The Internet of Things is unavoidable. In fact, the IoT is already here — and it’s time for investors to rethink their portfolio with Internet of Things stocks, or get left behind.
At the most basic level, the IoT is a technological ecosystem. We call these machines “smart” or “connected” devices because through their connectivity they transfer useful data to guide our everyday lives. But investors don’t have to understand all of the high-tech applications to make money on Internet of Things stocks.
Just consider IoT is the backbone behind advancements that companies like Amazon.com, Inc. (NASDAQ:AMZN) that monitors your behavior as a shopper and Fitbit Inc (NYSE:FIT) which monitors your health. Rather than just providing a product or service, Internet of Things specialists collect and analyze our life and behaviors.
The Internet of Things is an astronomical business. Billions of devices from cars to watches are already connected, and that figure will only increase. In less than three years time, the IoT market could hit $1.7 trillion in value. To put that into perspective, the forecasted value is greater than Canada’s GDP.
But not every name under the Internet of Things umbrella will do well. Like anything in life, you will have winners, and you will most certainly have losers.
So what Internet of Things stocks should you buy… and which ones should you avoid?
Click here to find out my top IoT stock…
Cisco Systems
Cisco Systems, Inc. (NASDAQ:CSCO) is not having what you would call a great year. Despite Cisco being one of the most recognized names in the world, CSCO stock is up a pedestrian 8% year-to-date. Although it’s not terrible by any means, Cisco lags boring benchmark indices like the SPDR S&P 500 ETF Trust (NYSEARCA:SPY). A major headwind is its declining sales of traditional network devices, such as routers and switches.
Nevertheless, as an IoT play, I think CSCO stock represents great long-term value. As its legacy business continued to dwindle, Cisco made critical inroads into the Internet of Things. A recent example is their acquisition of Jasper Technologies for $1.4 billion in 2016. With Jasper, Cisco is able to help its “whale” clients connect their customers to various smart devices.
Furthermore, Cisco is busy developing high-speed network connectivity for the automotive industry. This market presents lucrative partnership opportunities, as major organizations like Nvidia Corporation (NASDAQ:NVDA) are working non-stop to make automated cars a reality. With Cisco’s expertise in high-speed networks, CSCO stock could soar higher yet!
My next Internet of Things stock is….
Texas Instruments
Many readers may have bad memories of Texas Instruments Incorporated (NASDAQ:TXN). One of their most visible businesses is the manufacturing of graphing calculators, a key requirement for passing calculus class.
Of course, Texas Instruments is so much more than just a study aid: they’re a powerful but underappreciated IoT player. This dynamic makes TXN stock worth a second look.
Primarily, Texas Instruments partners with other tech firms to improve the Internet of Things’ functionality and integration. For instance, TXN produced powerful semiconductors to open up modulation capacity for the Amazon Web Service (AWS). Additionally, the tech company teamed up with Microsoft Corporation (NASDAQ:MSFT) — which is an IoT firm in its own right — to improve its Azure platform.
What really gets people excited about Texas Instruments is that its overall business structure is primed for success. So far this year, TXN stock is up 19%. Moreover, shares have been a reliable profit-maker over the trailing five-year period. Finally, don’t overlook its financials: Texas Instruments leads the majority of global semiconductor companies in profitability margins and return on equity.
While it doesn’t generate sexy headlines, TXN stock is a highly-valued IoT investment.
Keep reading for more IoT stocks to buy and sell…
General Electric
Unfortunately, no sector is strong enough to bring all participants onboard to profitability. Organizations have to thrive on their own merit, which is why I’m avoiding jack-of-all-trades General Electric Company (NYSE:GE). It’s not so much that General Electric is a bad company; quite the opposite, it’s an American icon. But as an IoT investment opportunity, GE stock doesn’t pay the bills…it creates them.
I understand the fact that General Electric is currently enjoying positive momentum. Since September 11, GE stock jumped nearly 4%. But the day-to-day trading doesn’t take away any ugliness from its longer-term charts. As I recently argued, GE is spiraling out of control. The leadership change hasn’t panned out well. Both business divestures and investments demonstrate questionable value.
Analysts sometimes hawk GE stock as an Internet of Things investment. Nothing could be further from the truth. Instead, General Electric is a massive, convoluted behemoth, of which IoT happens to be one of its billions of functions. GE is no more an Internet of Things company than I am Santa Claus simply because I occasionally give gifts.
Click here for the next page ….
International Business Machines
On the surface, International Business Machines Corp. (NYSE:IBM) appears to be the most perfect IoT firm. Many of you have seen IBM commercials featuring “Watson,” the company’s scary-good artificial intelligence platform. In particular, their elevator commercial, in which Watson predicts when an elevator will need repair service based on multiple data points, reflects the heart of the Internet of Things revolution.
Sadly, IBM stock doesn’t carry the same enthusiasm. On a YTD basis, shares are down nearly 11%. Now, I get the fact that the markets ebb-and-flow. However, last year was a pivotal moment for IBM stock because it bucked a years-long decline. Naturally, this year was the time to prove that 2016 was no fluke. And for the first two months, IBM looked like a real winner. But now, the price action looks awfully unconvincing.
In my opinion, IBM stock is very similar to GE. Both are major firms that lack direction after dominating good chunks of the “analog” century. But now that we’re firmly in the 21st century, IBM looks like a tired, old athlete reminiscing the glory days. Sure, Watson is great, but it’s just one arm amid their tentacles.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
