What do a basketball, a coffee machine and a parking lot have in common?

They are all dumb objects that will soon be plugged into the Internet to talk not only to us, but each other as well, in an imminent reality known as the ‘Internet of Everything’ (IoE). What am I talking about?

Imagine this.

You practice your shots on the basketball court. In real time, an app on your smartphone measures the dribble force/speed, shot speed, shot backspin and shot arc of each shot.

You wake up, get dressed, go downstairs and are greeted with a steaming cup of coffee that started brewing after talking to your alarm clock.

You’re driving around looking for a parking lot but they all seem taken. You stop the car by the side of the road and wait for a little while. Soon, a notification on your smartphone lets you know where a parking lot has just freed up.

According to Jim Chambers, CEO of Cisco Systems, the IoE is our imminent reality. The basketball example? It’s a real product, much like many others, that are beginning to transform the way humans interact with the objects around us. Dumb objects like a ball, a table or even just a pill container will soon be able to relay information to us via sensors and microchips.

For investors, this seems like the perfect opportunity to jump in, and rightly so. Money-makers and analysts are touting the IoE as the next big thing, and a great “stomping ground” for investors. However, does it sound too good to be true?

In this article, we break down the good, the bad and the ugly of the IoE for the wise investor, and give you an aggregated view of which stocks, if IoE is as successful as Cisco claims, are tickling the fancy of financial experts around the globe.

The Mind-blowing Potential of the IoE

Well, who doesn’t love more information? Nobody likes being kept in the dark. IoE will introduce a whole new level of information about our personal lives and that of potential customers that could transform the daily choices and options available to us. Things you never even knew about – how thorough your tooth brushing is, how your kid takes a daily detour to McDonald’s on the way home from school, how incredibly wasteful your inventory is. IoE revolutionizes what you can do with this new information.

But this doesn’t only work for the individual! The IoE also transforms the profit potential of businesses worldwide. IoE helps to maximize asset utilization, employee productivity, supply chain and logistics, customer experiences and innovation and R&D. What does this imply?

Well… for one thing, it apparently implies that a mindboggling $14.4 trillion Value-At-Stake is up for grabs by forward-looking businesses and enterprises. When you realize that the American economy is worth about $16 trillion, this figure is even more jaw dropping. This also means an opportunity for a 21 percent increase in global corporate profits.

More shocking statistics taken from Cisco:

At present, about 8 billion devices are plugged into the Internet at any one time.

Cisco estimates that this is only 0.6% of all devices that have the potential to connect. Majority of these right now are smartphones, tablets and laptops, but with the IoE, majority of connected devices will come from sensors and actuators. Cisco estimates that 50 billion devices will be connected by the end of the decade.

Morgan Stanley is casting their bets at 75 billion, with roughly 200 devices connected to the Internet per person!!!

Combine this with retail and corporate level dynamics and you get a seemingly limitless growth potential of the IoE. Companies will be rushing to cash in on the ability to monitor and analyze consumer behaviour, minimize inventory wastage and develop better marketing strategies. For the individual, you’re awarded greater ability to make more informed choices and plans in more parts of your life. So many things you currently don’t know about you will suddenly be made available. Sound appealing?

Here are some notable projects already in progress/under research to get you excited:

1. Jawbone bracelet. Going beyond a fitness band, it tracks the way you move, sleep, eat and even your mood.

2. Contact lenses with in-built sensors, circuits and antennas connected via Wi-Fi to create an augmented reality a la Arnold Schwarzenegger in The Terminator.

3. Shell will use wireless sensing system provided by HP to gain more accurate seismic data on what’s going on underground – and if there’s oil for them to collect.

4. Apparently, the city of Barcelona.

The movement is gaining momentum, from smart phones to smart cars to smart homes to smart cities, and even smart countries – even a smart planet. If the right combination of technological infrastructure (e.g. cloud technology) comes to fruition, the possibilities and profits are only as endless as our imaginations. Even if you perceive the IoE’s success to be based only on humans’ endless fascination with new, shiny things, the IoE has real, tangible benefits to offer all that is likely to outlast the desire to be the coolest kid on the block.

The Dark Side of the IoE

Well, it does sound a little too good to be true. With the existing type of technology that runs within the IoE circles, a crop of problems has already begun its harvest.

One problem that isn’t all that unfamiliar: cyber security. Take for example, the company TrendNet, that provided securcams – surveillance cameras that allowed people to monitor what was going on in their homes while they were out. What happened was that hackers uploaded live feeds of over 700 such cameras, all because of a lapse in security – anybody who obtained a camera’s IP address was able to look and listen through it. In one disturbing case, a man hacked into a camera and whispered honest-to-god disgusting things to a sleeping 2-year-old child.

That’s a big stumbling block in IoE’s path as security in technology becomes an ever bigger concern. This article notes that developers face technical constraints, which they circumvent “by either limiting functionality or compromising security. In a highly competitive tech marketplace, I think we all know which of these will be the first casualty.”

