I was so impressed with Jon Markman's research on the Internet of Things presented here last week, I decided to scan the field myself. And I promptly discovered three things:
Number one: He's right on the money. All over the world, enormous amounts of human resources, brainpower, technology and capital are moving into this new Super-Internet that connects people to devices and devices to each other.
Number two: The estimates he quotes regarding how dramatically the Internet of Things can grow – bigger than the sectors associated with Google, Apple, Facebook, Priceline and Amazon combined — may actually be understated.
And number three: The Internet of Things is not a single industry or sector. Rather, it's a force that's already sweeping across nearly all technologies and industries. That includes:
Electric utilities already mass-deploying smart meters that provide detailed data on energy usage, virtually eliminating the need for on-site visits.
Auto insurers setting premiums for commercial and fleet customers through the Internet of Things. Rather than rely on broad indicators like the driver's age and gender, they're installing devices in the vehicles to track how many miles drivers have driven, where they go and how safely they drive.
Train manufacturers outfitting trains with systems that can predict and prevent accidents.
Construction and mining industries rushing to equip hard-hat workers with wearable devices that scan the environment to signal when they're in danger.
Security companies connecting video cameras, alarms, door locks, motion sensors and tracking devices all into one integrated network.
At least 14 car manufacturers, accounting for 80 percent of the worldwide auto market, deploying strategies for transforming their cars into Internet-of-Things devices.
And much more.
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Moreover, none of this is speculation. It's all starting here and now. In fact, at just one company (Verizon), last year's growth in this field was 83% for their customers in transportation and distribution, 88% in retail and hospitality, 89% in home monitoring, 120% in media, 128% in finance, and a whopping 204% in the manufacturing industry.
The key question: How to profit?
I feel the best person to provide the answer is Jon Markman himself.
For decades, Jon has forecast and reported on nearly every major technology trend, including the rise of the PC, the popularity of the iPod, the mobile expansion of the Internet, and the dominance of the cloud.
Jon was the founding managing editor of MSN Money. He helped develop the first online stock screening system. And he earned shares of two patents at Microsoft for his contributions to the development of portfolio management systems.
Here are his answers ...
How investors can get richer
as everyday objects get smarter.
by Jon Markman
Usually I'm happy if I find one or two great investments in a new sector of the economy, especially one with such rapid growth potential.
But it's rare that I see so many investing opportunities that I can construct an entire investing portfolio from just one disruptive technology! That's the situation we have now with the Internet of Things.
Moreover, the wide array of choices makes it easier for me to cherry-pick the ones offering the highest returns with the lowest risk.
That's because the applications for the Internet of Things are virtually limitless. It's because industry experts, companies, and research firms are throwing trillion-dollar market estimates around like they're chump change.
- Recently, GE estimated the Internet of Things could add an additional $10 trillion to $15 trillion to global GDP over the next two decades.
- Networking equipment giant Cisco estimates the Internet of Things could add $19 trillion to the worldwide economy by 2020.
- And that's on top of the already $1.9 trillion global market for the Internet of Things in 2013.
The estimates may vary, but one thing is abundantly clear: We are entering a decade of immense technological change. And history has shown that any technology that can disrupt the world so thoroughly can also make investors so incredibly wealthy.
Consider smart phones. It was only eight years ago that Apple launched the iPhone.
I will never forget flying into the Dallas airport in 2008 about a year later. I looked around and couldn't believe that almost everyone I saw was already using one.
But I also realized this transformation was not yet reflected in Apple's stock price. Most investors had no idea how massive the transformation really was.
If you had understood the power of the smart phone technology, you could have watched your wealth skyrocket 579.5% following the iPhone launch. Every $10,000 invested in Apple at that time is now worth $67,950 today.
Just last year alone, over 1.2 billion smartphones were sold, for a total global market of $300 billion. And that's just a drop in the bucket compared to the coming $19 trillion Internet of Things Shockwave.
If you thought Amazon was just a
bookstore, you missed out on 9,362% gains.
Today we assume that we can find, buy, and ship just about anything to anywhere over the Internet.
But we often forget that this is actually a very recent phenomenon: Back in 2001, most people still thought of Amazon.com as just a bookstore. What most investors didn't grasp was that it wasn't about books at all, or at least not only about books.
Amazon wanted to transform the way that Americans bought everything.
The problem was most investors were too terrified to buy into Jeff Bezos' vision — especially smack in the middle of the 2001 tech bear market.
But if you had understood the massive upheaval Amazon was creating in the retail market and jumped on the stock, you could have racked up a fortune-making 9,362% return.
Think about it: A modest $10,000 investment in Amazon in 2003 would be worth $946,200 today — and that's in spite of another big bear market in 2008.
This summer, Amazon officially became the biggest retailer in the world — with a market cap of over $246 billion, surpassing Wal-Mart's $230 billion.
And even at $246 billion, Amazon's success is just a fraction of the total $19 trillion potential for the Internet of Things.
If you didn't realize that most travel agents were headed the way of the dodo bird, you missed out on 19,034% gains.
Consider Priceline.com. Yes, it was the poster-child for the dot.com bust. And yes, it crashed in value in the two years after its IPO.
But despite that crash, Priceline continued to ride a massive wave of change in the travel industry.
