FREE MONEY

FROM THE

INTERNET

OF THINGS

2

By George Gilder

The concept of the internet of things is difficult to grasp for a lot of people, especially those who wouldn’t consider themselves tech insiders.

Isn’t everything already on the internet? How can things be on it? Will that make things sentient? How could a sidewalk be online?

All valid questions.

To understand what the future of what the internet will look like, it’s im-portant to be clear on which phase of internet connectivity we’re in now.

In today’s world, we use M2M communication, or machine-to-machine communication.

It’s basically connecting any device with an on and off switch to the Inter-net, and to each other.

Some say we’re sitting inside the internet of things (Iot) right now. After all, you can control your home security cameras from your smartphones. You can program your refrigerator’s ice machine from your computer, set your washer and dryer on a timer, and record the steps your body takes during the day from a watch on your wrist.

Of course, its usefulness expands to cell phones, coffee makers, head-phones, lamps, wearable devices — almost anything else you can think of in your home, car or what you wear on your person.

That explains why Bain Research predicts the market for the Internet of Things will reach $520 billion by 2021, especially if it’s assisted by the rollout of 5G.

Free Money from the Internet of Things

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However, one of the biggest barriers in IoT implementation is — you guessed it — cybersecurity. Linking every insecure device in the world to the insecure internet has obvious pitfalls.

And since we know that problem is in the process of being solved — thanks to the emergence of the Cryptocosm — we can trust that IoT will become the standard way of life sooner than most people think.

And that’s how we’re going to benefit from the knowledge that the inter-net as we know it has had its day.

By investing in the companies that have their sights set on the Internet of Things — just one of the many by-products of the blockchain.

Let’s break down both companies and why their current practices make them the strongest bets for the future.

Smart Picks and Shovels for Smart Devices

TRENDS: IOT, AI

[Please note: We recently sold our initial recommendation — Kemet (NYSE: KEM) — for a spectacular Moonshot gain of 36%!]

Our new recommendation comes from Israel (no surprise there).

For nearly 25 years, Ituran Location and Control Ltd. (NASDAQ: ITRN) has been recognized as the global leader in vehicle tracking via GPS, with products and services for private car owners, fleet management, automo-tive finance, and stolen vehicle recovery.

There are several particularly interesting aspects of Ituran’s solutions.

On the driving front, for example, is the company’s integration of another Israeli company’s technology — Mobileye (now a subsidiary of Intel). Itur-an’s SAFETY system relies on Mobileye’s deep learning-enabled real-time monitoring and analysis of driving behavior (e.g., acceleration, braking, turns, sudden lane change, passing other vehicles, speed, speed-bump crossing, traffic-circle passage, etc.). This technology is used to prevent collision incidents via Ituran’s automatic response mechanism and a con-tinuous improvement feedback loop to improve driving behavior.

Another, addressing the fact that GPS and network-based cellular systems

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are prone to jamming by nefarious actors, is Ituran’s novel approach, which makes its products inherently resistant to such attacks. Instead of using GPS satellite positioning, the Ituran technology uses positioning between terrestrial base stations to triangulate location.

By employing “spread spectrum” to create secure connections (the scheme invented by Hedy Lamarr also during World War II), the systems are resistant to both natural interference and jamming. This is because its randomly coded signal is difficult to detect and decode by an interloper.

Why does this matter?

Enter another critical market segment for Ituran — fleet management.

It turns out that jammers are a weapon of choice for freight truck thieves. In short, the jamming devices make their targeted trucks “disappear” from fleet management monitoring systems. Ituran’s solutions make these vehicles invisible to the jammers!

And should a vehicle become stolen, the company also provides vehicle recovery and tracking services for its subscribers, which number nearly two million now, primarily in its dominant markets, Israel and Brazil (but quickly spreading throughout Latin America), with customers in over 20 countries.

So, Ituran lives at the rapidly mushrooming intersection of location-based services, cybersecurity security, and the connected car market, the latter of which is expected to grow by 16%, every year, over the next five years.

The fruits of this positioning are already appearing on the company’s bottom line, showing extraordinary growth. This is shown through the company’s net income which has:

• Grown by an average of 20% over the past five years

• Surged 34% over the past three years

• And risen 38% over the past year.

This puts it among the fastest growing companies in the world.

Moreover, it pays an attractive 3.8% dividend, offering a rare combination of growth and income.

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Despite these qualities, the stock is exceptionally cheap, selling for a price-to-earnings ratio of about 10, roughly half the market price. This is the perfect time to buy.

The only qualification is that Ituran does not trade as actively as the other stocks in the portfolio. For that reason, I recommend using a limit order to avoid chasing the stock.

Action to Take: Buy Ituran Location and Control Ltd. (NASDAQ: ITRN) below $30 per share, and do not use more than 1% of your funds dedicated to this strategy.

How to Train Your Smart Device

TRENDS: 5G AND IOT

We’ve already talked about the importance of network security. We know what this means for the protection of new 5G networks. But there’s one company that is also taking network security into the IoT space.

Allot Ltd. (TLV: ALLT) is an Israeli company that provides advanced net-work security solutions.

Essentially, the company’s core technologies examine network traffic to detect and eliminate threats.

It also provides a service specifically designed for the needs of IoT devices.

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This IoT security service records the normal behavior of an IoT device, and then monitors the device to detect when it starts behaving strangely.

Customers can also set how they want the device to function on a net-work, and the IoT service will monitor it for differences.

It uses this same technology for mobile devices. Allot provides network security for Vodafone, a strong partnership that began in 2014 and has quietly spread throughout Europe. The company’s product is now avail-able in eight European markets, and blocks more than 150 million network threats every year.

Allot is only a very small player in this market, but it’s growing fast. And the stock is relatively cheap.

In the most recent quarter, revenue grew by 17% over the previous year. The company expects double-digit growth to continue through the rest of the year, too.

Now, Allot isn’t profitable yet. But the rapid growth is a good sign, and it expects to start making a profit next year.

What makes the stock really attractive is its cash position. At the time of this writing, the stock trades for about $7 a share. The amount of cash the company has in the bank represents about $3 a share.

This means that about 40% of the stock price is represented by just the net cash in the bank. The rest is opportunity.

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And Allot has a lot of opportunities...

The company just launched a new security solution in Spain, partnering with major brands McAfee and Telefonica. It already had similar deals with other businesses in Japan and Kenya.

If Allot can keep making these types of partnerships, which it’s proven to be able to do so far, its fast growth should continue.

So we’re adding the stock to our portfolio. But here’s the thing…

The stock does not trade as actively as others, and it is much harder to buy in. This is an extremely risky trade. So we do not recommend that you jump right in.

For those of you who are comfortable with the risk, I recommend using a limit order. A limit order allows you to buy shares below a specific price, and the buy order will not happen if the stock price jumps above the limit.

We don’t want to chase this one if it starts to run away.

If you choose to buy shares, here’s what we recommend…

Action to Take: Set a BUY LIMIT order on Allot Ltd. (TLV: ALLT) at $8.00, and do not use more than 1% of your funds dedicated to this strategy.

Sincerely,

George Gilder Editor, George Gilder’s Moonshots

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