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Here're the Hottest IoT Stocks for 2020

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This year is sure to be a lucrative one for those focusing on IoT, thanks to the exponential growth in IoT devices and services.

But IoT is not just about websites but several devices connected to the Internet for the purpose of gathering information, scrutinizing functionality and automating various systems. For instance, an IoT watch can monitor your health, while an IoT-connected doorbell can easily send you a message whenever someone knocks at your door.

IoT-enabled sensors can control traffic lights and can even be used in airplanes to report maintenance issues. In fact, IoT allows supervision or automation of almost anything — from light bulbs to automobiles to refrigerators to smart speakers at home.

The IoT market is widely expected to reach a worth of trillions of dollars by the end of this year, with nearly 20 billion IoT devices. The global IoT market, by the way, is anticipated to reach $1.6 trillion in the next five years.

Keeping an eye on every stock with an IoT story won’t be feasible for most investors. Thus, investing in some of the companies with a well-defined IoT business should prove judicious. Here’re the top three —

Honeywell

Honeywell International Inc. (HON - Free Report) is a diversified technology and manufacturing company. Most of us know Honeywell for smoke alarms. But the company is nowadays focusing on the Industrial Internet of Things (“IIoT”), which is nothing but integration of digital technologies into manufacturing.

Honeywell claims that IIoT will allow customers to get maximum benefit from industrial assets. A leadership study by Honeywell that polled almost 600 U.S. business professionals showed that 70% of them have invested substantial amounts in IIoT, and nine out of 10 believe such investments will yield profits.

Overall, the company is in pretty good shape. It has been able to generate more than $4 billion in cash inflows in the last five years. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

And the company’s expected earnings growth rate for the current and next quarters is at 6.8%, for both. In fact, the company has outperformed the Diversified Operations industry over the past year (+31.6% vs +26.9%).

Alphabet

Despite Amazon.com, Inc.’s (AMZN - Free Report) Echo posing tough competition, Alphabet Inc.’s (GOOGL - Free Report) Google Home smart speaker has gained market share of late. The IoT device by the way is fully automated and is not controlled manually. And if we go back to 2018, Google Home added 600,000 more users in the United States than Amazon’s Echo.

In fact, the provider of online advertising services is playing a leading role in the IoT space and has introduced consumer-based products such as Google Assistant for connected homes. Alphabet’s IoT investments are focused on creating cloud-based solutions and the company is leading in the field of AI.

Nonetheless, Injong Rhee who leads Alphabet’s IoT business said that “one of the major things I would like to do with my Google colleagues is to get their efforts coordinated and aligned toward a concerted IoT story of Google -- in the process, create distinct consumer and enterprise product lines.”

In itself, Alphabet is doing pretty well. The company is not only a leader in search market but is also generating solid cash inflows from its mobile initiatives and acquisitions. Alphabet currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 6.6%, higher than the Internet - Services industry’s projected increase of 4%. What’s more, the company has outpaced the broader industry over the past year (+32.6% vs +12.1%).

Apple

Apple Inc. (AAPL - Free Report) designs, manufactures and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. At the same time, it is a big name that controls the IoT market. Apple has entered the smart speaker space with its HomePod that certainly poses stiff competition to Amazon Echo and Google Home. The HomePod provides its customers with a centralized control center for their connected homes.

To top it, the iPhone maker has entered the consumer IoT market through its watches and the information it gathers through iPhone services like Apple Health. Such smart devices provide information on heart rate, foot steps taken and many more.

Further, the company through its HomeKit service makes its IoT version of its IoS operating system available to developers. The company is also tying up with companies from other segments, including automotive, retail and industrials, to develop IoS-based IoT products and services.

Apple is expected to be the best FAANG stock this year. This is because the iPhone maker will continue to benefit from momentum in its non-iPhone businesses, particularly Services and Wearables, strong adoption of Apple Pay and a growing Apple Music subscriber base.

Apple currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 10.7%, slightly higher than the Computer - Mini computers industry’s estimated rise of 10%. The stock has surpassed the broader industry over the past year (+107.1% vs +98.1%).

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