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Investing in the 'Internet of Things'


Smart products will increase exponentially over five years. Can you capitalize on the trend now?

Emily Adler at Business Insider reports that the "Internet of Things" (IoT) will will grow 374% in the next four years to over 9 billion (with a "B") units implemented per year. That number is greater than all other smart devices (such as phones, tablets, wearables, and PCs) put together.

This revolution won't be televised, though it may be built into your TV (and refrigerator, and power grid). The economic effects may also be covert, like a riptide surprising beach bathers. On one hand, the efficiencies created by the smart web might bring down the cost of commodities. For example, smart electricity grids that make household, office, and industrial use more efficient will also bring down energy prices. And smart refrigerators that know just how much juice you consume will make sure you don't buy food that goes to waste. The effects will be widespread, and they will create losers as well as winners.

The future of IoT is diverse. Many companies that cover a variety of sectors are developing products for this breakout technological development.

Home Products

The most high-profile IoT products are for the home, and the Nest Learning Thermostat and the Nest Protect Smoke Detector by Nest Labs are the most visible of these products. Google (NASDAQ:GOOG) recently bought the company for $3.2 billion, adding to Google's already heavy investment in smart and IoT technology.

Philips (NYSE:PHG), an international manufacturer of consumer lifestyle solutions, partnered with Weight Watchers (NYSE:WTW) to make ActiveLink, a biometric device that collects data about the user's activity levels and provides that data in real time to support the user's weight-loss goals. Its Smart Air Purifier provides families with a real-time overview and control of indoor air quality via smartphone; its AVENT Smart Baby Monitor connects to and is operated by a smartphone, ensuring parents are never disconnected from their baby.

Office and Industrial Applications

Cisco Systems (NASDAQ:CSCO) founded its reputation by building the Internet's hardware infrastructure. As the IoT infiltrates every niche of the production process, Cisco will connect formerly unconnected devices with an open-standard, integrated architecture via the cloud. Its mission is to help businesses create and analyze formerly unrecognized data points that can boost productivity and operational efficiency.

LogMeIn (NASDAQ:LOGM) seeks to connect people in business like Cisco connects devices. Its cloud services are used to connect more Internet-enabled devices, such as smartphones, tablets, PCs, Macs, and sensor-enabled devices. LogMeIn's remote-access and collaboration services allow nontechnical users to access and control remote computers, run applications across different platforms and devices, and save data in the cloud.

Smart Power Grids

The most exciting development in the IoT is the possibility of a "smart grid" that will optimize power use, saving consumers money and possibly also saving the planet. Companies such as ABB Limited (NYSE:ABB), Siemens AG (NYSE:SI), and General Electric (NYSE:GE) have built out smart grid systems. But smaller players in the sector, such as Silver Spring Networks (NYSE:SSNI) -- which develops wireless mesh networks and transmits energy consumption data between meters, consumers and utilities in real time -- are positioned to bridge the gap between producers and consumers.

International Business Machines (NYSE:IBM), once a digital dinosaur, is reinventing itself in this space with grid-improving software and services. Not only is IBM involved in power generation optimization and intelligent plant life-cycle management for energy and utilities, it also produces cybersecurity solutions for utilities to protect the grid from attack.

Click for interactive version

Do you think the IoT will drive these stocks upward? Use this list as a starting point for your own analysis.

1. ABB Ltd.: Provides power and automation technologies for utility and industrial customers worldwide. Market cap at $58.6 billion, most recent closing price at $25.32.

2. Cisco Systems, Inc.: Designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology industry worldwide. Market cap at $115.04 billion, most recent closing price at $21.69.

3. General Electric Company: Operates as a technology, service, and finance company worldwide. Market cap at $263.97 billion, most recent closing price at $25.95.

4. Google Inc.: Google is the world's most popular search engine. Market cap at $406.76 billion, most recent closing price at $1213.0.
5. International Business Machines Corp.: Provides information technology (IT) products and services worldwide. Market cap at $201.3 billion, most recent closing price at $187.53.
6. Koninklijke Philips Electronics NV: Engages in health-care, consumer lifestyle, and lighting product businesses worldwide. Market cap at $32.04 billion, most recent closing price at $34.74.
7. LogMeIn, Inc.: Provides on-demand, remote-connectivity solutions to small and medium-sized businesses, information technology (IT) service providers, and consumers in the United States and internationally. Market cap at $1.1 billion, most recent closing price at $44.74.
8. Siemens AG: Operates in the industry, energy, and health-care sectors worldwide. Market cap at $109.1 billion, most recent closing price at $127.80.

9. Silver Spring Networks, Inc.: Provides networking platform and solutions that enable utilities to transform the power grid infrastructure into the smart grid. Market cap at $803.78 million, most recent closing price at $16.99.

Editor's note: This story by Will Kenton originally appeared on Kapitall.

Kapitall's lists break complex concepts down to their basics, offering education and investing ideas to novices that double as a refresher course for more seasoned investors. Inspired by video game design, Kapitall's revolutionary brokerage platform combines a graphical user interface with tools that make it easy to build portfolios, share ideas and execute trades.

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