Let's talk about the Wearables Revolution and investing in it.
When I say "Revolution," I mean it. Recall all the articles I wrote and TV spots I did about the App Revolution, explaining how huge it would become. Well, the Wearables Revolution is going to be the next huge phase of the App Revolution and it's going to be even bigger than the smartphone market when the calendar clicks over into the 2020s.
Let's assume the wearables marketplace grows from its current unit sales figures measured in the tens of millions of dollars to one wearable sold for every smartphone sold. That would mean about one billion wearable units sold a year. At an average price tag of just $200 each (which is probably on the low end for now, though by the time wearable cameras and sensors and smartwatches go mainstream, the average selling price of each unit will come down quickly), that's about $200 billion in wearable device sales alone.
Throw in the 50%-75% cost of goods for each of those devices, and that's another $100 billion-plus for the wearables supply chain -- annually, just five years from now. Add to that the dozens or hundreds of apps that will run on each of those wearables, and we're talking about a trillion wearables apps being downloaded annually in just another five years, too.
There will be new app companies that will create hundreds of billions of dollars in market value for the Wearables Revolution, just as there was in the original Smartphone Revolution and then the Tablet phase of the overall App Revolution.
As usual, we will want to focus on the highest-quality, best-run, most-dominant companies as we "revolution invest." I've got a few of the best positioned names in my portfolio, including Fitbit (FIT). I recently mentioned on RealMoney in real-time that I was buying some Wearables Revolution stocks such as Ambarella (AMBA) and a couple of others last week.
If you missed the recent Fitbit "crash" and don't own any FIT shares at all, I'd still probably look to do a small-sized tranche to get started. The stock was very cheap at $33 when I started loading up on it and is still cheap at $40. Now, all that said, I am personally trimming one-tenth of my Fitbit position since it is up 30% in the last five days.
Meanwhile, the Wearables Revolution probably still has a lot of potential upside if it grows as fast as I think it will over the next two or three years.
Target's (TGT) partnership with Fitbit, one of the biggest corporate accounts for the activity tracker company, illustrates that potential. Target is now offering the company's activity trackers to its 335,000 U.S. employees, becoming the latest firm to turn to wearable devices to improve worker fitness and reduce health care costs. Target employees will get the Fitbit Zip, which retails for $59.95.
While corporate services generate less than 10% of Fitbit's revenue, it's "one of the fastest-growing parts of the business," Chief Executive Officer James Park said in an interview. Maybe all retailers, maybe all employers, should promote health and fitness for their employees using Fitbit?
Most people think of the Apple Watch and other smartwatches as the biggest competitors to Fitbit. But I recently explained that I think we can expect to see up to 5 billion or 10 billion units of various wearable devices sold in a single year's time, by say 2019 or 2020.
Fitness wearables alone could count for several hundred million units sold per year and Fitbit could itself keep 50% market share in the fitness wearables market.
With high-beta tech stocks having led the overall market way down, it is the time to start scaling into some of the best Wearables Revolution stocks.