Seriously, who even uses a travel agent anymore? You just jump on line and bargain shop for the best deals on hotels, airlines, rental cars, and more.
It may seem obvious now, but very few people saw the transformation in the travel industry coming back in 2000. Priceline did. And they not only survived, they thrived after the bust.
If you had the chutzpah and the foresight to invest in Priceline at that time, you could have banked an incredible 19,034% gain over the past fifteen years. Every $10,000 invested turned into $1.9 million.
Here's the key: The technology stocks tied to the Internet of Things are riding a major wave of innovation greater than Amazon's, Apple's and Priceline's combined.
Priceline generated a whopping $8.44 billion in revenues in 2014.
But according to Cisco, the Internet of Things will generate over two thousand times that much.
It's not about building a better mouse trap.
It's about building a better world.
So I repeat: If you missed investing in Intel, Microsoft, Apple, Priceline, Google and others in the past years, that's okay.
Because you have one more chance in your life to ride a technology shockwave from its infancy all the way to maturity.
In fact, it may be the final opportunity you have in your life to grow a family fortune, to secure a comfortable retirement and to leave a sizeable inheritance to your children and grandchildren.
The Internet of things is automation on steroids.
There are already over 12 billion smart devices interconnected with each other and the Internet right now.
I'm not just talking about iPhones and computers. I'm talking about things like traffic monitors, roadways, pacemakers, manufacturing equipment, street lights and much more.
Estimates are for 50 billion more"things" or devices to be connected by 2020. But I think that estimate is low.
Why so much, so fast?
Here's why: Right now, there are three major tipping points catapulting the Internet of Things to a global scale not seen since the dawn of the industrial revolution.
Tipping Point #1
Rapidly Declining Costs
For any new technological revolution to succeed, production costs must drop, allowing mass commercialization to emerge. This is true for the Internet of Things as well.
Fortunately, sensor prices have already dropped more than half from $1.30 to 60 cents. And I expect to see continued drops — by half and half again — in the coming years. In fact, I wouldn't be surprised to see sensors ultimately fall to less than a penny each, propelling a massive surge in usage.
Meanwhile, we've already seen processing costs decline nearly 60 times over the past decade. And we've seen far cheaper bandwidth and networking costs – down by a factor of nearly 40 times in just 10 years.
Tipping Point #2
Virtually Unlimited Wi-Fi
Stop by your local coffee shop. Chances are it offers wireless Internet access.
You think nothing of it. It's the way things are, right?
Now? Yes. Just a few years ago? No way! It used to cost you a pretty penny to hook up to the Internet.
Then came Starbucks. In 2010, they began offering free unlimited Wi-Fi to customers. Other merchants quickly followed suit. Airports soon joined the bandwagon. Now, even entire cities offer free Wi-Fi.
Tipping Point #3
Advanced Network Connections
Today, network connections are faster, smarter and more automatic.
They connect nearly everyone and everything to the cloud.
And most important, the cloud is everywhere.
So now, mankind can expand the Internet of Things into nearly every nook and cranny of our lives.
Now, thanks to these three powerful triggers, you're going to see an explosion of new applications for smart cars, smart homes, smart businesses and smart cities.
And that means an explosion of new profit opportunities for investors in the know.
The companies meeting this need are
seeing enormous growth right now.
For example ...
One company is south of D.C. but has a major nationwide impact in keeping mobile traffic running smoothly. Since the start of 2015, shares of this Internet-of-Things company has more than doubled — up 118%.
This company controls more wireless spectrum than any other independent company, including a near-monopoly on the 5g cellular spectrum that is expected to become standard in the early 2020s.
When you consider the expansion of the Internet of Things and its vast hunger for space in the 5g world, this company is sitting on a cash bonanza. With a $480 million market cap at present, it could be worth 5 times more to your portfolio in the next seven years — either on its own or as a buyout candidate.
Another company headquartered in Luxembourg but with worldwide operations is taking a lead in the design of devices you can wear plus other Internet of Things devices. Think of this company as the outsource resource for the hundreds of major industrial manufacturers who want to create connectable products but don't have the design and software expertise.
Just like tech companies who outsource manufacturing to China, thousands of companies (and governments) outsource their design of Internet-of-Things software and hardware to companies like this one. Its shares are up 230% since going public in 2014, and are up another 120% this year alone.
Yet it is still only a $1.1 billion company, so it has the potential to advance another 5 to 10 times over the next 10 years. Similar global software and design companies based in India sport $30 billion caps, so there is definitely room to advance.
A chip designer company has created a free operating system to make it simple for other companies to develop Internet-connected devices. They wanted to make it easy for their platform to be used in all kinds of soon-to-be connected devices such as appliances, streetlights and wearable sensors that measure heart rates, for example.
Plus, they want to help create devices with a battery that lasts years instead of hours. In the past seven years its shares are up 900%. But that could be just the beginning.
These are just three tech companies that are working on the breakthrough applications, software and platforms that will help connect nearly every common object to the Internet.
In addition, I've honed in on four more companies leading the charge in the Internet of Things.
I call them my "Four Internet Shockwave Stocks" and I give you a detailed rundown on each in a special report I've just posted on the Web. Click here to read on ...
The investment strategy and opinions expressed in this article are those of the author's and do not necessarily reflect those of any other editor at Weiss Research or the company as a whole.