Smart homes and buildings are becoming increasingly popular with a projected market growth of 18% according to Acumen Researching and Consulting. The internet of things, and IFTTT (If this then that) has allowed for individuals to create systems that works together with minimal human intervention.
Automation and connected smart appliances have seen a huge rise in demand in recent years. Amazon recently acquired Eero and previously paid $1 billion to acquire Ring, a doorbell-camera startup. It had acquired Blink, a smart camera maker in 2017.
Google also invested heavily in the smart-home game a few years ago when it acquired Nest for 3.2 billion. Nest was quiet for a few years after its acquisition by Google but recently launched new temperature sensors, a video doorbell and an outdoor smart camera.
Smart lights, security, entertainment systems, and temperature control are the principle smart devices in demand. These products are surely to grow as we become more invested in energy-saving and healthy lifestyles.
Most of these smart devices work with voice assistants, but read carefully as not all are compatible, depending on your brand. Apple’s Homekit is an example of a software framework that lets you use a smart device with Siri.
Nest smart-home products at B&H
Here are the top companies developing smart homes products…
(A Top Pick May 09/18, Up 32%) They are a leading in the Cloud and the their membership sales are strong. Software is now a service.
Sony Corp. ADR (SNE-N)
They offer a suite of voice assistant enabled smart products that help automate the home. You can even control your Sony TV through Google Home.
One of the world's giants in consumer electronics. Very fine company. Starting to see the old stodgy management change. There's an American who's running it now.
Homekit, along with the Home app, is the company’s smart home system used as a platform for iOS user. The platform brings multiple devices together and coordinates their actions.
Own a position in a high-quality company like this and hold for the long term, then add when the street is critical of it. They have a ton of cash and are a great innovator.
A leader in e-commerce and they sell smart home solutions that also works with their voice assistant, Alexa. They help you get what you need to turn your home smart, and a way to control everything.
Amazon vs. Disney. Both in streaming. Both have long-term growth potential. Revenues are growing above average. Seasonally, high-growth technical names can do well in the summer. So this tells you that, as a tie-breaker, Amazon is better for the summer.
Alphabet Inc. (A) (GOOGL-Q)
They acquired Nest and is a big player in connected home devices. Many devices connect through their Google Home platform.
It is a fine company. It is on his watch list. He does not own it because of his concern with regulatory issues. They have so much share of search that it attracts the attention of regulators. He anticipates the separation of YouTube from Google Search and that would not be good. Wait for some…
Some stocks not on Stockchase are also worth mentioning : Alarm.com NASDAQ: ALRM, Control4 NASDAQ: CTRL and Sonos NASDAQ: SONO are among many smart-home stocks you should watch. Other companies are also involved and benefit from the home automation rise in demand even if they don’t develop consumer products themselves, here are more smart-home related stocks :
Canon Inc. (CAJ-N)
Smart all-in-one printers are the mainstay of a smart-office. Canon offers multiple solutions for big and small sized companies and help automate the workplace.
A supplier of billing and back-office support for telecommunication and cable companies. They offer real-time intelligence capabilities for contextualized customer engagement.
Logitech International SA (LOGI-Q)
Harmony Hub takes all your devices and lets you control them with your smartphone. They are working on creating a universal controller.
A great brand name for computer accessories. Also a great way to participate in the global move to wireless Bluetooth, game stations and Xboxes. A great entry point.
Marvell Technology Group (MRVL-Q)
They produce storage, communications, and consumer semiconductors. Their digital semiconductors for consumer communications is used in smart home technology.
Silicon Laboratories Inc (SLAB-Q)
A semiconductor producer that is used widely in cell-phones and smart devices.
They create chips that power the smart home devices. They have good technical support, and could break out, but semiconductors have done poorly recently.
(A Top Pick Oct 17/17, Up 22%) He likes the support technically and the 2.5% dividend yield. It is not as cyclical as AMD and others in the space. His model price is $80.51.
A strong player in the IoT space, offering connectivity and machine intelligence to smart home technology. They offer security and automation technology to consumers.
A leader in this space. Qualcomm bought NXP, but that's mired in the current US-China trade dispute. Meanwhile, Qualcomm came down. So he bought an option. Try buying an option going 2-3 months. Pays a yield of 4.3%.
They’re focusing on home security and automation systems to protect your home and family.
