Profit from the next Internet revolution

The Internet of Everything aims to unite people, process, data and things to make networked connections more relevant and valuable for businesses, individuals and countries.

By StreetAuthority Sep 3, 2013 12:36PM
 Hands in circle, palms upward, close-up © Sami Sarkis, PhotographerBy David Goodboy, StreetAuthority                                                             
The dot-com boom that went bust in early 2000 was an unbelievable time to be involved in the financial markets. Tiny companies with a dream and a sketchy business plan were able to raise millions if their name included the dot-com suffix. 

We know how the boom ended. But the Internet has truly revolutionized the way we live. Not only has it enriched investors, it has empowered everyone in ways never imagined as the technologies were emerging. 

If you missed out on the investment side of the Internet boom, a second revolution has started to emerge. This revolution will dwarf the first in terms of magnitude, personal impact and investment potential. 

I am not talking about a new company with an unproven technology. And this isn't something like the overhyped Segway transporter or a new way to sell pet food. This revolution will be built on the backs of established technology companies that have begun to develop tools and techniques for the transition from a world where machines respond to human commands to one in which machines, powered by complex algorithms and adaptive behaviors, act as intelligent agents on behalf of individuals. 

Many of you have experienced the first ripples of this revolution, which ultimately will connect nearly everything on the planet. A prime example of its early manifestation is the E-Z Pass for toll roads, ATMs and gas pumps. These tools are connected to the Internet through machine-to-machine interfaces. 

This revolution is called the Internet of Everything, or IoE. It is forecast to produce profits of $613 billion in 2013 and has the potential to become a $14 trillion market.

Cisco Systems in the forefront
Networking giant Cisco Systems (CSCO) estimates that by 2015 as many as 15 billion devices will be connected to the Internet. Many of those machines will interact with each other without our intervention, and often without our knowledge. When that happens, the Internet of Everything will have arrived. By another estimate, 50 billion connections will exist between everyday objects, people and devices by 2020. The Internet of Everything will connect everything from digital remote health monitoring to smart factories and virtual assistants. 

Everyday objects will be able to "talk" to keep owners informed and up to date. For example, imagine running low on milk. A throwaway tag will sense this fact and automatically place an order using your virtual assistant to deliver another gallon to your refrigerator.
 
The potential is mind-blowing. The Internet of Everything is truly a world-changing revolution that will forever alter the way we live, work and play. 

Sounds fascinating, but how can we profit?

The No. 1 company on the forefront of designing and profiting from this trend is Cisco. The company is developing routing technologies to help manage this revolution. It's a high-end routing device consisting of 1.5 million lines of code and 4 billion transistors and is expected to cost $250 million. This application-specific integrated circuit (ASIC) will create the technology needed for the Internet of Everything to become a reality. Cisco developers expect this chip to be available by the end of this year. 

In addition, developers of Cisco's Insieme Networks are working on the convergence of switching, routing, storage and computing on a common platform. The purpose of this device is that it allows the architecture to spread to the edge of the network providing the brains to the Internet of Everything. 

Cisco in the short term
Despite a fairly strong financial performance in its most-recent quarter, Cisco announced that it would slash 4,000 jobs (5% of its work force) in a cost-reduction effort. In addition, 2014 guidance was in line with analysts' expectations, but certainly nothing to get excited about. 

Taking a technical look, shares have pulled back from hitting resistance at the high of $26.50. Price broke through the 50-day simple moving average on the downside and may find support in the $23 range. The 200-day simple moving average in the $22 area is the next solid technical support level. 



Risks to consider: The Internet of Everything is an exciting idea, and Cisco appears to be the company best poised to profit from its growth. However, it remains unclear how consumers, businesses and governments will accept the concept at the projected scope. In addition, all the standard stock market risks are in play despite the huge projections. Always use stops and position size correctly when investing.

Action to take --> The recent lackluster projections by Cisco has knocked the shares down into my value-buy zone. Buying now, with a stop at $23 with a 12-month target of $33, makes solid sense right now. Investors interested in the Internet of everything should also look at General Electric (GE) as an alternative way to profit in this space. 

More from StreetAuthority
3Comments
Sep 6, 2013 12:32PM
avatar
strong buy on Skynet and Cyberdyne
Sep 4, 2013 12:17PM
avatar
I think I'll wait to see how the market reacts to more gridlock, continuing resolution, debt ceiling, going to war, and more rumor of QE taper in the coming months. I think the market is going to enter a buying opportunity when all of this sh1t hits the fan in Sept/Oct. I think Cisco, VmWare, Tesla Motors, and GE will be on my list. Not because of this article, but because I think those are good long term investments for a young buck like myself.

Sep 4, 2013 4:36PM
avatar
Old news IPv6 has been reality for almost over 5 years. Where have you guys been?
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

ABOUT TECHBIZ

Start investing in technology companies with help from financial writers and experts who know the industry best. Learn what to look for in a technology company to make the right investment decisions.

RECENT POSTS

6 ways Google screwed up with Glass

Consumer backlash has garnered plenty of attention for the tech giant's admittedly exciting and innovative eyewear. But here's why it will be remembered as a botched product launch.

VIDEO ON MSN MONEY

RECENT QUOTES

WATCHLIST

Symbol
Last
Change
Shares
Quotes delayed at least 15 min

MSN MONEY'S