The Internet of Everything, a vast network of devices like phones, watches, clothing and even toothbrushes – all communicating, all collecting and returning data – has been one of the biggest tech stories of the past five years.
But I’m here to tell you that it’s about to get even bigger, even more profitable, by an order of magnitude. That’s because the Internet of Everything is about to crack open the healthcare market, with small networked wearable medical, prosthetic, and therapeutic devices set to explode onto the market.
I’m talking about wearable therapeutics – or “wearapeutics.” It’s going to be a healthcare game changer.
Today, I’m showing you just how big the wearapeutics market is going to get – and the one investment you need to hold long term to get the most profits out of this exciting development.
Trillions in Untapped Potential
According to McKinsey Global Institute, the Internet of Everything-based consumer market alone is likely worth $1 trillion. Factor in the healthcare and medical side, and you’re talking another $2 trillion.
And all this before taking into account the potential movement into other industries, like energy, transportation and agriculture – just to name a few.
But it’s the IoE’s move into healthcare that’s the most exciting.
You see, right now, digital healthcare and wearapeutics is a “small” market, worth about $5.7 billion in 2015, according to IoE marketing research firm Parks Associates.
But a decade from now, this segment alone is expected to be worth $97 billion. That’s a compound annual growth rate (CAGR) of 33%, which is to say 33% growth every year for 10 years.
This is a conservative estimate, too, so any way you slice it there’s a huge opportunity up for grabs here.
But profiting from wearapeutics isn’t as straightforward as picking a company with one cool new sensor or the best real-time glucose-monitoring software. To get the maximum profit from this trend, investors need to “go big” and own something fundamentally important to all this growth.
In other words, the best play on this trend is to buy the infrastructure on top of which the wearable therapeutics market will be built.
Here’s what I mean…
Stake Your Spot
The shares I’m going to show you represent a ground-floor opportunity to participate in wearapeutics – the next leg upward for semiconductor makers.
This fund is already packing serious performance. In the past year, it has risen 21% in an extremely soft market.
It embodies all the innovation underway in wearapeutics and the wider IoE field, so there’s plenty of diversity here.
There are small, specialized semiconductor makers, and there are very big ones. Some are major mobile players, and others are taking real-world information (location, activity, weather conditions, heart rate) and creating a digital record in real time.
But large or small, semiconductors are the single best way to play the emerging wearapeutics trend, and the best way to invest in such chips is, hands-down, the exchange-traded fund (ETF) iShares S&P NA Technology Semiconductor Index Fund (Nasdaq: SOXX).
SOXX tracks the U.S.-traded semiconductor stocks in the PHLX Semiconductor Sector Index. This gives it broad exposure to some of the biggest semiconductor manufacturers in the world. That’s critical, because semiconductors are essential for getting wearapeutics, and indeed the wider IoE, to its fullest potential.
SOXX gives you access to them all – 30 of the best semiconductor firms in the world. Just check out a few of the names in this basket of companies…
You Can Have Them All
I won’t list all 30 firms here, but to give you a good idea of the scope of the opportunity here, I’ll run down four of the most dynamic, profitable companies this fund holds.
First up is Texas Instruments Inc. (Nasdaq: TXN), the “granddaddy” of semiconductor stocks and the biggest holding in SOXX. It started out as an oil and gas company in the 1930s, but with the onset of World War II in the 1940s, Texas Instruments broke into the aerospace business – avionics for U.S. warplanes, specifically.
TI grew in part because it kept pace with digital technology, such that by 1958 the company’s R&D lab produced the world’s first integrated circuit – the foundation of semiconductors.
Nowadays, TI is the leading producer of analog and digital chips, the chips that convert “analog” information (human activity) into a digital format. Of its $13 billion business, $8.3 billion of its revenue comes from analog chips.
In the “wearapeutics” space, this capability is essential for accomplishing things like monitoring vital signs or even neuromotor signals in the human body and translating that to meaningful (for devices) digital information.
One thing I love about Texas Instruments is the fact that this company is still plowing a whopping 10% of its revenue back into R&D, an impressive feat.
One the other end of the scale is ON Semiconductor Corp. (Nasdaq: ON), which is more than 10 times smaller by market cap than Texas Instruments.
But make no mistake, this company punches far above its weight.
ON started as a spin-off from late, great tech giant Motorola. And then it started buying companies, at least one acquisition a year since 2006.
Now it is a leading name in automotive, wireless, industrial IoE, power conversion and motor control. These are some of the biggest growth sectors moving forward. Smart cars and smart manufacturing alone are demanding ever-increasing complexity, and the advent of wearapeutics and other wearable tech is only going to intensify that demand.
I’d count on ON to deliver in spades.
In the past six months ON shares are up more than 30%, which is a pretty big clue as to what the “smart money” sees in this innovator. Margins continue to expand, and it has plenty of headroom from here.
It’s pretty clear, given its name, what Analog Devices Inc. (Nasdaq: ADI) specializes in. It makes sensors, algorithms and software that converts non-digital information to digital, which can then be shared across networks and devices.
ADI’s industrial, automotive and communications infrastructure segments are doing very well, and that should be the case for quite a while, given these segments are essential to IoE infrastructure build-out.
Analog is major player in the small-cell communications space, which the company sees growing handsomely in the next few years. Small-cell communications pushes signals from low-power transmitters so that signal strength can be good over a range of 30 feet out to just over a mile. In a sphere where many different devices in the same house are going to be communicating, this is huge.
Qorvo Inc. (Nasdaq: QRVO), the “new” company arising from the 2014 merger of RF Micro Devices and TriQuint Semiconductor, rounds out the aces up SOXX’s sleeve.
Its niche is radio frequency (RF) devices for mobile, military and original equipment manufacturers (OEM), making it a top player in this important segment.
Defense contracts in particular are good to see because (usually) the company has to manufacture robust products. Those products, once adopted and “proved out” by the military, go on to become highly valuable technologies for the business to business (B2B) and consumer markets. Defense contracts usually mean a good, solid revenue stream as well.
RF is gaining more attention from OEMs as mobile devices are becoming more data-driven. As we head from 4G to 5G LTE signals, RF plays an increasingly vital role.
Qorvo is an enthusiastic player in the small-cell market as well. A small company, strategically placed for monster growth, is hard to beat.
Right now, at the dawn of wearapeutics and digital healthcare, any of these companies on their own would be a smart bet. But as this growth reaches its fullest potential, owning all of the biggest players is a move your grandchildren will thank you for.