The world we live in is evermore connected. As the days, months and years pass by, it is assumed that the devices we use and interact with will grow exponentially in their level of connectivity. We are far from the days when the home PC was standalone connected device in a home or office. With change typically comes investment opportunities. Buggy whips and Kodak cameras no longer exist, yet we travel and take more pictures than we have in the history of mankind. Such examples are termed by economist and the business community as creative destruction.
When you visit a home goods/hardware store such as Lowes or Home Depot, take a look around at items that are electronic in nature. What you will find is an emergence of ‘connected’ devices. These devices range from light-bulbs to large appliances that can be controlled remotely (typically via smart phone). The scope of possibilities is already wide and will continue to expand in the coming years. Your smart phone will enable you to orchestrate activities in your smart home. Technology has developed to the point where it is becoming practical and affordable to incorporate Wi-Fi and Bluetooth connectivity in smaller items such as thermostats, power outlets, light bulbs, coffee makers and the list goes on.
The change in electronics from stand-alone items to those that are now connected is similar to what occurred around 10 years ago with HDTV. Television’s value proposition changed, which led to an upgrade cycle in the television market. Plasma/LCD/LED flat screen televisions became practical and affordable for the regular person and adoption took hold. The adoption will be less dramatic for smart appliances and peripheral equipment, but will be revolutionary, nevertheless.
Which companies stand to benefit from this shift? One major manufacture is General Electric (GE). GE makes items from light bulbs to dishwashers and much more. They are a major player and well diversified not only on the consumer side, but on the commercial side, as well. The larger the operation, the greater the potential benefit is from having a connected system. Security and cost control translates into a more stable and efficient operations whether in your house or business. In the case of businesses, when value can be directly translated into dollars and sense, then it’s much more likely to be done. In the case of connectivity and integration, the quantification of the argument ($$$) should be relatively straight forward.
Beyond the business world, a trend pertaining to the U.S. homeowner should be noted. A large swath of the Millennial generation is now in its late 20’s to early 30’s. Already delayed in the purchase of a first time home, this group continues to move toward the prime age for purchasing their first home. Of all the ‘working’ generations, Millennials are most comfortable and active with existing and new technology. Therefore, as this generational group moves into the home owner market, an increased focus will be placed on home connectivity; whether the home is new or existing.
As an investor what are you to do faced with this emerging trend? Below I am providing a sampling of companies that stand to benefit from the trend. This is very far from an all inclusive list and should be used as a starting point to identify areas where companies might exist that are providing solutions to the connectivity revolution.