Why IoT Stocks are an Important Addition to your Portfolio
In the world of technology, few phrases have been on the lips of experts quite as often as “Internet of Things.”
16:00 28 January 2021
On the face of it, the term can seem somewhat loose and ill-defined: almost every object, after all, can be termed a “thing”! But the reality is that the Internet of Things (IoT) is a specific, and high value sector, so far, that is changing the lives of people across the world.
IoT objects and services are located in many homes across the Western world, and there’s a plethora of potential commercial applications too. One study from recent years suggests that over 20 billion Internet of Things devices are now likely to be live – and there’s a lot of money in it. Big businesses like McKinsey and Google are already jumping on the Internet of Things bandwagon – and it may well be that there’s no time like the present if you want to get involved. With that in mind, this blog post will explore what IoT stocks might have to offer you.
What is the IoT?
It may seem like an obfuscating, vague or complicated term. But the chances are that the Internet of Things is already part of your life in one way or another. Any device that you have in your home which is connected to the Internet, makes your life easier and which is not a computer or tablet could well be classed as an Internet of Things “smart home” device. A smart speaker, an Amazon Alexa or a kitchen appliance which has an Internet-enabled function is likely to fall under the IoT umbrella.
In a technical sense, the IoT can be defined as a series of devices and other technologies which have the capacity to integrate and communicate with each other – largely of their own volition. While computers, tablets and smartphones can connect to networks, they usually only do so after some sort of repeated input by the user. In the IoT context, the devices tend to communicate of their own accord following set up. An example might be a sensor, which captures data about a room’s heat and transmits it over a network to a smart thermostat – without the regular intervention of a person. In a commercial context, an equivalent example might be a device which records how many components of a particular product cross a certain point in the production line, and then uses that information to optimize processes and identify efficiencies.
IoT interest from big business
For big corporations, the Internet of Things represents a real opportunity for growth. In a 2019 paper, the firm McKinsey encouraged its clients – and especially its private equity investment clients – to reappraise their approach to the Internet of Things and to find a way to adapt their portfolios so that the IoT was included. Private equity firms in particular, which tend to gravitate towards investment opportunities in companies that are medium-sized in nature, were earmarked as being potentially especially suited to the IoT.
And these firms responded. Venture capitalists have been leading the way when it comes to IoT investment. McRock Capital, for example, decided in 2019 to launch the McRock Fund II LP which is specifically designated for investment in the industrial applications of the IoT. It quickly managed to scale the heights of the sector and reached close to its target in a short space of time.
Investing in shares
But it’s not just the private equity firms of this world that can proceed with investments in Internet of Things stocks. It’s also possible for retail investors to get involved, and they can do so by speaking to a broker with a strong reach across a range of different tech-focused markets – like Capital Markets Elite Group.
It’s important to remember that even with a broker and all this corporate interest on the IoT on side, it’s not necessarily the case that the trader will see a rise in profits. But the Internet of Things is growing quickly and exponentially. Google, for example, has a whole service – called Cloud IoT Core – devoted to the management and analysis of the big data generated by IoT devices, and Google is, of course, one of the largest and most successful tech firms ever. Without being part of this market by using a balanced and diversified portfolio, it won’t ever be possible to realize any potential gains from surges in value.
Ultimately, the Internet of Things appears to be one of the most exciting growth opportunities in the tech sector at the moment. There’s no guaranteed way to figure out exactly how any sector will work out as time goes on, of course, and no investment is guaranteed. But with so much interest in the Internet of Things from big business, the signs for this industry are certainly looking positive.