Investing in the ‘Internet of Everything’

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
[Computer chip]

If you’re reading this, you’re on the Internet — but are you on the “Internet of Everything?”

If you think this sounds like another buzzword that tech-savvy Silicon Valley-types throw around to sound sophisticated… well, you’re right.

That said, the Internet of Everything is a game-changing phenomenon that is already becoming a disruptive force in the marketplace.

It is also a trend that can make you big money as an investor.

So, what exactly is the “Internet of Everything?”

Often referred to simply as the “IoE,” the Internet of Everything is the connection of people, data and objects to the Internet, as well as to other smaller, more local networks.

Already, millions of “intelligent” devices are being designed to link up to the IoE.

This allows the end user a higher-quality, more integrated experience with countless devices that today you’d never expect to be part of the IoE.

A Megatrend That Won’t Be Denied

Today, you likely have an Internet connection via a DSL/cable modem or corporate router. That’s the traditional way to connect to e-commerce websites like Amazon.com (AMZN) or eBay (EBAY), video streaming services such as Netflix (NFLX) or music streaming/downloading services such as Pandora Media (P) or iTunes from Apple (AAPL).

Yet, thanks to the burgeoning growth of smartphones and a plethora of other devices now connected to the Internet, the number of devices that are part of the IoE in your household is set to explode.

Within a few years, home appliances, medical devices, gaming consoles, industrial machinery, home entertainment systems, smart meters and security systems all are set to become what are called “non-traditional wireless access points.”

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And this is a megatrend that won’t be denied. Just ask Internet pioneer and Cisco Systems (CSCO) CEO John Chambers.

Chambers estimates the IoE could soon become a $19 trillion market. To put that number in perspective, that’s about $2 trillion more than the current size of the U.S. economy.

Chambers says IoE will be the biggest single trend in high tech in the coming decade. And, the best part is that we are barely out of the starting gate.

According to a Swedish telecom provider, the average user accesses data on her smartphone 151 times per day. Swedish handset maker Ericsson (ERIC) also estimates the total number of devices subscribed to mobile networks will reach 9.3 billion by 2019, of which about 60%, or 5.6 billion, will be smartphones.

As it turns out, smartphones will end up being only a small part of the total number of connected devices. In 2012, only 8.7 billion devices (including smartphones) were connected to the Internet. By 2020, Morgan Stanley (MS) estimates that number will rise to more than 70 billion.

That’s 10 connected devices for every man, woman and child on planet earth.

And the IoE Winner Is…

Every major technology trend has both winners and losers. The rise of the automobile industry put the horse and buggy industry out of business, while the computer turned the typewriter into a museum piece.

While it remains to be seen which industries will be the biggest winners or losers due to the IoE, several companies are set to reap the IoE harvest.

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First on my list is Skyworks Solutions, Inc. (SWKS). This is a company that subscribers to my Alpha Investor Letter have known about since September of last year. And it is the single best company I know of that allows you to profit from one of the most compelling technology trends of today.

Headquartered in Woburn, Massachusetts, Skyworks is a leading supplier of radio frequency (RF) chips to smartphone makers and other electronics manufacturers. Skyworks focuses on high-end smartphones, which require higher RF dollar content per phone.

Skyworks’ customers are mostly large smartphone and tablet manufacturers like Apple and Samsung. And, as a primary supplier of complex RF chips for Apple mobile devices, Skyworks is particularly set to benefit from the immense popularity of the latest Apple smartphone iteration — the iPhone 6. In fact, every single one of the 74.5 million phones Apple sold last quarter had a Skyworks chip inside.

Here’s What The Future Looks Like

Within the next several years, just about every device you use — your car, appliances, television, alarm system and thermostat — will be connected to the Internet. Homes are increasingly becoming “wired” — a trend that Google hopes to profit from with its recent acquisition of household device maker Nest for $3.2 billion.

Your smartphone already tracks your location in and out of your home. Soon, your GoogleNow app will turn on your IoE compatible coffee machine, turn off your alarm system and turn on your heat or air conditioning — all before it opens your front door.

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In short, the IoE and a RF device from the likes of Skyworks turn your home into what you saw on the Jetsons cartoon as a kid.

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The IoE also has broad implications for nearly every industry.

Large retail stores already use the IoE to tailor their marketing to customers. Farmers are using connected devices on irrigation systems to turn them on or off based on rainfall and the level of soil.

Connected collars on livestock allow farmers to monitor their herd’s health through mobile phones, tablets or PCs. Oil and gas companies are gathering and managing data from operations in remote environments.

In the future, the “Internet of Everything” will be everywhere.

And it should be in your investment portfolio as well.

In case you missed it, I encourage you to read my e-letter column from last week about how to make a mint on Europe’s new bull market, which led to my invitation to appear as a guest tomorrow at 4:15 p.m. EST on Fox Business to discuss my views with Liz Claman and Dave Asman, co-anchors of “After the Bell.” I also invite you to comment in the space provided below my commentary.

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