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It’s BlackBerry Ltd. vs Sierra Wireless Inc. in the Battle for the Internet of Things

Over the past few years, some of the world’s smartest money managers have been quietly accumulating positions in a little-known corner of the tech industry. According to industry sources, this technology could be bigger than the iPhone, 3D printing, and even the personal computer. Early estimates predict this emerging market might soon be worth up to US$2 trillion.

Now their bet is paying off. Some of these companies have already reported blowout profits and this might only be the beginning. Let me explain…

How to strike it rich in the second Internet gold rush

Picture this…You wake up in the morning and your coffee maker automatically brews a fresh pot. As you drain the last drop of cream, your refrigerator orders a refill. Then after, you hop into the car and your vehicle dashboard sends an alert. There’s a traffic jam on the main drag, so your smartphone gives you an alternative route to work. Your office computer is notified and reschedules that nine o’clock meeting.

These ideas might sound farfetched. In fact, it resembles something out of a science fiction movie. The crazy part is that all of these innovations are possible today thanks to the Internet of Things, or IoT.

Simply put, the IoT is the connection of people and objects to the Internet. Today, more than 99% of all “things” are unconnected. But soon, just about everything you use—including your car, T.V., and appliances—will be online.

However, the household is just the beginning. For instance, the IoT could allow sensor-equipped shopping carts to improve a customer’s experience in a store and boost sales. Moisture detectors could manage irrigation systems to save water. Traffic lights could be remotely controlled to reduce energy use.

In short, the applications for cities, countries, and companies is enormous. For instance, Cisco CEO John Chambers predicts that by 2020

  • the market for IoT products and services could hit US$2 trillion;
  • the data equivalent of every movie ever made will be transmitted each minute; and
  • the IoT could add US$19 trillion to the world’s gross domestic product each year.

If that sounds like an opportunity to you, I’d have to agree. Even if the IoT only lives up to a fraction of the hype, companies that collect, store, and analyse all of this data are poised to make a fortune.

Sierra Wireless Inc. (TSX:SW)(NASDAQ:SWIR), an emerging company based out of British Columbia, is positioned to do exactly that. In essence, Sierra is building the nervous system of the IoT. Its wireless modules allow ordinary objects to connect to the Internet, creating the networks needed for all of these devices to talk to one another.

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY), too, is looking to strike its claim in the new Internet gold rush. Last year, CEO John Chen announced Project Ion—a series of initiatives designed to put the company at the centre of the IoT revolution.

“While there are five billion handsets in the world that we want to connect to, there may be 500 billion devices out there,” Mr. Chen wrote last year. “That presents a tremendous opportunity for an organization with the experience and track record of QNX.”

Connecting 500 billion devices to the Internet would generate an enormous amount of data. But if BlackBerry has its way, however, it can provide the tools to distill this deluge into actionable information. So, where Apple and Google have built the apps to gather these facts and figures, BlackBerry is working hard to organize all of this data into something useful.

The smart money is betting on the Internet of Things; should you buy, too?

Of course, I’m not the first person to spot this opportunity. Some of the world’s smartest money managers have also been quietly building positions in companies on the forefront of this boom.

According to SEC filings, billionaire technology investor Chuck Royce has accumulated an US$8.4 million stake in Sierra Wireless. Other hedge fund managers, including Prem Watsa, Irving Kahn, and Jeff Buick increased the size of their positions in BlackBerry last quarter.

What could have these money mavens so excited? I’d say it could mean only one thing: they see an epic rally ahead.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robert Baillieul has no position in any stocks mentioned. David Gardner owns shares of Apple, Google (A shares), Google (C shares), and Sierra Wireless. Tom Gardner owns shares of Google (A shares) and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares).

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