The internet of things, or IoT, is gaining popularity day by day. More and more people here are talking about that now. Moreover, several companies are embracing IoT to complete jobs efficiently. So, the query we all have today is, what is IoT? How does it work?
The internet has become a regular part of our lifestyle, and we access the internet dozens of times per day for data, communication, recreation, and more. That's where the Internet of Things (IoT) comes into play. The Internet of Things is a broad idea.
It essentially implies that the items we use during the day are connected to the internet and may talk with each other. It also means that these objects include sensors and other smart technology to interact with the environment around them. Many top technology businesses are adopting IoT in their smart products.
What is the internet of things?
The Internet of Things is the expanding network of networked gadgets that reduces the need for direct human-computer contact. It is a very basic concept, but the truth is that it enables nearly limitless options for developing efficiencies, reducing waste, and saving money for individuals, companies, and governments while delivering previously unattainable levels of insight from the data collected.
Smartphones, coffee makers, washing machines, refrigerators, traffic light systems, jet engines, healthcare monitoring systems, and activity tracking gadgets are just some of the many uses that this new technology is revolutionizing. Almost anything with an on/off switch already belongs to or has the potential to join this fast-expanding industry.
How is the internet of things implemented?
You must be reading this on a smartphone or laptop computer. The laptop or mobile smartphone is connected to the internet. Likewise, there are millions of internet-connected devices that emit data.
The challenge now is where the emitted data reside. Similar to how our brains store information, IoT platforms store the data collected by the devices. This platform segregates and shares with other connected devices vital data that can be utilized in the future.
Consider this example: Suppose Delhi is home to a prominent TV manufacturing company. They have been utilizing IoTs to accomplish various jobs within the company. Attached to the machines used to create things are sensors. These sensors collect and transmit information regarding the number of televisions being produced and other production details, allowing the maker to spot problems before the product is sent.
The conveyor belt is equipped with a second sensor that scans the barcode of each television. Therefore, the manufacturer learns where the goods are being shipped. They can easily determine which city has the highest demand by conducting a survey. With the use of IoT, the manufacturer can also determine when a retailer's stock is running low and send them additional televisions accordingly.
In addition, the attached sensors provide the manufacturer with information about the TV's operational state. If the company detects a flaw, the user will be notified immediately via their mobile device.
In recent years, the global investment in initiatives to adopt Internet of Things (IoT) technologies has increased. Popular IoT solutions include utility management, transport monitoring, insurance, carsharing, and equipment diagnostics.
With the introduction of wireless technologies, actual resource consumption billing times are shortened. Reduced fuel consumption at industrial facilities enables monitoring and optimization of production processes in locations where it was previously difficult owing to technological constraints. IoT solutions also continuously monitor climate factors and optimize data center engineering system operation modes.
Although in many plants, automation of technological processes is constrained by hazardous working conditions. Fortunately, spark-proof and explosion-proof wireless sensors are already commercially accessible, albeit in limited quantities. Temperature and humidity are measured via sensors and leaks, and other production indications.
With monitoring sleep quality or blood sugar levels, heartbeat, and respiration of patients with respiratory diseases, the Internet of Things is also used in medicine. It is a voice-activated, Wi-Fi-enabled voice assistant that provides weather and exchange rate information.
However, the primary benefit of IoT solutions is that they enable a complete reversal of approaches to business organization, altering the corporate mentality and understanding of the proper organization of business processes, particularly the transition from a product-based to a service-based business model. According to analysts, even limited experience with the Internet of Things indicates that it gives a predictable return on investment over time, allowing for reduced expenses in the long term.
How should one invest in the internet of things?
Conduct research
Before deciding which IoT stocks to invest in, you must conduct research. It is beneficial to read a great deal of information about the industry in newspapers, magazines, blogs, and other sources and from major and small companies. You can also get assistance from specialists. Ultimately, the greater one's knowledge, the better decisions one can make.
Determine the level of industry exposure you desire
Choosing an investment company depends on the amount of industry risk you are willing to invest in. For instance, you can select companies like Skyworks and Sierra Wireless that rely only on the Internet of Things as their principal business. You can also choose companies with a greater variety of products and services.
Regardless of your decision, you must determine a company's IoT exposure and client base size.
Determine the amount you intend to invest
Consider the level of your industry presence compared to your position. The more stocks you buy, the bigger the potential return on equity investment and the greater the associated risk.
You can reduce your exposure to risk by diversifying your portfolio's investments and instruments within the same asset class. Thus, you safeguard yourself against unforeseen occurrences.
Identify a broker for the deal.
As with any other stock purchase, you must appoint a broker to facilitate the stock purchase of your preferred company. If you wish to invest in foreign companies, you must find a broker who will buy shares on foreign exchanges. And finally, after making your selection, place your order with your broker online, over the phone, or in person.
1. Advanced Micro Devices (AMD)
AMD offers products such as AMD Embedded, x86 microprocessors, chipsets, discrete graphics processing units (GPUs), etc. Computing and graphics, enterprise, embedded, and semi-custom IoT solutions are the company's segments.