Looks a little bit like a value trap. A competitive business. Subscriber growth is flattening out. The company keeps on adding debt every year. There is not a lot of dividend coverage. Not a fan of the sector. (Analysts’ price target is $34.35)
AMERICA MOVIL, S.A.B. DE C.V. (AMX-N)
They are working on 5G technology and are working to commercialise smart products to tap into the IoT universe.
Gaining continus scale. Penetration is still going very strongly, as well as having several ventures in Brazil.
Home Depot (HD-N)
You can get everything you need to connect your home. They’ve profited from the DIY boom and smart homes could be the next big thing.
(A Top Pick Jun 29/18, Down 4%) A play on household formation in the US. With tax reform last year and with HD-N having plans to increase dividends (maybe over 25% growth), he will continue to hold it.
Best Buy Company Inc (BBY-N)
A name synonymous with consumer technology. They offer a wide variety of smart homes devices, and smart home systems.
Has a massive presence online. Probably trading at 4 or 5 times earnings compared to Amazon at about 100 times. Thinks people are overly pessimistic about this company. No question their business is in decline but maybe they’ll turn it around.
Office Depot (ODP-Q)
They offer a smart home and office installation service that installs and connects Google and Nest products to you building.
Audiovox Corp. (VOXX-Q)
A custom home automation and consumer electronics company. They are working on connecting residential and commercial properties.
No debt and $160 million in cash, a little over $7 per share. Chairman owns 20%. Not widely followed.
Comcast Corp (CMCSA-Q)
Its Xfinity brand has driven their smart home products. They specialize in smart voice-drive TV experiences. They also have partnerships with home security and smart lock companies.
(A Top Pick April 27/16. Up 24%.) This just did a 2 for 1 stock split last week, and continues to have huge market leadership. They continue to roll out the X1 Infinity Operating system. This has a pretty captive audience and a really good subscriber rate. It should be part of everybody’s portfolio. Still…
ABB Ltd. (ABB-N)
A Swedish-Swiss multinational that develops robotics, power, and automation technology. They are working on building smart grids. These grids are adaptive and responsive, and many current infrastructure needs replacing. These smart grids have a big potential when these infrastructures are redone.
These big capital equipment companies are obviously fairly late cycle plays because the people who buy stuff from them have to feel confident and have the funding to do so.
Honeywell International (HON-N)
They have consumer smart home solutions, including thermostats, and security systems. It has a good management team and they have good branding.
It has been a great company and is well run. It has left GE-N in the dust. The history of spinouts is that after the original dumping of stock investors got, spinouts outperform other parts of the market. You might even buy more of it.
General Electric (GE-N)
They have smart outlets and security systems. However, it’s been beaten down a lot, and analysts are wary. They are not cash flow positive, and the business is trying to sell off assets trying to survive.
Destruction of capital. You don't want to be in a position where you're selling off your trophy assets. He wants to buy top-quality companies with great management, and that's not happening here. Buffet says "turnarounds seldom turn," so he tries to avoid these situations.
Johnson Controls (JCI-N)
An automotive batteries and electronics, and HVAC equipment producer. They also have their building automation system. The system helps keep occupants safe and productive.
Eaton Corp. (ETN-N)
Provides engineering equipment to different companies. They are a key player in the global human machine interface (HMI) race. HMI is a growing market especially due to the rising demand for lower expenses.
Trading at quite a low multiple because of the perception that it is a trucking supply company. Have done a great job of diversifying away from this over the last 5 years, mainly through acquisitions. 75% of their business is not related to the automotive side, but is an infrastructure play. Strong balance sheet.
They manufacture electronic instruments and electromechanical devices. They make monitors for many industries, including pharma and oil. A leader in highly engineered electrical connectors.
Likes industrials. He used to have a decent weighting, but with the recent run-up in industrial companies in the US, he sold a great many of them, but kept this one. It is a high-quality multi industrial. Their forecast this year is to grow zero to maybe +4%. Over time they have shown the ability…
Anixter International (AXE-N)
A communications and security products company. They offer a full-line solutions. A leader in helping businesses and communities build reliable systems.
This is a feeder into the global industrial growth. They make and are distributors of communication products, wire and cable products. About 15% of their businesses is C class parts consisting of nuts and bolts, screws, etc.