Internet of Things: How you can benefit from the technology of the future
The “Internet of Things”, in German the Internet of Things, is still not a concept for many investors. But it’s time to deal with it. Because a trend is developing that is likely to take on impressive dimensions in the coming years. So it can be worthwhile to benefit from this at an early stage. Let’s take a closer look at that.
The “Internet of Things” – fascinating perspectives, fascinating stocks
When the Internet started to conquer the world, it triggered huge hype on the stock exchanges. That sometimes led to a burst bubble, but the trend was irreversible. And stocks like Alphabet or amazon.com make it clear that the trend is continuing. This was followed by the fascinating development of mobile telephony up to increasingly powerful smartphones. Did investors recognize these trends from the start? Many do not, on the contrary:
When the internet took its first steps into the household sector, many investors were skeptical, keeping their hands off stocks that had to do with it. And when Apple launched the first smartphone ten years ago, many shook their heads: Nobody needs anything like that, it said. And today? Today, in the retrospective, one realizes that one would have been well advised to deal with these innovations at an early stage and to be more open to them. For the IoT, the “Internet of Things”, it would still be early enough. So what is this about?
Internet of Things: a definition
The Internet of Things (IoT) refers to the intelligent integration of “things”, be they elements of the environment, objects or devices, in an Internet-based network for direct interaction with people or for the interaction of different things with one another to fulfill pre-defined requirements Conditions.
Trying to define the IoT looks bumpy, as you can see, but it is not enough to simply call the IoT a system in which people and things interact with each other. That would already be the case with any technical device that does what it is asked to do. Casually: If you set an alarm clock to seven o’clock and it gives the required wake-up signal exactly then, that would already be an interaction between man and machine. No, IoT means a level in which things integrated in the network support people without being asked, as quasi “invisible helpers”. The best way to explain this is with a few examples:
How the IoT can change our lives
A printer that constantly checks whether the printer cartridges are still sufficiently full, reports to the user and asks to reorder the necessary cartridges, is normal nowadays. It is a simple link between a person and a “thing”. But as soon as the printer is able to correct the imbalance itself by ordering the necessary cartridges without human intervention and, because it is networked with an entire network of “things”, also arranging the necessary payment, that is something completely different. And that’s the way the Internet of Things wants to go. Another example:
There are sensors built into clothing that measure where and how often you move, how body temperature, blood pressure and heartbeat change etc. This data is forwarded to a smartphone app, for example, which then gives the user the opportunity to evaluate the information . This is also a form of the Internet of Things. The next steps would be, for example, sensors that suggest cheaper walking routes for the user when jogging. Or sensors that are able to adjust their outer skin to changing weather conditions. That sounds completely utopian. But you are already on the way there.
And the possibilities and goals of the IoT are not limited to convenience. Sensors in baby cots measure the child’s breathing and warn parents if irregularities occur. In the event of a fall, sensors in carpets can generate an emergency signal that, in conjunction with a mobile phone, immediately informs the emergency service – which can save the lives of older people.
The best Internet of Things stocks
How could this development benefit? A tried and tested way: You put together a small portfolio of stocks that participate in this trend in different ways. This offers a suitable spread of possible risks and a meaningful coverage of the broad range of developments that together make up the IoT.
Of course, the big technology companies are also trying not to miss the train here. Large corporations like IBM, Alphabet or Siemens are quite active there. But there the IoT is understandably only a fraction of the activities. Those who want to “shop” more specifically in the IoT are more likely to look for smaller companies that have dedicated themselves to this topic. With some like the Chinese IoT company SenseTime, investors are still hopefully waiting for them to go public. But not a few are already listed on the market and thus offer the opportunity to “buy” in the area of IoT. Here are four interesting stocks that are involved:
Skyworks Solutions: The chip specialists
The Massachusetts-based company Skyworks Solutions (ISIN: US83088M1027 – symbol: SWKS – currency: USD) is a specialist for “special requirements” in the semiconductor sector, the wording “Solutions”, “Solutions” is quite right here. Skyworks regularly launches new solutions that are specifically geared towards the IoT. The focus is on elements that optimize the interaction between wireless connections and networks. Companies who romp in the IoT should regularly come across the Skyworks solutions, especially since they say they are working effectively on optimizing the signal range of individual sensors with minimal energy consumption at the same time, an important parameter to make the IoT effective and profitable.
