3 Stocks to Invest in The Internet of Things

By Markets Fool.com

The Internet of Things, or IoT, might still seem a bit hazy for some consumers. While most everyone has likely heard the moniker bandied about, grasping its seemingly unlimited possibilities is another matter. Imagine a world in which your home, car, city, and virtually every "thing" around you is interconnected. Welcome to the Internet of Things.

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Naturally, as the IoT becomes mainstream -- and significant strides are already being made -- there are tremendous opportunities for leading-edge companies such asCisco , Google and IBM . While these three tech behemoths are hardly alone in the world of the Internet of Things, each has already taken steps to lead their respective IoT sweet spots.

The world around us
Smart cars and homes are often the first solutions mentioned in discussing the Internet of Things. However, Cisco recognized early on that one of the fastest-growing markets within whatCEO John Chambers calls the Internet of Everything (IoE) is smart cities. One recent study suggests smart cities will become a $1.5 trillion market unto itself, and Cisco is already make inroads.

In addition to inking deals with some of the world's largest metropolitan areas, including Hamburg and Munich, Germany; Santiago, Chile; and Barcelona, Spain; Cisco recently announced similar deals here in the states. Densely populated cities such as San Jose, Calif., are implementing Cisco solutions to monitor air quality and to instantly alert citizens of public transportation alternatives.

Other projects in the works: connecting parts of Kansas City via sensors,and constructing "smart" commercial buildings that monitor themselves for fire, water leaks, and other potentially disastrous emergencies. With an estimated 1.1 billion connected "things" sold this year, and nearly 2.7 billion expected in just two years, smart cities offer tremendous revenue potential. Cisco is already ahead of the pack.

Next up, smart homes
Smart homes are one area that might not only rival, but possibly even surpass, the potential of smart cities. This year alone, according to Business Insider, smart-home sales will total $61 billion, and they are forecast to grow to a staggering $490 billion in just four years. While hardly the only smart-home player, Google has positioned itself as the undeniable leader.

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Google's focus on smart homes really took off with last year's $3.2 billion deal for thermostat, air quality, and alarm manufacturer Nest; but that was just the beginning. Google followed up the Nest deal by acquiring smart-home security specialist Dropcam, and then networking device developer Revolv.

Revolv helped Google solve one of the smart-home industry's biggest hurdles: how to get all those home devices to "talk" to each other. For smart homes to truly be "smart," all the disparate devices -- door locks, lights, security, and appliances, among others -- will need to communicate with one another. Revolv's "smart hub" solutions do just that.

As a result of its acquisitions and smart-home development efforts, Google is signing deals with some of the world's leading appliance makers and household item providers (door locks, lights, etc.) to sync virtually every item in the world's homes. With Nest as the hub, and the growing number of agreements with leading home device suppliers, Google's smart-home efforts are already showing signs of life; and it's only going to get better from here.

What to do with all that data
A significant ancillary benefit to IoT, as digital advertisers such as Google know firsthand, is the unprecedented amount of data to be collected, analyzed, and ultimately utilized. Of course, the "utilized" piece of the IoT data equation will require extremely powerful computing solutions. Which brings us to IBM.

If investors had any questions regarding CEO Ginni Rometty's commitment to the Internet of Things as one of IBM's "strategic imperatives", those were answered unequivocally last week. IBM announced it would invest $3 billion over the next several years to fund a new IoT business unit. In conjunction with IBM's fast-growing cloud business -- which is currently tracking to $3.5 billion in annual sales -- IoT will become a legitimate growth driver.

Toss in IBM's existing Watson supercomputer and Big Data capabilities, and making the transition to becoming a leading player in IoT data management is a natural. IBM has already inked deals to help some of the leading companies on the planet manage their "smart-generated" data, and those are just precursors of things to come.

The Internet of Things is on the verge of becoming a huge market, and Cisco, Google, and IBM are primed to lead their respective IoT niches.

The article 3 Stocks to Invest in The Internet of Things originally appeared on Fool.com.

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems, Google (A shares), and Google (C shares). The Motley Fool owns shares of Google (A shares), Google (C shares), and International Business Machines. 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.