Investing: How the big guys are betting on the future

Small companies aren’t the only ones involved in megatrends shaping the future. Titans of industry are there, too. Investments in innovative businesses and strategies will benefit many big companies, making some of them good ways to invest indirectly in key trends.

Consider Google (symbol GOOGL; recent price, $558). It generates 89 percent of its revenues from Internet-search advertising, but it has tentacles spreading into other trends. Google burst onto the home-automation scene with its acquisition last year of Nest, which makes smart thermostats and smoke detectors. Wearable devices include Google Glass (shelved for now) and Android Wear smart watches.

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And Google’s self-driving car, unveiled last December, is the ultimate connected device. Gavin Baker, manager of Fidelity OTC Portfolio, says all cars are likely to be self-driving or assisted-driving. “If Google software and computing powers that, it’ll be very financially relevant,” he says. Google also acquired eight robotics companies in 2013. Its venture-capital arm has a stake in personalized medicine.

Amazon.com (AMZN; $372) is similarly on the cutting edge. The company will soon divulge the size of its cloud-computing business, which is likely its fastest-growing segment. And a major push into robotics has the potential to cut costs in its e-commerce business.

Amazon bought Kiva Systems in 2012 and now counts 15,000 Kiva robots working in its distribution centers. CEO Jeff Bezos has spoken about the company’s aspirations to use drones to deliver merchandise. “People have to analyze what robotics could do to the bottom line,” says Cathie Wood, head of Ark Investment Management, which sponsors four actively managed exchange-traded funds that focus on technologies. “It could be a tremendous boost to profit margins.”

With some firms, the promise of innovation in one area is overshadowed by older, stodgier businesses. General Electric (GE, $25) is developing the Internet of industrial things; its software applies powerful analytical tools to streams of data harvested from heavy equipment to boost efficiency and cut downtime. CEO Jeffrey Immelt has said industrial Internet operations could generate annual revenues of $4 billion to $5 billion in a few years. That’s a pittance compared with the $150 billion a year in sales that GE generates now. Meanwhile, although the GE Capital division is still on target to account for 25 percent of profits in 2016.

“We don’t own GE,” says Wood. But she’s watching the company — in particular, GE’s use of 3D printing. “It’s veering into the right spaces,” she says.

Anne Kates Smith is a senior editor at Kiplinger’s Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. For more on this and similar money topics, visit kiplinger.com.

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