Jim Simons is one of the best stock pickers on the planet.
In 1982 he founded the Medallion Fund. Since inception, the fund has generated more than 35% returns annually for clients and today it’s one of the largest hedge funds in the world.
This is why I always pay attention to what stocks Simons is buying. And right now, he’s making some interesting bets on the technology sector.
How to stake your claim in the new Internet gold rush
Today, more than 99% of all things in the physical world remain unconnected to the Internet. But soon just about everything—from cars and televisions to dishwashers—will be online.
Simons has been quietly backing a new theme out of Silicon Valley called the Internet of Things, or IoT. In essence, the IoT is simply the connection of everyday objects to the Internet. And in recent quarters, he has built huge stakes in companies on the front line of this revolution, such as IBM, F5 Networks, and Sierra Wireless.
Simons has also just picked up a new position. Last week, SEC filings revealed that the billionaire investor boosted his stake in BlackBerry Ltd (TSX:BB)(NASDAQ:BBRY). As of December, the Medallion Fund owned 3.3 million shares valued at US$35.9 million.
Simons’s disclosure is unexpected. BlackBerry is better known for its cash-hemorrhaging smartphone business. Few investors expect the company to last long against tech giants like Apple and Google.
However, this narrative is becoming out of date. Since taking the helm at the firm last year, new Chief Executive John Chen has put BlackBerry on a solid financial footing. Now, he has declared the IoT as the new strategic focus for the company.
Last spring, BlackBerry announced Project Ion. The initiative consists of three parts: supporting the IoT ecosystem, creating a secure platform to run QNX software, and partnering with other top players in this emerging industry.
To put it simply, the company wants to be the connective tissue in the larger IoT nervous system. Rather than building the interface that consumers interact with, BlackBerry is building the infrastructure needed for all of these devices to talk to one another.
And the market here could be huge. For instance, networking giant Cisco Systems predicts that by 2020…
- The IoT will add US$19 trillion to the world’s gross domestic product.
- The worldwide IoT market for products and services will grow threefold to more than US$3 trillion.
- The number of devices connected to the Internet will pass 50 billion, up from about 10 billion devices today.
BlackBerry is well positioned to lead this revolution. The firm’s QNX operating system is already counted on to run medical devices, nuclear power plants, and vehicle infotainment systems. No other company can match BlackBerry’s reputation for security.
So, while most investors are still focused on capturing the 5 billion handsets in the world, BlackBerry is setting its sights on the 500 billion or so other devices that are out there. That presents a giant opportunity for an organization with the experience and track record of QNX.
This could be bigger than 3D printing, the personal computer, or even the iPhone
Judging by Mr. Simons’s positions, he is definitely optimistic on the IoT. Even if the market is only half as big as some analysts are predicting, the potential could still be enormous. That means big profits for investors willing to back this emerging industry.
The IoT trend is here, and the largest companies in the world are focusing on “connectivity.” I suggest adding a few IoT players like BlackBerry to your portfolio right away.