In 2019 and 2020, their stock topped the market. AMD has expanded its footprint inside this market. In recent years, the company has grown to include the release of embedded processors specialized for IoT needs.
AMD earned 52 cents per share on $3.45 billion in revenue in the March quarter. Analysts anticipated earnings of 44 cents per share on sales of $3.21 billion from AMD. AMD's earnings increased by 189 percent, and its revenue increased by 93 percent year-over-year. In addition, AMD anticipates revenue growth of approximately 50% through 2020, and this is an increase from the earlier estimate of 37 percent growth in 2021.
2. Intel (NASDAQ:INTC)
Intel is a company of electronic equipment and computer parts, including chipsets, microchips, and processors. They divided their IoT market strategy into providing sensors and technologies to connect ordinary devices to the network and "smarten" them, the ability to collect and process information during the design phase, and the development of autonomous devices that can collect, transmit, and make decisions based on the results of the analysis.
In 2020, the company experienced certain challenges as a result of outsourcing the production of semiconductor chips. As a result of the company's relocation of production overseas, investors grew anxious for the company's future. This resulted in a price decrease by mid-2020. The stock, however, rallied and proceeded to increase steadily in 2021.
In 2020, the company's yearly revenue was close to $78 billion. Intel has increased its annual spending on research and development, which will top $13.5 billion in 2020.
3. Qualcomm (NASDAQ: QCOM)
This company manufactures some of the most advanced Snapdragon mobile CPUs, which improve with each generation. The existence of a Qualcomm Snapdragon processor ensures a smartphone's superior performance. These chipsets persuade consumers to buy smartphones with their installation. However, the company produces more than only flagship chipsets.
The stock of Qualcomm is on the increase. Despite the decline in March 2020, the company returned to normal, and the share price peaked in January 2021 and remained elevated.
4. Cisco Systems (NASDAQ: CSCO)
Cisco Systems is the leading manufacturer of hardware for enterprise networking. The tech company benefits from the proliferation of internet-enabled devices since its goods are the backbone of the internet.
Cisco supplies networking hardware designed to manage huge numbers of connected devices and rugged, long-lasting systems for industrial applications. Cisco offers the Cisco Kinetic platform and other solutions for managing IoT data and devices on the software side.
Cisco is also one of the largest companies in the cybersecurity industry. The company provides hardware, software, and services designed to secure networks against threats, including those that target IoT equipment specifically.
Cisco is a low-risk investment option for IoT. In fiscal 2021, the company achieved an adjusted net income of $13.6 billion on revenue of $49.8 billion, resulting in a tremendous profit margin. The company is susceptible to global economic conditions because its clientele consists of numerous significant companies, organizations, and governments. However, investing in the stock is a low-risk approach to obtaining exposure to the Internet of Things.
During the COVID-19 epidemic, the company's sensitivity to economic situations manifested itself in the form of a slowdown in demand from some clients as they struggled with economic uncertainty. However, Cisco has again resumed expansion, and it should reap the benefits of pent-up demand.
The epidemic affected Cisco's sales, but the long-term outlook has not changed. Cisco's dominance continues unabated, and the company is prepared to profit from the expansion of the IoT sector.
5. Cloudflare (NET)
There are currently billions of connected devices on the Internet of Things, and there will soon be billions more. The IoT has a challenge that was not truly expected. The majority of these billions of gadgets were released with little security planning. This has created an opening for cybercriminals, who have already weaponized smart IoT devices such as cameras and home appliances. Hackers have utilized these devices to attack internet-based services such as streaming video and social media by flooding them with digital traffic. These DDoS attacks are often debilitating.
It is a significant issue that continues to worsen. This is when Cloudflare comes into play. Cloudflare is best known as a content delivery network (CDN) (content delivery network). In a word, Cloudflare makes websites and internet-based services accessible quickly from any location. However, Cloudflare is also a renowned DDoS protection provider. The company claims that its security network prevents 70 billion threats every day on average.
During the past year, the NET stock has increased by 183 percent. Protecting websites and services against IoT-based DDoS attacks is integral to this expansion. Due to the rising number of IoT devices, NET is one of the Internet of Things stocks that are projected to benefit.
6. Dexcom (NASDAQ:DXCM)
The Internet of Things is not limited to consumer electronics. Dexcom focuses on diabetes management, specifically continuous glucose monitoring devices. The company's G6 system consists of an auto-applicator, a sensor and transmitter, and a touchscreen receiver that displays glucose data in real-time. Smartphones and smartwatches that are compatible can also be used to display data.
According to data from the Centers for Disease Control and Prevention, the number of Americans diagnosed with diabetes increased from 1.58 million in 1958 to 23.35 million in 2015. Currently, more than 37 million Americans have diabetes, and 96 million adults Americans have prediabetes.
