The “Internet of Things” is sure getting a lot of attention these days — most people throw around the forecasted numbers of $17-20 trillion as the market for this new technology, in which everything is interconnected and data is collected about you and your appliances and the roads you drive on and, well, everything. Even Donald Trump is in on the action, at least when it comes to newsletter hype — he was pitched as the owner of a big “internet of things” company last week, and we covered that in the Friday File.
But today it’s an ad from Jon Markman we’re looking at — he talks about a bunch of internet of things companies and trends, and ends up hinting at three stocks in this “sweet spot” and then more specifically pushing you to buy four others that he calls “Shockwave Stocks” for this sector. We don’t often write about Markman, because he’s more likely to talk about short-term trades and technicals and charting than about fundamental reasons for investing in specific stocks, but he has been around for a while.
So, instead of subscribing to Tech Trend Trader (for which he’s now asking $1,697), we’re going to figure out the stocks for you and give you the names and tickers and, if I’ve got one, a quick opinion or some background… then you can think for yourself.
Which is still free, thankfully.
Here’s how Markman gets us excited about the big idea:
“The New Investing ‘Sweet Spot’ In the Internet of Things
“You see, when most investors think about the Internet of Things, they get all excited about the “things”. Those James Bond gadgets that make cool things happen.
“But the truth is that the real profits are NOT in the “things ” …
“What’s propelling the Internet of Things into a blockbuster blowout isn’t the creation of the gadgets and gizmos and things, such as our fitbits, our smart phones and iPads.
“Instead, the Internet of Things is going in a whole new direction … taking the $1.9 trillion a year ‘device’ market into a $19 trillion a year ‘connected’ market in less than a decade!
“This utter transformation will unleash a frenzy of profit potential as companies — seasoned tech giants as well as new tech innovators — rush in to create the software, the applications, the networks and the structure to connect the whole world into the Internet.
“It will be a massive cyber-infrastructure rebuild that will happen in just a few years. Imagine every ‘dumb’ everyday object is retro-fitted or replaced with the smart version of its former self.
“The effort to accomplish this retrofit will be huge.”
No real argument with that — I have no idea how fast things will move in our increasingly interconnected world, and we’re still doing a lot of guessing when we try to imagine who’s going to be in the “sweet spot” when it comes to actually turning this big wave of connectedness into profits… but we’ve got a lot of sniffing around to do, so let’s get right to it — we’ll look in and see which seven companies he hints at in his ad:
“One company is south of D.C. but has a major nationwide impact in keeping mobile traffic running smoothly. Since the start of 2015, shares of this Internet of Things company has more than doubled — up 118% — and it’s just getting started.
“This company controls more wireless spectrum than any other independent company, including a near-monopoly on the 5G/millimeter wave cellular spectrum that is expected to become standard in the early 2020s.
“When you consider the expansion of the Internet of Things and its vast hunger for spectrum, this company is sitting on a cash bonanza . With a $480 million market cap at present, it could be worth 5X more to your portfolio in the next seven years either on its own or as a buyout candidate.”
This one’s an interesting story, though it’s one I hadn’t paid any attention to before today — the stock being teased is Straight Path (STRP), and it was indeed surging this year, up well over 100%… but then Kerrisdale Capital released a scathing “short” analysis on Thursday last week and the stock gut cut in half, so it’s now, at $30, only up 50% on the year… and it has a market cap now of about $360 million. It does not have a “major nationwide impact” on anything at the moment, though STRP believes they will do so in the future.
Straight Path owns and is trying to develop spectrum assets in anticipation of a next wave of 5G demand for the next generation of communications, which could perhaps include “Internet of Things” stuff, and with the hope that that 5G networks will use their frequencies and mmWave technology, which I can’t say that I know anything about.
The company was spun out of IDT a few years ago as their next-generation spectrum “bank”, more or less (it was part of Winstar before that, this spectrum was mostly auctioned off by the government around 2000) and they aren’t likely to generate any earnings at least until there’s some clarity about whether their spectrum or technologies will be core to the next mobile networks, and that’s all beyond my ken. I would urge you, if you’re interested in this one, to at least read the report from Kerrisdale Capital and the press release and then “still in progress” rebuttal by Straight Path (click on “Investor FAQs” from this page) that they’re updating today — they also held a conference call to respond to Kerrisdale’s attack today, I haven’t listened to that.
STRP is all about the future value of their spectrum, which I don’t think will be known for a while — but, if Kerrisdale is correct, the value could be dramatically lower than investors expect. Straight Path does refer to 5G upgrades as a 2020 story in much of their investor materials. In the meantime, they don’t spend a lot of money on operations, so they can probably keep puttering along for quite a while without running perilously low on cash. Though the legal bill will probably be going up a bit this month.
“Another company headquartered in Luxembourg