussing Red Hat (RHT) as a potential IoT play:
“Red Hat won’t be the only security vendor in the Internet of Things space, or even necessarily the largest one. But in a market this huge, even a small niche can be game-changing. And I’m quite certain that Red Hat will hang on to a respectable slice of this rapidly growing market.”
Industrial Giants
While tech stocks generally come to mind first when we talk Internet of Things, the mega-trends true size is evidenced by the fact that other companies are cashing in. Take General Electric (GE), for instance — it’s generally thought of as a stodgy industrial giant, yet IoT is transforming what a watch can do as well as how that watch is manufactured (on top of countless other things — think engines, turbines and so on).
Heck, just last week, the company struck what ZDNet’s Larry Dignan called an “Internet of things alliances” with Verizon (VZ), Cisco (CSCO) and Intel (INTC). Already, he writes, General Electric monitors and analyzes 50 million data points from 10 million sensors on $1 trillion of managed assets daily. So…
“For GE, the Internet of things, which the company calls the industrial Internet, the networking of machines and industrial gear is a growth engine. GE wants to position its turbines, engines and other equipment as smart gear that are connected via its software. In many ways, GE is a software company and technology firm akin to IBM.”
The bottom line? The Internet of Things is hardly a niche play. The trend truly is mega — and if you’re looking to put some money behind it, there is no shortage of potential plays.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
