Best IoT Stocks To Buy: Which Is Best?

What are the Best IoT Stocks to Buy? When early science fiction movies showed a world in which objects could interact with people, few believed this technology would eventually be part of daily life – at least so soon. However, many of those science fiction devices are now in use and available to anyone who wants a little more automation in their environment.

Amazon’s digital personal assistant Alexa has more than 90,000 skills, and upwards of 100 million Alexa-enabled devices have been sold.

Smart appliances can be found in homes around the world. Smart industrial applications automate workflow and ensure materials are never out-of-stock. Smart cities use strategically-placed sensors to monitor traffic and weather conditions, then adjust infrastructure to respond accordingly.

In short, smart devices are objects – other than traditional computers – that have the ability to connect and communicate through the internet wirelessly. Collectively, this group of smart devices is referred to as the Internet of Things (IoT), and IoT is growing rapidly.

In 2017, the total number of connected devices topped 8.4 billion, a 31 percent increase over 2016. Industry experts have thrown out staggering numbers for IoT growth, with predictions that range from 20.8 billion to 200 billion distinct connected “things” by 2020. Some expect the IoT market to reach $1 trillion for 2020 and $1.1 trillion in 2021.

Even if those figures are overly optimistic, it is clear this area will continue to grow at a rapid rate. That means opportunity for investors who purchase stock in successful IoT companies. With so many options, it can be challenging to figure out what are the best IoT stocks to buy?. These are four contenders to consider.

Johnson Controls Stock 

Johnson Controls International is a global organization focused on developing smart  infrastructure.

Examples of projects in progress include smart buildings, next generation transportation systems, and efficient energy solutions.

At the end of second quarter 2019, Johnson Controls’ stock was up 35 percent. That’s quite an accomplishment considering the S&P 500 only increased 12 percent during the same time frame.

Some of the credit for the increased stock price goes to steadily rising revenues. Johnson Controls [NYSE: JCI] averaged a 2.6 percent increase each quarter since the beginning of 2018.

As revenues have increased, Johnson Controls has successfully reduced operating expenses. That means bigger profits for the company and greater value for shareholders.

It appears that Johnson Controls [NYSE: JCI] is well-positioned to capitalize on future IoT growth. However, some analysts believe the share price already reflects those expectations.

If so, stock prices are unlikely to increase dramatically short-term, even if the company continues its upward trajectory. This company is best-suited for investors taking a longer-term approach.

Rockwell Automation Stock 

Rockwell Automation is an American company with clients in more than 80 countries. It is focused on the industrial side of IoT technology, developing smart solutions for manufacturing and process control. For example, Rockwell Automation designs customized robotics, and it develops data collection and analysis platforms to optimize workflow.

Rockwell Automation [NYSE: ROK] offers a unique opportunity for investors interested in getting involved with the future of industrial automation. While other companies have segments dedicated to this work, few are exclusively focused on this area of IoT.

Overall, Rockwell Automation has been successful, but there is some concern over the third quarter 2019 results reported at the end of July. Sales are down 2 percent year over year, with signs that the trend will continue.

The issue Rockwell Automation [NYSE: ROK] faces is not internal. The company’s revenues are highly sensitive to global economic conditions. As other industries slow down, for example the automotive industry, Rockwell Automation’s sales follow.

The general sense is that many of the industries Rockwell Automation supports will see a decline in coming months, so investors are not eager to purchase stock in Rockwell Automation right now. Instead, some are waiting for lower revenues to generate lower share prices, so they can add Rockwell Automation to their portfolios at bargain rates.

Qualcomm Stock 

Though Qualcomm calls California home, it has an international presence. The company has 224 locations scattered around the globe. Qualcomm is a leading producer of semiconductors – the chips that allow objects to connect to the internet wirelessly. It designs and distributes a range of products related to wireless telecommunications, and it derives substantial profit from its patent licensing businesses.

Qualcomm [NASDAQ: QCOM] is a Fortune 500 company that is popular among investors, because it has a reliable history of paying out dividends.

However, analysts are not impressed with Qualcomm’s prospects in coming months. The company relies on revenues from patent licensing to generate profit, but that revenue is on the decline. It went down by 10 percent year over year during the third quarter of 2019, and that trend is expected to continue.

The entire business unit has been the target of regulatory probes, and a number of fines have already been assessed. More alarming still, Qualcomm’s interim agreement with the massive Chinese smartphone producer Huawei has expired.

If no new agreement is reached, Qualcomm [NASDAQ: QCOM] faces the loss of future licensing payments. Overall, investors and analysts are generally not promoting purchase of Qualcomm at this time. It’s wiser to wait and see whether the company can get back on track for long-term success.

Intel Stock 

Intel was the longtime industry leader when it comes to the manufacture and distribution of semiconductors. That put the company in the right place to lead development of IoT technologies.

Though Samsung has taken first place in terms of total revenues from semiconductors, Intel [NASDAQ: INTC] is still powering innovation in this field. However, a couple of major errors in judgment have tarnished the brand from an investor’s perspective, driving share prices down.

Intel’s first mistake was underestimating the potential market for Apple’s iPhones more than ten years ago. It missed an opportunity to partner with Apple on the project, and Apple worked with Samsung instead. Intel patched up its relationship with Apple in recent years, and it has been supplying the company’s modems.

Unfortunately, Intel [NASDAQ: INTC] hasn’t been able to keep pace with developments in 5G technology, and Qualcomm’s 5G modems are considered far more advanced.

In April 2019, Apple announced it was leaving Intel for Qualcomm which, in combination with less-than-stellar first quarter results, pushed Intel stock prices down 10 percent. To date, share prices have not fully recovered.

This presents an interesting opportunity for investors who are considering purchasing stock in IoT companies. Intel projects 2019 revenue of around $69 billion, and it is exploring opportunities to expand into other markets. This could be a perfect time to get Intel shares at bargain prices, before they creep back up to historical levels.

Best IoT Stocks to Buy: The Bottom Line

Ultimately, there are a lot of choices for investors who want to get into the IoT market. The best option for any portfolio depends on the individual investor’s financial goals and risk tolerance. Johnson Controls [NYSE: JCI] is well-positioned for long-term growth, but because those prospects appear to be included in the current share price, it may be some time before investors see substantial movement.

Rockwell Automation [NYSE: ROK] is one of the purest IoT companies, but it is quite sensitive to wider economic cycles. Many believe stock prices will decrease a bit more, which means investors could get these shares at bargain prices.

Qualcomm [NASDAQ: QCOM] is a solid company with a history of success, but it may be entering a rough patch thanks to the trade war. It is hard to say when things might turn around, so these shares are risky – at least in the short term.

Finally, Intel [NASDAQ: INTC] is a massive organization that is very likely to go on generating strong revenues in coming years. With stock prices lower than usual, investors can take advantage of less-expensive entry into this market.

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.