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2 IoT Stocks to Buy for the Connected Future

By Matt McCallDec 03, 2018

The “Internet of Things” (IoT) is already a fairly well-known term, but by next year I expect it will be a phrase used in every household. It refers to the worldwide network of connected devices.

The reach of the IoT is massive. It includes the commonly thought of devices like smartphones and televisions, as well as new possibilities such as thermostats, automobiles, and even street lights.

The growth potential here is massive as well. The home market alone is expected to increase from $47 billion in 2015 to $122 billion by 2020. And in the auto world, 250 million vehicles are predicted to be connected to the internet in the next seven years.

Just think of the amount of data that will be shared across devices 24/7. The sensors, data storage, memory chips, software, and more that will be needed to support this growth create a huge opportunity for long-term investors.

Countless companies and industries will be affected positively by this booming trend, but two in particular stand out as some of the biggest beneficiaries. And they are companies that most investors are overlooking right now.

1. Sensata Technologies (ST)

Sensata is a $7.6 billion company based in the UK. One of the key components of connecting devices to the IoT is sensors, and Sensata is a major supplier of such sensors to manufacturers around the globe.

The company’s products are used in a variety of industries, including transportation. The sensors measure everything from pressure to temperature to speed.

Sensata is also attractive fundamentally, with its PEG ratio sitting at 1.05 and its forward P/E ratio at 11.3. With technology stocks as a whole experiencing a period of weakness, ST is a great buying opportunity at current prices.

2.  DexCom (DXCM)

This $11.1 billion company based in the United States is a play on connectivity in the healthcare sector. Many investors may not immediately recognize its ties to the IoT, but its continuous glucose monitoring (CGM) systems take data directly from the body and transmit it to a smartphone app. Not only can the user see this information, it is also sent to the patient’s files for doctors to analyze.

This is the future of medicine.

DexCom tripled its revenue between 2014 and 2018, and even though its valuation remains high, this stock is a true growth story. The company has proven itself as a leader in the market over the last few years and there is no indication that the long-term trend is slowing.

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