The Best Investment to Play the $19 Billion Wearable Tech Industry

Now's the time to buy in to wearable technology - if you haven't already - and we've found the best investment to capture the entire sector's massive growth.

Just take a look at these numbers...

"The tech forecasters at IDC say the wearables market will grow at a compounded annual rate of 78% for the next several years," Money Morning's Defense and Tech Specialist Michael Robinson said. "That means it will double roughly every 11 months."

And Juniper Research recently said retail revenue from the wearable tech market will jump from $1.4 billion in 2013 to $19 billion in 2018.

That's why research firm Canalys recently claimed wearables will be a "key consumer technology" by the end of this year.

One of the biggest segments fueling wearable tech growth is Best Investmentsthe smartwatch market.

Roughly 4 million smartwatches were purchased last year. Incredibly, that number will spike to 330 million in 2018. That's an 8,150% increase in five years.

"And that's only one segment of the wearable tech market," Robinson said. "Wearables also include medical devices, fitness and health monitors, GPS trackers, and virtual reality headsets."

In 2013, more than $330 million was spent on fitness wearables. In fact, fitness trackers were the most popular type of wearable and accounted for 61% of all devices on the market.

And the applications for wearables reach far beyond counting calories. They also have the potential to monitor serious health issues including diabetes.

Researchers from Boston University and Massachusetts General Hospital are currently developing a "Bionic Pancreas." It regulates the amount of insulin a patient receives based on information collected from a sensor the patient wears. Information is also sent to the user's smartphone for monitoring.

"We're just getting started. The possibilities with devices that you wear on your body are endless," Android Director of Engineering David Singleton said earlier this year.

Now for the wearable tech investment we're recommending now - but first, here's a popular wearable tech stock to avoid ...

The Best Wearable Tech Pick - and One to Avoid

GoPro Inc. (Nasdaq: GPRO) has been one of the biggest names in the wearable market since it was founded in 2002.

It roared out of the gate following its June IPO. GPRO stock jumped 103% in its first four days and 290% in a little over three months.

But it's not the best wearable tech pick.

You see, GPRO is one of the most volatile stocks on the market. In the last five trading sessions, GPRO dropped more than 18%.

It's also seriously overvalued. Right now, GoPro has a P/E ratio of 75. More established tech firms like Apple Inc. (Nasdaq: AAPL) and Google Inc. (Nasdaq: GOOGL, GOOG) have P/E ratios of 16 and 26, respectively.

"In this market, we just can't justify paying 75 times forward earnings," Robinson said. "And besides being a risky stock, GoPro is just a start to the world of wearable technology."

Even despite the huge growth we've already seen, this is still an emerging industry.

"It's important to note that we're still at the dawn of wearable tech." Robinson said. "It's a bit early to try picking the winners from the losers. What we're looking for now is a way to capture as much upside as possible from the whole sector."

That's why we're recommending this wearable tech play...

The Vanguard Information Technology ETF (NYSE Arca: VGT).

"Vanguard Info Tech has some 413 holdings, but more than half of its assets are in the fund's top 10 stocks," Robinson said. "For instance, Apple and Google make up 22.6% of the ETF's holdings. That right there gives us two major wearable plays."

But those aren't the only wearable tech companies that VGT invests in. Here are three other major holdings:

  • Intel Corp. (Nasdaq: INTC) comprises 4.2% of VGT's holdings. Intel is one of the biggest chip makers in the world, and is currently working on a line of smart bracelets. Earlier this year, Intel bought the wearable fitness device firm Basis Science Inc. for $100 million. INTC is also working with Fossil Group Inc. (Nasdaq: FOSL) and clothing retailer Opening Ceremony.
  • Microsoft Corp. (Nasdaq: MSFT) is VGT's second-biggest holding at 8.53%. Microsoft recently released software for mobile devices, and a free app offered through Google Play. MSFT is also developing its own smartwatch that will synch with iPhones, Android phones, and Windows phones.
  • Garmin Ltd. (Nasdaq: GRMN) is just a small portion of VGT's holding, under 1%, but is working to become a big player in wearables. The company is known for GPS products, but recently pushed into health fitness bands that track calories burned and steps taken. The company is also working on watches with fitness and GPS tracking.

"With its lineup of top tech names - and a concentration in tech's fastest-growing sector - this is a great long-term play," Robinson said. "Vanguard Info Tech is an investment that captures the quick profit potential in wearables while still helping you build a solid investing foundation."

"Throw in market-beating performance and you have a real winner on your hands."

Through the first 10 months of the year, VGT climbed 10%. That compares to a gain of just 5.9% for the Nasdaq and 1.4% for the Dow Jones Industrial Average.

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