Like all stocks of companies that deal with future technologies, Skyworks Solutions, which is listed on the Nasdaq, is a stock that is quite volatile. We are currently seeing an exciting constellation in the form of a possible large double depth. Closing prices well above $ 95 would clear the way up from a purely technical point of view. However, one should also proceed with caution in the case of such a technical buy signal. Chip manufacturers, whether active in the IoT area or not, are very cyclical and their stocks are therefore always volatile.
Software AG: The platform suppliers
Darmstadt Software AG (ISIN: DE000A2GS401 – symbol: SOW – currency: EUR) is one of the major European software houses. With the takeover of the startup company Cumulocity in 2017, Software AG opened an important door for companies and end users who want to use the IoT. With Cumulocity IoT, Software AG offers a cloud-based platform with which devices can be connected to one another in a clear manner.
In terms of business platforms, Software AG is an all-rounder that covers many areas of application. This step into the “Internet of Things” has created another, immensely promising area. The current, comprehensive correction of the share can lead to an interesting entry-level basis for investors, especially since the slight decline in earnings per share expected by the analysts for 2019 would be the first after years of constant profit increases and the correction could therefore be a little overdone. But here too, the high fluctuation intensity of these stocks should be taken into account and it would therefore be advisable not to take the falling knife but to wait until, for example
PTC: The software company
The US company PTC (ISIN: US69370C1009 – symbol: PTC – currency: USD) is a software company that has consistently focused on the area of IoT and from IT specialist Gartner to Software AG to the leading visionaries in the area of “IIoT”, the “Industrial Internet of Things”, is expected. PTC’s “ThingWorx” platform is a platform that is specifically designed for solutions in this area.
At the end of July in particular, PTC presented a quarterly balance sheet that was good per se and exceeded the analysts’ expectations in terms of sales and profits. The fact that the stock subsequently came under considerable pressure seems exaggerated. But such stocks are sometimes priced in with immense expectations, so this drop in price may be an opportunity, but it’s unpredictable whether the price won’t get any cheaper. Therefore, you should always wait for bullish signals of the price and not reach into such a currently falling knife.
Splunk: The data hub
The Californian company SPLUNK (ISIN: US8486371045 – symbol: SPLK – currency: USD) operates a tool with which the most diverse data of technical devices can be collected and structured. This makes them accessible and evaluable for a wide variety of users. Originally, the main area of application was troubleshooting and analysis in the IT area. But the capabilities of the SPLUNK tool are ideal for the development of IoT structures, since it offers the possibility that this data can also be appropriately structured and implemented by people or other machines and devices outside of the pure IT area, so that Interactions between different systems based on mutual data evaluation are possible.
While sales have grown steadily and rapidly since the IPO in 2012 (from $ 121 million in 2011/2012 to $ 1.8 billion in 2018/2019), SPLUNK only reached the breakeven point in the fiscal year ended January 2019. For this, SPLUNK appears expensive from the course. But the investors are betting on the great opportunities that the company has in the context of this trend towards the “Internet of Things”. And after all, it was possible to clearly exceed analysts’ expectations in the first quarter of the new 2019/2020 financial year. Highly speculative, but just as interesting!
Symantec Corporation: The Watchdogs
With the development of the IoT, there is a need to back up all the data that these little helpers collect in the “things” and move among themselves. Because the more data about a person is recorded, the more far-reaching the actions are that “do things” in the direct or indirect order of the person (eg independent orders or money transfers), the greater the risks that this data will be accessed and used by unauthorized persons own goals can be misused. Securing the IoT is therefore an area that grows with the Internet of Things – and is therefore extremely interesting for investors.
The Californian company Symantec (ISIN: US8715031089 – symbol SYMC – currency: USD), known for its security software “Norton Security”, already claims to protect over a billion devices in the Internet of Things. Symantec is one of the established companies in the field of IT security, which should grow with the volume and complexity of the IoT. The stock listed in the US Nasdaq 100 index is no less volatile than most other stocks in the “Internet of Things” area, as this weekly chart shows. Bottoming after resets would basically be a good opportunity to gradually build up a position here.
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- Amram is a technical analyst and partner at DFI Club Research, a high-tech research and advisory firm .He has over 10 years of technical and business experience with leading high-tech companies including Huawei,Nokia,Ericsson on ICT, Semiconductor, Microelectronics Systems and embedded systems.Amram focuses on the business critical points where new technologies drive innovations.