Dexcom believes that the market penetration for continuous glucose monitoring for those on intensive insulin therapy is between 35 and 40 percent for persons with type 1 diabetes and just 15 percent for people with type 2 diabetes.
The combination of rising diabetes incidence and the switch to continuous glucose monitoring will provide Dexcom with enough prospects for growth in the future years. Its revenue increased by 27 percent to $2.45 billion in 2021.
Despite early unpredictability, the epidemic did not impede Dexcom's expansion. The company anticipates revenue growth of between 15 and 20 percent for 2022.
People with underlying medical disorders, such as type 2 diabetes are more likely to acquire severe COVID-19 infections. Long-term, even after the pandemic has subsided, this may encourage more individuals to use continuous glucose monitoring.
Dexcom has typically traded at premium multiples, but it is a stock to explore for investors prepared to assume some risk to gain exposure to both IoT and healthcare.
7. Apple (AAPL)
Apple is best known for the iPhone, but this is not the only company in which it operates. Apple is involved in the creation of smart homes, the manufacturing of wearable devices - smartwatches, collaboration with industry manufacturers (while creating its own smart vehicle), and other industries. Apple has about 1.65 billion active devices, including iPhone, Mac, and iPad products. The majority of them are Internet-connected.
Apple's revenue in 2020 was $274 billion, of which 50 percent came from iPhone sales. In 2020, Apple's services section was the second-largest division, accounting for 19% of the company's total revenue. In 2021, the company was likely to surpass $2 trillion in revenue. And the company's stock, which has increased 68 percent over the past year, has become a popular investment option.
8. Honeywell International (HON)
Aerospace systems, innovative materials, building technologies, and process automation, amongst others, are among the company's diverse business operations.
Honeywell is gaining prominence in industrial IoT. (IIoT). Management asserts that Honeywell provides the most comprehensive suite of secure, IIoT-ready solutions across all industrial internet components.
Late in July, management released Q2 results. The revenue increased 18 percent year-over-year to $8.8 billion. The adjusted net income was $1.4 billion, or $2.02 per share, up from $895 million, or $1.26 per share, in the prior year.
The company generated $1.5 billion in free cash flow. Cash and equivalents were $11.4 billion at the end of the quarter.
Our achievements were driven by top-line expansion and margin expansion across all four business segments. Organic sales increased by 15%, powered by double-digit growth in Performance Materials and Technologies, Honeywell Building Technologies, and Safety and Productivity Solutions, as reported by CEO Darius Adamczyk.
Analysts emphasize that the company's investments in software development and IoT technology are transforming it into a "software industry." The company also works on "breakthrough initiatives," such as quantum computing and robotics.
The current price of HON stock is $215, up 1% year-to-date but 23% over the past year. The shares are fairly valued, selling at 23.5 times forecast earnings and 4.5 times trailing sales.
Dr. Tezcan Gecgil has over two decades of experience in investment management in the United States and the United Kingdom. She has completed all three levels of the Chartered Market Technician (CMT) examination in addition to her official schooling in the industry. Her passion is trading options based on the technical analysis of fundamentally sound companies. She particularly enjoys arranging weekly income-generating covered calls.
9. Emerson Electric (EMR)
Emerson Electric offers industrial and home automation and software solutions. It was named "Industrial IoT Company of the Year" in 2018. Automation Solutions and Commercial & Residential Solutions are the two primary revenue segments reported by the firm.
Emerson reported Q3 results at the beginning of August. The net revenue climbed by 20% year-over-year to $4.75 billion. The adjusted earnings before interest and taxes increased from $597 million to $863 million.
The company's adjusted EPS increased by 36 percent year-over-year to $1.09. The quarterly free cash flow was $977 million.
Following the news, CEO Lal Karsanbhai stated, "We are happy with our achievements this quarter, as accelerated sales growth in key end markets and outstanding execution by operations enabled us to achieve exceptional financial results."
Analysts pay close attention to Emerson's software and technology for digital automation. EMR, for instance, recently announced a multi-year global deal with PureCycle Technologies (NASDAQ: PCT) that permits the company to utilize Emerson's Plantweb digital ecosystem platform for large-scale polypropylene recycling.
Emerson's Plantweb Optics Data Lake data management software enables organizations to examine data to acquire useful insights. Given the rising demand for advanced analytics applications, EMR's most recent software is likely to attract more customers.
Currently, EMR stock is valued at over $95, a gain of over 35 percent annually and 17 percent year-to-date. The share price is 21 times future earnings and 3.2 times present revenues. A probable decrease to $90 or even below would increase the safety margin.
Final thoughts
Everyone desires to better their lives. In numerous areas, such as healthcare, manufacturing, and transportation, IoT technologies can boost productivity, and IoT-enabled products have greater potential to communicate with consumers.
Therefore, there is already a pool of companies with the requisite infrastructure to expand this region. If you wish to invest in IoT, you won't have to spend a long time searching for the correct shares. When constructing a portfolio, don't overlook Internet of Things hardware manufacturers. In a couple of years, the IoT will have a substantial return on investment.
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