You often hear buzzwords like the Internet of Things (IoT), but may wonder what the heck it really means. Probably the simplest definition for it is that the IoT describes a growing network of connected “things” that contain sensors, chips, processors and the ability to interact with other “things” on a network.

With each day that passes, more and more “things” become connected to the internet. Today, these include not only your computer and smartphone, but very possibly your car and your home appliances. Last year, there were an estimated 18 billion devices capable of receiving and sending data. That number is expected to soar to more than 75 billion in 2025, according to research firm IHS.

In fact, the home market for smart devices is forecast to be a $125 billion one by 2022. But the much bigger opportunity for you as an investor will reside in the business applications of the Internet of Things, which goes by the name of the Industrial Internet of Things or Industry 4.0.

The number of connected devices here is growing exponentially. According to the research firm Gartner, there were 2.4 billion connected devices being used by businesses in 2016 and a forecast 3.1 billion in 2017. That number is expected to more than double by 2020, to 7.6 billion.

Industrial Internet

The reason behind the growth is simple. IoT sensors in devices constantly gather data, which businesses can crunch using machine learning to discover more about their customers, machines and supply chains. In theory, this should lead to better decisions and more efficiency and profits.

The pace of spending by businesses on IoT varies depending on whose research you read. Technavio believes the market value of the IoT will be $132 billion in 2020. Gartner says more than $440 billion will be spent on IoT in 2020. The Boston Consulting Group forecast that annual spending on IoT will hit nearly $300 billion by 2020. And IDC says global spending on IoT will reach $1.29 trillion in 2020.

 

While the numbers vary widely, the takeaway is as Bill Ruh – chief digital officer for General Electric (NYSE: GE) – told the Financial Times, “It’s a huge opportunity for all industrial companies.”

It is also a huge opportunity for the established cloud computing giants like Amazon.com (Nasdaq: AMZN), Microsoft (Nasdaq: MSFT) and Alphabet (Nasdaq: GOOG). They are the biggest providers of Internet of Things platforms.

But I question whether industrial companies will want to become too dependent on the tech companies with whom they may become competitors someday soon. The auto companies are already in a battle with Silicon Valley for future control of the vehicle market.

And I’m sure companies like GE do not like the fact that tech firms are offering predictive maintenance technology that competes directly with its Predix Industrial Internet of Things platform designed specifically to interpret industrial data.

Choosing the Right 3 Stocks

There are a number of ways you can approach investing into the IIoT. Here are just three of them, approaching the future of the Industrial Internet of Things from three different angles.

First, of course, there is more to the Internet of Things story than all the good things. There is the dark underside of having billions of connected “things” – increased hacking and cyberattacks.

This past summer, there was a report about a casino that got hacked through a fish tank! Hackers gained access through an Internet-connected aquarium, which had sensors connected to a PC that regulated tank conditions such as temperature, the amount of food and cleanliness.

So at the top of my Internet of Things list to buy is something related to cybersecurity. A good, broad-based choice is the ETFMG Prime Cyber Security ETF (NYSE: HACK).The fund’s portfolio consists of 35 stocks and an expense ratio of only 0.60%. The ETF is up nearly 15% year-to-date.

Among the top positions in HACK’s portfolio are leading companies including FireEye (Nasdaq: FEYE), which is currently helping Equifax, Symantec (Nasdaq: SYMC) and Check Point Software Technologies (Nasdaq: CHKP).

Next on my list is an industrial company that is hitting on all cylinders and a major player in the Industrial Internet of Things – Honeywell International (NYSE: HON). Its stock has climbed about 24% so far in 2017. While Honeywell recently announced the spinoff of its home heating and security business as well as its turbocharger unit, the company currently is divided into four divisions:

Aerospace (36.5% of revenues) is a major global provider of integrated avionics, engines, systems and service solutions for aircraft manufacturers, airlines, military, space and airport operations.

Performance Materials and Technologies (22.2%) offers technologies and high-performance materials such as hydrocarbon processing technologies, catalysts, adsorbents, equipment and services.

Home and Building Technologies (27.1%) offers environmental and energy solutions, security and fire, and building solutions.

Safety and Productivity Solutions (14.2%) includes sensing & productivity solutions and industrial safety, as well as the recently acquired Intelligrated business, leader in warehouse and supply chain automation.

Specifically related to IIoT, Honeywell offers sensors and automation control products as well as process solutions similar to GE’s Predix. It is also working with companies like Intel (Nasdaq: INTC) to expand its IIoT offerings.

On the technology side, I’d feel comfortable owning another company hitting on all cylinders, Microsoft. Its stock has jumped 25% so far in 2017.

Its CEO, Satya Nadella, is well on the way to restoring its former glory. As mentioned before, it is a growing powerhouse in cloud computing and is deeply involved in the Internet of Things with its Azure IoT Edge for industrial applications. Its new technology delivers artificial intelligence (AI), machine learning and advanced data analytics via the cloud to local computing devices.

And Microsoft is among the early leaders in field of quantum computing. Nadella describes quantum computing this way in a Financial Times interview: If you think of computing problems as a corn maze, a conventional computer would tackle each possible path, turning back when blocked. A quantum computer will take all the paths at the same time, making even the most complex problem solvable quicker.

Whichever of three paths you choose to invest in the Industrial Internet of Things, I believe, will be a profitable one. But if you’re interested in my top recommendations in the sector, I reveal those in Growth Stock Advisor.

You’ve probably already heard about the Internet of Things, however as we’ve discussed above it’s the Industrial Internet of Things where the real investing opportunities are. Sure, networked fish tanks, baby monitors, and iPhone connected doorbells are interesting, but the truly groundbreaking – and profit making – application of the Internet of Things will happen in industry. In fact, it’s already happening but if you don’t work in a modern factory then you’re probably not witnessing it. And that’s where early investments can pay off… placing where most people aren’t looking and getting in before the Wall Street crowd and financial news organizations start jawboning investors to pile in. And it’s how my readers and I are already making money from our Industrial Internet of Things portfolio.

