The Best Internet of Things Stock
The rate of technological innovation in the last decade or so has been rapid.
As only a few examples, 10 years go none of the following companies existed.
These companies are called “Tech Unicorns.” And they’ve come on the scene in the last decade. Took over their industries. And transformed the world.
EDITOR’S NOTE – The term Tech Unicorn means a tech company was founded and then grew to a $1+ billion valuation.
You no longer must leave your house to interact with people around the world in seconds.
You no longer must go to the grocery store and deal with lines and rude people.
And you can summon a car to take you places in seconds on your phone.
Most of this was unthinkable 10 years ago.
But now they’re part of our everyday lives.
And they’re becoming even more important as we’re locked in our houses away from our friends and family during these coronavirus times we’re now living in. in our lives.
In the coming years technology will change even faster with the implementation of The Internet of Things.
The Internet of Things is a time when almost everything we interact with daily will have microchips and sensors in it.
These sensors and chips will spit out data to us to help us improve potentially every aspect of our lives.
From helping get rid of rush hour traffic.
To helping us spot a health issue before it causes major problems in our bodies.
To spotting potential pandemics before they spread around the globe.
To making sure our food is fresh.
The Internet of Things will hook almost everything in our lives to the internet.
These will change us and our lives in both positive and negative ways.
And The Internet of Things is already being built. But it will accelerate even more because of our increasing reliance on technology in these coronavirus and social distancing times we’re dealing with now.
In the coming years and decades there will be many stocks that turn into huge winners from the Internet of Things.
But I don’t recommend you invest in smaller Tech Unicorns in the hopes of catching the ride up.
Not because some of them won’t succeed massively.
But because I think it will be almost impossible to spot the winners and invest in them before they skyrocket. While also avoiding the ones that fail miserably and go bankrupt.
I want to bet on solid companies over the long term… Ones that have solid balance sheets and are profitable today.
Not ones “hoping” to earn profits at some undetermined time in the future.
Today I want to show you one stock that will benefit enormously from the Internet of Things… While also being a great company now.
Why Intel Is One Of The Best Internet of Things Stocks
Intel’s been around for decades.
You’ve seen the logo above over the years. And have used its products in your PC’s and other devices.
So why do I recommend Intel to take advantage of this new Internet of Things trend?
Because even after decades it still dominates the microchip industry.
It owns an estimated 75%+ of several of its markets in the microchip industry. And soon almost everything we use every day will have a microchip in it.
As the dominant leader in this arena Intel’s likely to gain most of the market share in this new space too.
Plus, through acquisitions of leaders in sensor and driverless car technology, Intel also offers products and services in these arenas.
These newer industries will see enormous growth in the next decade or so as the Internet of Things takes off. And this will help increase the value even more over time.
Most importantly the company is great now.
Over the last 10 years it earned a total of $178.9 billion in total operating profit. And its operating profit margin over the last decade has averaged 29.1% per year.
I look for any company to produce above 10% margins on a consistent basis to consider as an investment.
Its produced $115.2 billion in total free cash flow in the last 10 years. And its FCF/Sales margin averaged 19.8% every year in this time.
Both mean that not only does it earn huge profits from its operations. But also, that it has more than enough money to reinvest in R&D to build out the things necessary to take advantage of the new technologies to continue its dominating in the Internet of Things.
Plus, it pays an 2.2% dividend just to own its shares.
And its also cheap right now as its selling at a Price to Cash Flow (P/CF) ratio of 8.5.
I consider buying companies that have P/CF ratios below 25. Intel falls well below this threshold which means it’s cheap now.
Intel’s one of the worlds best run and most dominant companies… Its dominated its industry for decades which allows it to earn enormous profits.
This allows the company to reinvest its capital into R&D to continue staying ahead of competitors.
And this will also allow the company to transition well into The Internet of Things arena so it dominates that too.
If you’re looking for a great Internet of Things stock to own don’t look to buy one of the tiny companies and hope you get a tech unicorn… Yes, some of them will explode to huge success in time. But many others will implode and go bankrupt.
It will be near impossible to tell which is which in the coming years.
But one thing is for sure, Intel will still be around. It will still dominate. It will still generate enormous profits and cash flows. And it will continue compounding the value of your investment well into the future.
And The Internet of Things may even help this 5+ decade old company reach new heights of growth and value in the coming years.
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Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.