Another issue is privacy. Recall the disgust you felt, knowing that Google screens your Gmail and advertises to you based on your private messages. Now imagine that happening in almost every part of your life. If objects around us are constantly sending data not just to ourselves but to others as well, soon everybody knows everything about us. This includes some of the most unscrupulous kinds of people – advertisers. How exactly would we respond to being marketed to at every possible level of our lives? The same article hypothesizes that tracking our food intake could reveal lots of personal things, from the condition of our health to our religion.

Though governments are getting themselves involved in protective legislation relating to the IoE, are comprehensive and effective measures being taken to ensure that we can opt out if we wish to? Can we be selective about which parts of ourselves are getting connected to this gigantic virtual network?

Which leads to another question: is IoE simply driven by technological wizards too blinded by the grandeur of their ideas to see that there might be no real demand? People might not really need (or care) about chairs that notify you when you’ve gained weight. (We already have distant family relatives for that job.)

Lastly, everybody will be familiar with the fact that technology often breaks down. Unexpectedly, without warning, air conditioners stop working or our laptops get wiped out. Not such a big deal if all that happens is you don’t get your morning coffee. Probably a bigger deal if your car brakes suddenly stopped working. Such severe consequences could cripple a company in a second, and compromise the whole industry’s integrity in the next.

Risk? Reward? Both?

So there you have it. The upsides and downsides of our ‘imminent reality’. Of course, it’s difficult to choose a side. You could be like Cisco, who have decided to “essentially reorganize their entire company around the IoE” and are going all in. If you’re not quite convinced, maybe you’re leaning towards being more selective with your stocks.

Either way, here are some stocks and sectors that financial experts are touting will be highly involved in the IoE as it progresses:

CalAmp Technology (NASDAQ:CAMP) is one company whose name is mentioned by analysts from DailyFinance, the Ticker Report and 1492 Capital Management. This company provides the infrastructure for collecting, analyzing and delivering data to users, via web-based and mobile technology. Still a fairly small cap firm at $1.19 billion, CalAmp has pretty strong fundamentals, a diversified portfolio and an active plan going forward. Major acquisitions and collaborations, all within the tech industry to further drive their data analysis offerings (especially within the trucking industry) point to a greater expenditure of effort into the IoE. If IoE takes off, CalAmp (and your portfolio) could be poised for rapid growth.

Qualcomm (NASDAQ:QCOM) is another company that earns a huge bulk of their income from wireless technology and patents, on top of production of their Mobile Station Modem (MSM) chips that are used a lot of smartphones and tablets today. Strong fundamentals and growth prospects are also boosting investor confidence in Qualcomm, endorsed by Stockhouse, Investorplace and Hendershot Investment.

ARM Holdings (NASDAQ:ARMH) is a company that designs chips – a design that already exists in 95% of all smartphones. ARM is poised to monopolize design of the kind of silicon chip that will be used in a lot of the IoE’s smart objects in the future. Morgan Stanley has endorsed this stock as one of its picks for the IoE.

Skyworks (NASDAQ:SWKS) is a semiconductor company that has worked with clients like Sony, Motorola, Cisco, Google, Apple and so on. Its semiconductors are already used in a wide range of applications, from smartphones to GPS, from lighting solutions to synthesizers. Three investment gurus from Nasdaq have added Skyworks to their portfolio, and the price of Skyworks has more than doubled over the last three years.

Still seems a little scary? Feel unfamiliar with all these names? Not to worry, because the IoE is an all-inclusive phenomenon. Chances are that you already have one of the stocks that are likely to profit.

Of course, I’m talking about our big tech companies.

Google (NASDAQ:GOOG)is leading the fray with their $3 billion acquisition of Nest, a start-up that invented the smart smoke alarm (once hooked up to Wi-Fi, it can tell the user which room smoke is coming from, if the alarm is going off, detect levels of carbon monoxide and so on). This is indicative of Google’s optimism of the IoE future. Google also stands to gain from their major share in cloud computing technology.

Of course, gadget giant Apple (NASDAQ:AAPL) is also pushing its way in, with advancements such as Bluetooth smart technology.

Other big tech companies like IBM (NYSE:IBM) and Intel (NASDAQ:INTC) are also gearing up not only for technological advancements but to also provide consulting services in helping companies integrate M2M networks into their systems. IBM in particular has positioned itself at the forefront the intellectual development of M2M technology in its collaboration with Italian firm Eurotech on creating an open-source M2M protocol for educated programmers.

Last but not least, if you’re as optimistic as Jeff Chambers is, you might consider putting your money with the self-proclaimed leader of the IoE – Cisco (NASDAQ:CSCO) itself. Cisco is a worldwide leader in networking, which is extremely beneficial when you consider the amount of network support needed to send a bajillion gigabytes of data all across the globe, all the time.

Taking Action

Whether or not you’re deciding to jump into the IoE, watch from afar or wade in slowly, the IoE is definitely an area for further research for the wise investor. Get familiar with the bits and pieces that are building up this new empire, and who knows? The IoE may just be the next best thing to happen to your portfolio.

Remember to add some IoE stocks to your watchlist on TradeHero to keep up with the action!

Image credit: www.cloudtimes.org