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An Interesting Area For 2014, 2015 And Beyond: Sensors For The Internet Of Things

|Includes: InvenSense (INVN), SWIR

At the turn of each year, pundits like to make predictions and issue stock picks what will do well over the course of the next calendar year. My long pick for 2013 was long Japanese stocks such as SNE to pick one (or long the N225 using an ETF if you don't like single stock risks) and at the same time short the JPY versus your local currency to hedge.

My timescales are longer for a change. I like to look into 2015 and beyond in this entry, not just 2014:

Much like Robotics, the Internet of Things has been discussed for over a decade as a potential "next big thing". Like Robotics (at least Robotics outside of "traditional" Industrial Robotics in manufacturing plants*), there were many false starts and delays on the road to mass markets.

Things could be finally coming together in 2014-2015, so my stock picks are in this sector:

"Wearables" / Augmented Reality / Internet of Things ("M2M", associated sensors and Internet of Everything **)

In terms of companies this could include AAPL and potential suppliers for Apple and its competitors such as NXPI, STM, INVN, SWIR, GTAT (and many more I left out).

Out of these companies, Apple has the old "law of large numbers" issue I discussed in earlier Instablog entries, STM and NXPI are smaller but still diversified into other areas.

A more interesting and concentrated (but of course also riskier, due your own due diligence as always) pick could therefore be two smaller sensor companies, namely INVN and SWIR.

Both stocks had run-ups in 2013 already, up over 100% over the 52W-week low and are near their 52W highs. But in contrast to other technology companies I see a huge potential over the coming 5-10 years for such companies.

Investors looking at the two names should look at the patents again, especially INVN is engaged in a patent fight with STM. The future value and core advantage of both INVN and SWIR could be closely linked to successful defense of their patent portfolios in the sensor/M2M areas.

So it may be ironic I find two tech companies (still) interesting after I warned about a bubble in the tech space repeatedly in 2013 - but since both companies are long-term plays, investors interested can scale in the two companies over a longer period of time in 2014 and beyond.


* Since GOOG recently bought 8 smaller robot companies, most lately the privately held "Boston Dynamics", robotics may also be an interesting area long-term. Unfortunately, there are only a few listed companies (iRobot, trading as IRBT as well as ADEP come to mind) in this sector and the timeframe for a return on investment may be very long - this may work well for GOOG and its "moon shot projects" research arm, but not most retail investors.

** I liked the old, more modest term "Internet of Things" better than the newer buzzword "Internet of Everything". Maybe it was CSCO 's John Chamber 2013 blog entry who helped the new term gain more popularity:

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I may go long on both INVN and SWIR over the coming weeks and months