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Opportunities in the 'Internet of Things'

The tech boom renaissance which started in 2012 has seen the Nasdaq Composite Index move to new highs. The reason for this is not just the huge increase in Internet usage across both developed and emerging markets, but the exponentially growing number of devices connected to the Internet.

Citigroup believes that during 2008, the number of devices connected to the Internet exceeded the number of people in the world. Cisco goes further and estimates that in 2010 there were 12.5 billion devices connected to the Internet, by the end of 2015, it will be 25 billion and by 2020 there will be 50 billion devices connected to the Internet.

We believe that this will be the fastest growing thematic globally, regardless of economic growth. Companies which have tried to use Internet technology to replace old world processes have missed the point, which is the reason why so many corporates waste millions on IT spending. Now the smart companies are more client centric and solutions-driven reviewing customer needs and looking at ways that they can incorporate advancements in Internet technology and connectivity to innovate and better reach and service customers. Subtle, but getting this right will create a huge gulf between the haves and the have nots.

Cisco categorise these items as the ‘Internet of Things’. Devices are managed by intelligent systems, which are secure electronic systems that run a high-level operator system (HLOS). They autonomously connect to the Internet, execute native or cloud-based applications, and analyse data collected. Citigroup cite some examples of things pervading our everyday life and connecting with the Internet as follows:

  • Connected cars: can include emergency call systems with embedded sims as well as early diagnostic monitoring, telematics, and in-car entertainment systems including wifi
  • Remote healthcare monitoring: can perform continuous and real-time readings of vitals such as blood pressure, heart rate or sugar levels to notify caregivers and/or medical personnel in the event of elevated readings.
  • Personal fitness: with wearable fitness devices (i.e., Fitbit, Nike+ fuelband), users can track steps taken, calories burned, and hours slept for example and monitor results on their smartphone or personal computer, as well as link to (or create) social networks.
  • Public transit: local and municipal governments can use solutions to run, operate, and monitor public transit systems for fuel optimisation, fleet tracking as well as positive train and traffic control. Systems for monitoring and controlling train movement improve railway safety (train separation or collision avoidance).
  • Transportation: use connectivity to leverage telematics and RFID devices to monitor and control shipping equipment and cargo on a worldwide basis. Producers are able to monitor and analyse asset safety and quality across the supply chain. For example, transporting food from farm to fork is a sensitive process to ensure that foods do not spoil while in transit.
  • Smart utilities: use connectivity to monitor energy consumption by automatically measuring and monitoring home energy usage with adjustments when approaching severe energy shortage.
  • Discrete manufacturing: use robotics to further automate production of automobiles and other equipment.
  • Home security and monitoring: provides protection against home intrusion but also is capable of monitoring and controlling home environments, such as lighting and temperature.

The tech boom in 2000 was about ‘eyeballs’, revenue multiples and issuing essentially worthless shares to expand and grow, which is why it eventually crashed. The Internet of Things is about reaching clients through new channels, delivering products and services that make life easier and creating applications that replace what people are doing today. This is actually what consumers want, that is why Apple, Google, Microsoft and Verizon are holding the largest cash balances of US corporates.

Unfortunately it is difficult to access investments in Australia to participate in this growth wave and as a result we expect to see more Australian investment dollars moving offshore to diversify from banks and resources into one of the most exciting growth opportunities seen in a long time.


Michael Birch is Head of Equities at Mason Stevens. This article is general information and does not consider the personal circumstances of any investor.

March 22, 2015

Any thoughts on internt infrastructure to exploit the exponential data theme ...

ISPs - TLS, IIN, TPG, MTU have grown well over the years and could keep doing so, potentially at an increasing rate.

Data centres - eg. NextDC (NXT) which has just become cashflow positive. All the new technologies mentioned above have some cloud component which means storing the data somewhere - one might expect rapid growth in cloud demand.

Could be a bit like virtual infrastructure . ISPs are virtual tollroads with ever increasing traffic, cloud storage providers are virtual REITs with ever increasing tenants? Might be a safer bet on this theme than trying to predict who the commuters and tenants actually are.

March 20, 2015

struggling ASX stocks but with a story -

Connected cars: Connexion (ASX code CXZ) - software app for web connected motor vehicles. Their vehicle management service Flex provides fleet users with the ability to manage an entire fleet of vehicles from a central control point using cellular mobile connectivity

Personal fitness / OHS: DorsaVi (DVL) - Their device uses wireless biomechanical and electrophysiological technology to measure a worker’s movement and muscle activity to better manage their physical work demands and help reduce injury rates and work-­- related costs. The device can also aid the rehabilitation of injured employees and help them return to work.

Personal fitness / OHS: Catapult (CAT) - A global sports analytics company that provides elite sporting organisations and athletes with detailed, real time data and analytics to monitor and measure athletes. Its products have been used by more than 500 sports teams and organisations worldwide. Its product suite encompasses a range of hardware and software solutions across its two brands, Catapult and GPSports.

Transportation: Smart Parking (SPZ) - specialises in on-street and off-street technology and data transfer for parking space availability


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