The wearable device industry is still in its infancy as companies learn what kind of products resonate with consumers. Former hits like Fitbit's tracker or the Nike Fuelband are giving way to smartwatches that offer more information than just steps or calories for the day.
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Product extensions and niche applications are also starting to pop up, allowing companies to fill them with innovative solutions. As investors look at wearables in 2018, there are three stocks that offer compelling value for investors.
No company makes wearables on the scale of Apple (NASDAQ: AAPL). In two and a half years on the market, Apple Watch has become the flagship smartwatch in technology. Apple doesn't release unit volumes for the Apple Watch, but estimates are that around 15 million watches have been sold in the last year, and the company is already among the biggest watchmakers in the world by revenue.
What makes Apple so intriguing in wearables is that the watch is just the beginning. AirPods can be tied directly into a cellular-connected Series 3 Apple Watch, allowing the user to remain in touch with the world without carrying a smartphone. A product like AirPods may not seem like a wearable, but as a user I find myself wearing them most of the workday, just to have quick access to phone calls, podcasts, or music I'm listening to. In that sense, the combination of Apple Watch and AirPods has become indispensable.
We don't know what wearable devices Apple is working on, but I wouldn't be surprised to see the platform expand. Glasses with augmented reality or a full virtual reality headset could be on the horizon, given the technology Apple has already released. What's clear is that Apple's effort to dominate wearables is far from over.
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Apple is the wearable company with a wide reach, but Garmin (NASDAQ: GRMN) is a wearable company with more niche applications. Its watches are standard for athletes who run, bike, swim, and do triathlons. Marine, outdoor recreation, and even cameras are also markets that Garmin targets in wearable devices.
What's nice about Garmin's wearable business is there are distinct use cases for its products. As an example, doing a triathlon with an Apple Watch is possible, but a Garmin Fenix watch is specifically built for triathlons and is durable and has enough battery life to last for a long race. Owning those niches will give Garmin a valuable position in the wearable market.
My surprise wearable pick isn't a wearable company at all (at least not directly). Verizon Communications (NYSE: VZ) is the wireless company that will connect millions of wearables to the world over the next decade. Today, watches from Apple and Samsung are leading the charge to connect watches to wireless networks, but that could be just the beginning. In the future, augmented or virtual reality glasses could stream data directly from 5G wireless networks. We could be wearing medical devices that provide real-time medical data to service providers.
It's not really clear what next-generation wearable devices will be released over the next few years, but I think it's becoming obvious that fast wireless networks will be an enabler of new technology. Verizon is a leader in the industry and its investment in 5G networks will help drive wearables to a new level. That's why this is a great investment in the future of wearables.
Wearable tech is finally ready for prime time
Wearable technology isn't yet as commonplace as a laptop or smartphone, but the segment is growing quickly as products improve. That presents an incredible opportunity to companies that can build wearable products people want to use. Apple and Garmin have strategies that can win in the market, and Verizon is the platform millions will use to connect those devices. That's why they're the wearable stocks I would buy today.
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Travis Hoium owns shares of Apple and Verizon Communications. The Motley Fool owns shares of and recommends Apple, Fitbit, NKE, and Verizon Communications. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.