It’s part of a bigger movement. One that will change how you work, where you live, what you eat, how you communicate, how you get from A to B, even how you sleep. And it will pressure governments and society to adapt quickly or fall by the wayside and risk irrelevance. I call this monumental shift “The Singularity”: the convergence of everything – all driven by the rapid ascent of technology and profit motive.

The Singularity presents investors with the opportunity for a pieces of the over $100 trillion growth over the next seven years. Some of that will derive from the Internet of Things, some from other sectors. That’s why I’m so actively uncovering every investment I can with this space. I’ve recently completed research on The Singularity that lays everything you need to know to get started… the technologies of the future, the pace of change, and the investments you can make right now – today – for a very profitable future. Click here now for access.

Author: Tony Daltorio.

Tony is a seasoned veteran of nearly all aspects of investing. From running his own advisory services to developing education materials to working with investors directly to help them achieve their long-term financial goals. Tony styles his investment strategy after on of the all-time best investors, Sir John Templeton, in that he always looks for growth, but at a reasonable price. Tony is the editor of Growth Stock Advisor. 

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Twenty years ago, we arrived on the surface of another planet. This marked one of the most important moments in space exploration history. It was 1997: the first successful touchdown on Mars via the Pathfinder rover.

Now, space exploration has expanded beyond our own government program, NASA. It has become the passion of some of the most revered, forward-thinking minds in the world.

In 2000, Amazon CEO Jeff Bezos began a side project called Blue Origin. Although most of its activities are kept somewhat secret, Bezos has stated that its near-term goals involve space tourism and satellite TV. Then, in 2002, Elon Musk began a company called SpaceX. This company was started with the sole purpose of colonizing Mars, even before Musk founded Tesla.

Right now, a main goal of NASA is to be the first to have a manned Mars mission. And now, there is increased competition from private companies, SpaceX in particular, as well as a multinational race, similar to that of the race to the moon.

It would be great to be able to invest in a company with such a unique and monopoly-like focus as SpaceX and Blue Horizon, but unfortunately that’s not an easy option; these companies are not publicly traded. However, I believe the next best option is investing in the systems that make these companies’ rockets “go.”

Rocketing Into History

About 98% of the material that’s launched into the sky during liftoff is related to propulsion. And it doesn’t just get the rocket off the ground. Complicated propulsion systems are also necessary to maneuver the ship once it’s in space.

With this being said, I believe I’ve found the best investment in the space industry right now.

It’s a relatively small aerospace and defense company here in the United States. Its specialty is propulsion systems, which comes in handy when working with rockets and other space-traveling vehicles. In fact, it’s the largest producer of space propulsion and power systems in the U.S.

The company also has a huge client for whom it does most of its business: NASA.

In the past, most of the business it has done for NASA involved the space shuttle. This includes 30 trips to and from the International Space Station; it also supplies the batteries used to keep the station running. In fact, the propulsion system that it designed and built guided the shuttle for 135 missions with a 100% success rate, making it the world’s most reliable rocket ever built.

But going forward, one of the major reasons for demand will be American-manned space launches. Although we have not had a manned space launch since 2011, this activity will be revitalized with the goal of making it to Mars.

This will be done via NASA’s Space Launch System (SLS), which is expected to take off for the first time in 2019. But the SLS is just the launching vehicle; the crew capsule that will carry the passengers is called Orion, and the company I’m recommending today is making the propulsion system for just about every component for both of these crafts.

It really is making history with this project, as no manned spacecraft has ever been designed to take humans into deep space, potentially to Mars and even the asteroid belt.

Another project this company has been selected to work on is the propulsion system for the Defense Advanced Research Projects Agency (DARPA)’s Experimental Spaceplane. In this project, it is collaborating with Boeing to make a hybrid airplane/traditional launch vehicle that will be used to send military satellites into space.

The Defense Department’s goal is to have this vehicle fully functional and tested by 2020. So, while this is a smaller project, it is still something coming up within the next few years.

A Sudden Growth Phase

Of course, any company can sound like a great investment, but it still has to be financially stable to actually be a great investment.

That’s why I believe Aerojet Rocketdyne Holdings Inc. (NYSE: AJRD) is on the verge of newfound growth in revenue due to the revitalized space program.

This year, its first-half sales increased by 13% after just 4% growth over the previous two years combined. And over the past year, expectations for revenue have grown from $1.78 billion to $1.9 billion. A year ago, Aerojet wasn’t supposed to make $1.9 billion until 2020.

You know a company is in a sudden growth phase when its expected revenue is accelerated by three years. And Aerojet has already booked $4.3 billion worth of future projects.

Lastly, when a company enters a growth phase, it’s important to make sure it has enough cash to fund its future operations. Over the past two years, Aerojet has brought in over $350 million in cash from operations, essentially doubling its cash position in anticipation of its projects ahead.

Looking at Aerojet’s stock price, it’s obvious that the market has discovered the company’s growth potential. The stock has gone up about 100% over the past year. But I still believe it has plenty of room to grow going forward.

As a company, Aerojet is still valued at only $2.4 billion, which is less than 1.5 years’ worth of revenue. And soon enough it’ll be making more than that in just one year.

Overall, in the aerospace and defense industry, it is the seventh-cheapest company in terms of valuation out of 28 companies, and that’s after its price went up 100% in the past year.

Clearly, as Aerojet continues to grow, more and more investors will realize its potential and buy into its stock.

Regards,

Ian Dyer
Internal Analyst, Banyan Hill Publishing

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Source: Banyan Hill