3 ways to play the Internet of Things boom in 2017

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Telit chip technology

As far as investment themes go, it's hard to think of one as exciting as the Internet of Things (IoT) boom. With self-driving cars, smart cities and homes, and intelligent wearables, it's a rapidly growing industry that's set to see the number of connected devices grow from 13bn in 2015 to 50bn by 2020, according to some forecasts. 

Any new technology creates investment opportunities and I'm confident that the IoT will throw up many opportunities in the coming years for canny investors. And while many of the world's largest technology companies are listed in the US, there are plenty of ways that UK investors can get involved in the IoT - here's a look at three of them. 

IoT pure-play

For a 'pureplay' on the IoT, it's hard to look past £330m market cap Telit Communications(LSE: TCM).

Telit has a 30% share of the IoT module market, providing integrated end-to-end IoT solutions for corporates and enterprises. And not only is the company a specialist at designing and manufacturing IoT modules, but Telit is able to add further value through its services platform, feeding data into apps and business systems to provide real-time intelligence to its clients.

It has generated impressive revenue and earnings growth over the last five years, however unexpected delays to a new product line last year put a brake on earnings momentum and resulted in the company's share price taking a considerable dive.

It now appears the delays have been sorted out, and Telit recently announced that it expects FY2016 earnings to be between 26 and 30 cents per share. That equates to a P/E ratio range of just 11.9-13.7, which seems low given the company's growth history and exciting prospects. With the CEO recently purchasing more stock in the company and the share price resuming its upward trend, I believe now could be a good time to jump aboard this technology small-cap.

International stocks

For those looking for large-cap exposure, US stocks NVIDIA Corporation, Qualcomm and Sierra Wireless all offer considerable exposure to the Internet of Things.

NVIDIA, with its DRIVE PX 2 platform, looks to be a formidable force in the self-driving car market and the share price has risen around 300% in the last year as demand for the stock has soared. Qualcomm, better known for its Android chip prowess, recently spent $39bn to acquire Dutch IoT chip leader NXP Semiconductor, ensuring that it will be a key player in the IoT market going forward. And Sierra Wireless, the world's largest manufacturer of 2G, 3G and 4G LTE-embedded modules, has IoT exposure across a broad range of industries.

Whereas buying international stocks was complicated in the past, these days most brokers will allow you to trade international stocks in the same way that you trade domestic ones. So don't be afraid to invest overseas, although keep in mind that fluctuations in exchange rates can potentially add to or detract from your returns.  

Technology funds

Lastly, investors preferring a more diversified approach could look at funds specialising in the technology sector for exposure to the IoT. Two funds that come to mind include the Polar Capital Technology Trust and the AXA Framlington Global Technology Fund. These funds have returned 133% and 118% respectively over the last five years and the fund managers of both have emphasised the IoT as a key theme. 

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Edward Sheldon owns shares in Telit Communications. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.