With the Internet of Things, Unintended Consequences Could Be a Rich Opportunity for Investors

Unlimited connectivity creates security holes that need plugging.

Jul 8, 2014 at 7:00PM

We can all agree that the Internet of Things is going to be massive, connecting billions of devices and unleashing trillions in potential market value. Presuming, of course, that we don't destroy the world's networks in the process.

Every gold rush has a lead lining
Avoiding disaster is going to take serious effort. According to a recent study commissioned by Infoblox, 90% of the of 400 U.S. and U.K. tech pros surveyed said their companies are already taking steps to support IoT projects. Yet 63% of that same group describe IoT as a threat to network security. How big a threat are we talking? Consider the deployment statistics:

  • Gartner expects the installed base of Internet-connected devices to grow to 26 billion by 2020, up from just 0.9 billion in 2009.

  • By 2018, the majority of homes are expected to have about 200 devices hooked into the Internet of Things.

  • The McKinsey Global Institute pegs the 10-year economic impact of the Internet of Things at between $3 trillion and $6 trillion.

Impressive stats, no doubt. And yet the act of rapidly expanding network capacity to support IoT projects is certain to introduce blind spots. As Infoblox Chief Infrastructure Officer Cricket Liu put it in a press release announcing the study's findings:

"With so many objects and IP addresses being added, it's important for network teams to keep track of what's on their network at any given point, and also to bear in mind all these objects and IP addresses are potential weak links in an organization's IT infrastructure."

Fine-grained security matters
Who will plug those holes? That's tough to know, but I also think it's fair to say that traditional Internet security -- based on detecting unusual traffic patterns and network behavior -- won't be as useful. The Internet of Things will establish entirely new patterns, making it easier to hide vulnerabilities.

You can bet that every digital security vendor is working on a strategy for combating baby monitor hackers and other IoT miscreants. These two could be better positioned than most:

1. Check Point Software Technologies (NASDAQ:CHKP). A leader that's been executing well for two decades, Check Point helped birth the network firewall. Today the company serves more than 100,000 businesses worldwide, including the entire Fortune 500. No single company has more to gain from securing the Internet of Things.

2. Palo Alto Networks (NYSE:PANW). The market visionary according to Gartner, and, in my opinion, the most likely to craft a solution for the problem of identifying miscreants in the Internet of Things. Why? Rather than scan for patterns, Palo Alto looks for context via patent-pending device and user identification technology. Who's online? What devices are on the network? What apps are in use? In a network of billions, fine-grained access and control may prove to be an important advantage.

The promise of a hyper-connected world comes with a cost. For investors betting on the right stocks, that's a rich opportunity.

An even bigger opportunity is on the horizon ...
ABI Research predicts 485 million of a new breakthrough type of device will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see what this new smart gizmo looks like, just click here!

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends Check Point Software Technologies and Palo Alto Networks. The Motley Fool owns shares of Check Point Software Technologies. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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