(The Internet of) Things often take far longer to mature than you'd expect

I don't suppose I make myself very popular when I make negative comments about a company's prospects. Notice the understatement!!

I don't do it very often, although this week has been an exception. I've no interest in going short for very many reasons. One of those reasons is that I've found going long on a stock and holding onto that stock until the story changes for the worse (if indeed it does) is far more profitable and a much safer option.

I'd like to think that in general when selecting companies for investment I'll work through the financials then apply some common sense assessing the business model, and the likelihood of success. It also helps you to avoid companies that are likely to get into distress or flatline. I have to say at this point that I don't always follow my own advice, and have been known to take a complete punt.

However, one company I did avoid investing in despite the so-called "sexy" area it's working in is Lightwaverf which is involved in the IoT market.

Since I first commented on the stock back in October 2015:-

http://uk.advfn.com/forum/search?q=michaelmouse&post_poster=on&post_post=on&index=posts&thread_id=32612016&offset=30

The stock has fallen from around the 26p/27p mark to its current 15p.

Some of my comments were a little flippant and designed to be amusing, but this one now appears to have been highly pertinent:-

http://uk.advfn.com/cmn/fbb/thread.php3?id=32612016&from=2593

"Will I ever buy shares in this company? Well never say never, but not at the moment. The reasons I've listed are good enough for me to avoid this one in the short to medium term, but my bigger concern is longer term.

I might be totally wrong but I think that this market will take considerably longer to develop than many think by which time the competition will be intense.

I would imagine that the best chances of success are selling their products to companies that will install them in new builds - both offices and new homes. However, (and I more than happy to be corrected here) it appears that they are trying to get retailers to sell them to homeowners e.g. through Maplin stores etc.

The majority of homeowners are undoubtedly aged 35+ and the majority of those are probably older. The demand for devices that remotely control your heating, lighting etc through an APP will be low for some years to come since the age group most likely to need them is the least tech savvy or interested.

In ten/fifteen/twenty years then it may be a different story as today's tech savvy cash poor youngsters eventually get onto the housing ladder, but as I stated that's a considerable time to wait.

Now I may not fully understand their business model or the full range of products they offer, but if I don't then sadly there are a large proportion of people in the same boat. Judging by this line in their finals, "Although we continue to remain alert to how we pursue our strategy in detail", neither do their management team. The sentence is total and utter gobbledygook, and illustrates that their strategy lacks any clarity."

A report in today's Telegraph suggests that my caution seems well placed:-

http://www.telegraph.co.uk/technology/2016/08/27/internet-of-things-struggles-as-use-of-smart-home-gadgets-flatli/

"The figures suggest that such connected home gadgets, which allow their owners to control their lighting without leaving the sofa or turn on the heating as they come home, are failing to resonate with consumers."

“Some of them aren’t resonating well because they offer too little,” he said. “The ability to micromanage the temperature in your house doesn’t appeal to the mainstream, and the savings aren’t significant enough to upgrade.”

In my experience, it's very easy to underestimate the amount of time it will take for a "new" market to develop. If you do buy shares in a company in these "new and sexy" areas then expect to wait many years for a decent return on your investment. Think dot-com boom. These type of stocks fly up on hype and hope, and then come crashing back down to earth when reality sinks in.

As ever though, this is a personal blog and I don't offer buy or sell advice.  It's simply a record of my experiences.