Investing In The Internet of Things

The Internet of Things is one of the biggest buzzwords of 2014 and could be one of the hottest technology trends for the next several years.  To completely understand why this is a sound investment sector, you need to understand what IoT actually is and the businesses that will be positively impacted by this movement.

What Is The Internet of Things?
The Internet of things is a proposed development of the Internet in which everyday objects have network connectivity, allowing them to send and receive data.  Think of a connected thermostat or coffee pot.  They are connected to the internet, controllable via a phone or computer.

How Can an Investor Benefit from the Internet of Things trend?
I see a few heirarchies developing within IoT:

  1. Infrastructure providers – think Cisco
  2. Manufacturers of connected devices
  3. Retailers selling to connected consumers

Typically in the early boom of a new trend, the winners are the infrastructure providers – the companies that provide the network infrastructure, sensors and semi conductors that will make all of the devices connected.  Goldman Sachs has recently come out saying that they believe the IoT is a real and investable movement.

Three of the best stocks for The Internet Of Things

When looking for stocks in which to invest in for the IoT movement, I would stick to the infrastructure players and the companies that manufacture the sensors that will be inserted into all of the various devices.  Some software and big data companies will definitely profit, but software and data is a more competitive industry than chip manufacturing.

Microchip Technology Inc. (NASDAQ: MCHP) will be a player in the Internet of Things world. Microchip directly partnered with multiple industry-leading sensor manufacturers and sensor-fusion specialists to create a solution that enables faster time to market without the need for sensor-fusion expertise. The company is a leading provider of microcontroller, mixed-signal, analog and flash-IP solutions.

Nimble Storage Inc. (NYSE: NMBL) may be one of the most intriguing names on the Stifel list. The company focuses on providing a hybrid storage system, combining features of both flash and disk drives. It offers high-speed flash speed with an ordinary disk for storing data. This allows faster loading of applications and reduces cost of the storage system. The stock had a recent initial public offering and has been red hot since.

Red Hat Inc. (NYSE: RHT) provides open source software solutions primarily to enterprise customers worldwide. The company develops and offers operating system, middleware, virtualization, storage and cloud technologies. The stock remains a favorite of CNBC’s Jim Cramer and is expected to show strong sales gains the rest of this year.