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…
Buy the current pullback? Admires it a lot. In the past decade, MSFT boasts a new, strong CEO and products, namely the cloud. A good stock.
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.
This is not only a technology company. Much of its earnings are coming from games and movies. Both those areas are very difficult to predict. He sees better value elsewhere.
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.
What return over 10 years? A good holding and finally trading at an accurate multiple. He bought this in 2006 at $9. You can hold this for the future. Apple will be a player in 5G that will demand a huge turnover in hardware (Apple phones). Apple also boasts on a sky-high customer loyalty rate.
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.
AMZN vs. MSFT Prefers Microsoft, and can justify the valuation at these levels, but wait for a pullback of 5-10% to buy. MSFT has a very strong balance sheet and net cash position. It's transitioning to a subscription model. Cloud business is growing well. For 1-2 year horizon, MSFT will continue to do well.
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.
There are always rumours about GOOG-Q acquiring TESLA. Don't buy GOOG-Q for this. Buy it for their expertise. There is a lot of money sloshing around in the market. There is nothing technically wrong with Google but he would not buy it because it is not seasonally strong.
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.
Unfortunately they have had a tough time. Camera division is doing extremely well. Coming out with new cameras. He is scrutinizing it hard. 4.2% dividend is safe. Strong balance sheet. If camera division takes a turn to the worse he would sell.
A supplier of billing and back-office support for telecommunication and cable companies. They offer real-time intelligence capabilities for contextualized customer engagement.
One theme she really likes is a company that provides products and services that other companies simply can't live without. This company is so ingrained with other businesses processes. They work with AT&T, BCE, Telus, Rogers and Vodafone. Do back-end billing, making sure you are getting charged what you are supposed to be charged for…
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.
Play on EM. Computer mice, trackballs, and controllers. Potential is driven by cloud, PC Gameplay, and explosion in content creators. Stock hasn't been moving much, and is basing right now. Should do very well. (Analysts’ price target is $47.00)
Marvell Technology Group (MRVL-Q)
They produce storage, communications, and consumer semiconductors. Their digital semiconductors for consumer communications is used in smart home technology.
He holds it personally and for his clients. He got in at $26.17. He was looking for 5G stocks and the chart looked good. A fairly recent purchase. If it break out above $28, it could go as high as $35. (Analysts’ price target is $29.33)
Silicon Laboratories Inc (SLAB-Q)
A semiconductor producer that is used widely in cell-phones and smart devices.
(A Top Pick Jan 26/05. Down 36%.) Face the opportunity for single chip cell phone technology to penetrate the low end of the market. Went up 30% and he sold. Looking at it again.
They create chips that power the smart home devices. They have good technical support, and could break out, but semiconductors have done poorly recently.
He is not a big believer in INTC just yet. PCs still make up 50% of their business -- a real anchor these days. In terms of manufacturing they used to have a key advantage, but their have given up that leadership position to Taiwan Semiconductor.
A strong player in the IoT space, offering connectivity and machine intelligence to smart home technology. They offer security and automation technology to consumers.
QCOM vs. MSFT His concern is that a lot of the passive money is driving the price of MSFT. Not cheap, almost 30x forward earnings for an 11-12% growth rate. If you own it, keep it. Or if you have too much, pare back. Qualcomm has done well, starting to outperform with the rest of…
They’re focusing on home security and automation systems to protect your home and family.
They bought Direct TV, which is losing subscribers; also have internet and wireless operations. They bought Time-Warner, so they're going into the streaming business, but have taken on a lot of debt to do that. They've sold some assets to reduce that debt which remains high. Pays a nice dividend though. In contrast, Verizon, sticks…
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.
(A Top Pick June 5/07. Down 8%.) Largest cellular company in Mexico. Their capacity utilization of the network is superior to many other global ones. Very Bullish on this stock.
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.
One of the largest home improvement dealers and a play on the health of the US housing market and low interest rates. Household formation is still increasing and there will always be a need for home repairs. Yield 2.22% (Analysts’ price target is $240.59)
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.
There is a pattern that could be called a Double Top, and from there it has been in a downtrend. You have lower highs and lower lows. Until the stock starts to consolidate, with no more lower highs or lower lows, and breaks past the last high and past the 200-day moving average, you are…
Office Depot (ODP-Q)
They offer a smart home and office installation service that installs and connects Google and Nest products to you building.
Has been outperformed by Staples. Global. Good balance sheet. Good cash flow. New management coming in.
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.
It is a steady performer. 15% per year dividend growth. The stock has traded in a range until recently when it broke out to new highs. The group as a whole is behaving well. He likes the combination of assets and their opportunity for streaming in this area. (Analysts’ price target is $51.00)
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.
Are they connected enough to green? They focus on smart grids, building grids that connect renewable projects. Now is an interesting time for grid development. Many, like Ontario's, are ancient and need updating. ABB is a play on smart (adaptive, responsive) grids, which are really expensive. If there's more infrastructure spending to update the grid…
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.
(A Top Pick Jun 27/19, Up 5%) He got stopped out in late-fall 2019 when it pulled back. Industrials will do well this year, though.
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.
Still on the sidelines. CEO is respected. Its engine business is being impacted with Boeing. Not sure what earnings and cash flow profile will be a year from now.
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.
(Top Pick Feb 6/17, Down 2%) He expects that it will probably get back to $42-$45. Typically auto does well until the end of May.
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.
(Market Call Minute.) He likes the industrials and this looks very interesting. They provide engineered equipment to different companies.
They manufacture electronic instruments and electromechanical devices. They make monitors for many industries, including pharma and oil. A leader in highly engineered electrical connectors.
Electronic equipment that makes monitors for many industries from pharma to oil. Established international company. ROIC rose from 14% in 2009 to 26% now. Stock is still cheap. $17B market cap. $3.8B in revenue. Consistent, well-diversified company.
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.
(Top Pick Oct 4/13, Up 2.40%) It is core industrial America. Just made an acquisition that will be accretive right off the bat.