Within the wide world of technology, one trend in particular that I’ve been keeping a close eye on is the Internet of Things (IoT).
Each day the world becomes more connected. At first it was our cell phones, which allowed us to get in contact with someone on the other side of the world within seconds. But now it’s expanded to include so much more. We can close our garage door from our phone if we realize we forgot when we’re already out and about. We can turn off lights and program our thermostats. Our refrigerators can tell us when we’re low on milk.
The Internet of Things has even found its way into the workplace – nearly every industry has the ability to use IoT to improve production and reduce costs. And according to Gartner, over half of all new business processes will contain devices connected to the internet.
The worldwide market for IoT platforms reached $298 million in 2015. With an estimated compound annual growth rate (CAGR) of 33%, IoT platforms are one of the fastest-growing segments in the market. In fact, they’re forecasted to become a $1.6 billion opportunity by 2021.
Even municipalities that haven’t been big spenders over the last few years are making a big push into the Internet of Things. They’re expected to spend $133 billion by 2019, up from only $36 billion in 2014. Just think how great it would be if sensors could tell stoplights to reroute cars when there is traffic! I may even start driving more instead of walking and biking most places.
In fact, the biggest industry within the IoT space has to do with automobiles. We’re already seeing cars with online capabilities, and by 2020 there are expected to be 250 million vehicles on the road that are connected to the internet. Right now it’s all about the car being able to collect and use data and share it with others, but the eventual endgame is autonomous vehicles – that’s right, cars that drive themselves.
One of my favorite plays in this niche sector has to do with sensors that are used throughout the IoT process. Sensata Technologies (ST) is a Netherlands-based company that is the world leader in sensors and controls. Fundamentally, the company is undervalued versus its peers and the overall market, trading with a forward P/E ratio of 11.8 and PEG ratio of 1.13. Technically, the stock has been choppy and underperforming the market, making now a time to buy before the next leg higher.
It sounds like I’m talking about a futuristic world, but this is what the Technology Revolution has the power to do sooner rather than later. There’s incredible growth potential here, and plenty more ways to play it. Keep an eye out for my next article. I’m not done yet!
