Investment Opportunities

Internet of Things Companies Present an Overlooked Opportunity

There’s a special class of companies I like to target called “20/20 small caps.”

And I can not imagine a more apt year to talk about them than 2020.

These are companies that are seeing at least 20% revenue growth and 20% earnings growth. Over the years, I’ve found that these are some of the most profitable stocks to invest in.

Today, I want to highlight a company that’s a 20/20 small cap. But it’s also involved in an opportunity that often gets overlooked by investors.

The Smart Revolution

Most of us likely remember when we first got “the internet” in our homes.

It was a magical time chock-full of excruciatingly slow dial-up speeds, constantly interrupted by some inconsiderate person picking up the phone.

The glory days of dual-purpose landlines!

Now the internet is all around us.

I can’t wave my hand anywhere in my home without hitting an internet-connected device.

This is where the numbers become overwhelming…

Because our homes – and our lives – are increasingly melding with the internet.

It’s not just smartphones, tablets, PCs and consoles.

It’s digital assistants, refrigerators, security cameras, smart speakers, thermostats, TVs, toothbrushes and a growing laundry list of devices.

125 Billion Eyes and Ears

In 1999, British tech pioneer Kevin Ashton coined the phrase “the Internet of Things,” or IoT.

At that time, only computers were connected to the web.

But even in those dark ages of the late 1900s, the future of a connected world was inevitable.

It’s been two decades since Ashton conceived the IoT. Slowly but surely, it’s become a reality, arriving one device at a time.

And over the next decade, the numbers will become truly staggering.

Projections show that there will be more than 125 billion devices connected to the internet by 2030…
Number of Internet Connected Devices by 2030That’s a 368% increase from 2019, let alone the astronomical rise from 2018!

And by many accounts, that 125 billion projection seems to err on the side of being somewhat conservative.

It’s estimated that 127 new IoT devices connect to the web every second.

And it’s forecast that each home will eventually have more than 50 connected devices.

So we could easily see more than 125 billion connected IoT devices by the end of the decade.

Keep in mind that 20 years ago, we had only one clunky desktop in our homes connected to the internet.

And it moved at kilobyte-per-second speeds. A rate that would drive us insane today, let alone render our devices useless.

Plus, it’s been only a little more than a decade since Apple‘s (Nasdaq: AAPL) iPhone changed the world.

We’ve seen a meteoric rise since then. To me, that means the next decade of adoption could be even more rapid than we imagined.

A $36 Billion Opportunity

IoT is igniting a spending boom across a wide variety of industries, not just among consumers.

In fact, by next year, the global industrial IoT market is expected to top $124 billion. And by 2026, the global total IoT market will balloon to more than $1.1 trillion.

One study has already found that 69% of companies have more IoT devices than computers.

Of course, all these devices represent billions of new vulnerabilities for ne’er-do-wells to exploit. They offer billions of new possibilities for hackers to worm their way into networks.

We’ve already heard tales of baby monitors, security cameras, sex toys and even medical devices being compromised.

So these stories are likely just the tip of the iceberg.

And this has spawned a whole new industry of IoT device security, led by companies like Rapid7 (Nasdaq: RPD).

The global IoT security market is increasing at nearly a 24% compound annual growth rate. And it is projected to be worth more than $36.5 billion by 2025.

Rapid7 just reported its second quarter revenue grew 25% and forecasts third quarter revenue to climb at least 20%.

So there’s still plenty of upside – especially as our homes are increasingly becoming more connected.

Ashton saw this connected world decades before anyone else.

He pushed for people to see a time when these internet-connected devices would be the eyes and ears of computers.

Unfortunately, in today’s world, the eyes and ears of computers aren’t always the ones we want.

That’s why investors need to make sure their financial independence isn’t stolen by thieves or shortchanged by missing out on opportunities like IoT security. They must have some exposure to this market over the next five to 10 years.

Here’s to high returns,

Matthew


About

Matthew’s expertise ranges from classic industries such as oil and mining to cutting-edge markets like small cap tech, cannabis, 3D printing and cloud computing. With almost two decades of financial experience under his belt, Matthew’s knack for finding market trends never fails to surprise us, which is why we keep a close eye on his free e-letter, Profit Trends.

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