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If you're curious about internet of things stocks, you've probably heard of Nest thermostat. It was one of the first and most prominent applications of the internet of things (IOT).
Rather than using timers or people to monitor temperatures, the integration of artificial intelligence at a corporate level to control and help the programs at an individual level allows consumers to automate their thermostat. The constant monitoring and analysis of the data from the thermostat allow a remote program to optimize heating and cooling, reducing costs for consumers.
Not only does this technology seem like that of the faraway future - people want to invest in IoT stocks. Here's how to invest in the Internet of Things stocks today.
Main Takeaways: How to Start Investing in the IoT
- First, understand the IoT global market and its major players.
- Know your supply chain you want exposure to and budget you'd like to stick to.
- Last, buy an IoT stock from a reputable online broker.
What is the IOT?
The internet of things simply refers to the interconnection of devices across a wide array of sectors from retail to commercial to governmental.
An easy way to think about this is to imagine everything in your life connected to the internet, from washing machines to windows, from gardens to your personal health. The technology essentially takes everything around us and embeds the ability for us to see, analyze, and potentially use that item.
Why the IOT matters for companies
In a world of artificial intelligence and complex programming, data has become almost as valuable as precious metal. Gathering large amounts of data from a wide variety of sources allows companies to gain better intelligence on everything from consumers to their supply chains.
Through the increased data analysis and control offered by the IOT, companies can reduce costs across their networks, improve efficiencies, discover more about their customers and develop new ideas.
The total market for the IOT is actually pretty immense. It’s expected that from 2016 to 2020, the IOT market will grow from $157 billion to $457 billion, a compounded annual rate of 28.6%. Check out more information on the IOT.
The major players in IOT
While the IOT encompasses a wide range of companies and industries, they typically fall into three categories:
Suppliers provide components that connect wireless devices.
- Skyworks (SWKS): Mobile tech company that delivers front-end modules, radio frequency chips and power amplifiers.
- Sierra Wireless (SWIR): One of the world’s largest suppliers of embedded modules and gateways which allow for machine-to-machine learning.
- Intel (INTC): World’s largest microprocessor supplier for everything from mobile to industrial applications.
Enablement provides the software that enables the connections.
- Amazon (AMZN): Amazon’s web services provide the processing platform to connect the IOT devices with their specialized AWS IOT platform.
- AT&T (T): More than just the connections between wireless devices, AT&T offers a suite of software solutions to manage a businesses IOT.
- Google (GOOGL): While Google owns hardware like the Nest thermostats and cameras, they also provide enablement platforms for people to develop and run their IOT devices.
Manufacturers and end users create devices that connect to and can be managed from the cloud.
- GE (GE): An industrial giant pioneering the way of the industrial IOT, with connected devices from locomotives to healthcare equipment
- Apple (APPL): Providing applications like the Healthkit and HomeKit that integrate iOS, tvOS, and watchOS, Apple aggregates data for users, allowing them to make decisions about things like their health and home.
How to invest in internet of things stocks
Given the wide array of companies you can choose from for investing in the IOT, we recommend you take the following steps:
Decide which part of the supply chain you want exposure to. As we previously discussed, investors can choose more pure plays in the IOT such as Skyworks or Sierra Wireless that are suppliers, those that provide the software such as Amazon, or the end users such as Apple or Fitbit.
Regardless of the choice, consider how exposed that company is to the IOT, as well as how broad its customer base is.
Choose how much you want to invest. Once you’ve decided on the stock you want to purchase, you’ll need to decide how much you want to invest. Companies that are pure plays in the IOT business carry more industry-specific risk than those that make money from a broader assortment of sectors.
Find an appropriate broker for the transaction. As with the purchase of any stock, you’ll need to get set up with a broker that supports the purchase of your chosen company. If you are looking to invest in companies outside the U.S., you’ll need to find a broker who can purchase shares on other exchanges.
Check out some of our favorite online brokers below.
Purchase the company stock. When you’ve made your selections you will enter an order with your broker online, over the phone, or in person. Transactions that purchase stock on exchanges in countries outside the U.S. generally cannot be automated through regular trading platforms.
As the IOT describes a broad array of activities, it’s important to understand the risk associated with the activities of a company in relation to the IOT. For example, 40% of Skyworks revenue is tied to Apple. Consequently, if you purchased shares in both Apple and Skyworks you might be assuming more risk on that specific supply chain than you might have intended.
Additionally, while some companies like Intel compete heavily in the IOT, they aren’t beholden to it in the way that smaller players like Skyworks or Sierra Wireless might be. However, the tradeoff is the relative safety provided by their diverse revenue streams means they aren’t as likely to see their company grow as quickly as smaller competitors.
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