Another Motley Fool growth stock to sniff out for you today …

David Gardner has gotten a reputation as a compelling “rule breaking” growth stock picker over the past few decades, with some huge winners chosen (and held through very tumultuous times) as he built the Motley Fool with his brother Tom.

The flagship Motley Fool Stock Advisor newsletter has gotten more and more inexpensive over the years as they’ve cut the price to bring in more readers and get them into the “upgrade cycle” for their more expensive services, but the performance of that letter has still been good on average (beating the broad market quite handily over the last decade) as it features the ongoing battle between value-focused Tom and growth-focused Dave.

Now, that doesn’t mean David Gardner picks only great-performing stocks — like most growth investors, his portfolio is presumably very patchy, with substantial losers mixed in with the 1,000% winners — but it does mean that we stand up and pay attention when he starts teasing a new stock … partly because we’re curious about what it might be, and partly because the marketing prowess of the Motley Fool means we’re going to get lots of questions from our readers whenever they come out with a new pitch.

So what’s today’s spiel? Well, as with a lot of the recent Fool ad letters it’s not actually signed by David Gardner, the ad comes from Fool analyst Lyons George, and here’s how he gets us interested:

“They’ll Call 2014 the Year the Internet Died… But You’ll Just Call It ‘The Year I Made My Millions’

“Silicon Valley is dancing on the Internet’s grave — and gearing up to cash in on the birth of an even BIGGER market.

“From solving traffic jams to weighing soup cans…
“From catching terrorists to watching television …
“From modern medicine to professional football…
“And dollar for dollar, insiders are calling for the biggest new market in the history of capitalism…”

He goes on with some thinly veiled cites of commentary by John Chambers (referred to just as “John”) about revamping Cisco to help grow with “the mystery market bigger than the Chinese economy” that’s projected to become a $14.4 Trillion market … so of course we’re curious. $14.4 Trillion is big (and yes, it is more than the current annual GDP of China).

The $14.4 Trillion number they’re throwing around as an estimate is for the year 2020 (the number was dramatically lower recently, $44 billion for 2011, the ad says), so it’s crazy growth but it’s within the somewhat foreseeable future, and that’s the target time period for this stock as well — apparently David Gardner thinks this one can make you a return of 89X your money on this pick, turning your $500 investment into $44,500.

So what’s this secret market? More from the ad:

“4 Words, 1 Can’t-Miss Opportunity… Get in NOW on ‘The Internet of Everything’ …

“When it comes to investing in game-changing new technologies, history has proven time and again that the real money isn’t in the invention of something…

“The real money is in the implementation….

“Why NOW is the final stage of the Digital Era’s ‘Implementation Gap’

“Put simply, the Internet of Everything is the final stage of the Internet’s progression….

“The Internet — and all the potential for progress it brings with it — is about to move from “Internet-Only” objects to EVERYDAY objects…

“Meaning tens of billions of regular ‘things’…

“Sidewalks and cereal boxes…minivans and dress pants…the lawn mower in your shed and the pillows on your bed…

“Will soon be connected together in an Internet of Everything….

“The Death of the ‘Internet’ — and the birth of the ‘InterWorld'”

OK, so it’s the “Internet of Everything” or the “Internet of Things” that we’ve been hearing about for a decade now — is it really going to happen? The promise has been the refrigerator that knows when you’re out of milk and orders it for you, the car that sends your husband a message when you’re running late, smart clothes that know when they’re dirty or when your heartbeat is erratic, etc., the sensors and controllers everywhere that interact with the digital world. And lots of it is possible now and has been possible for a while, depending on how much you want to spend, though integration into the consumer economy might be coming at unpredictable speeds.

[My favorite product that fixes a problem I’ve never had? the $70 egg tray that tracks which eggs are oldest and should be used first and syncs with an app on your phone. An app. For deciding which egg to use and telling you when you’re running low. I’m lucky if I remember to take them out of the carton and put them in the tray in the first place, I’m certainly not going to sync the egg tray with my phone. But you get the idea — sensors and wireless stuff is now cheap enough that someone green-lighted this project, and people are buying it.]

And, as you might have guessed by now, we’re told that there’s “one small company” at the heart of this that will make us rich, with 89% annualized gains over the next six years:

“… regardless of how you feel about the revolutionary technological shift the InterWorld represents, the facts of the matter are painfully clear:

1. The InterWorld revolution is already underway — and gaining momentum at an incredible pace.
2. There is exactly one company that sits at the very heart of the InterWorld market…and it stands to rake in hundreds of billions of dollars between now and 2020.

“Most investors haven’t heard about the InterWorld yet — they’re still busy trying to figure out when Apple will release another piece of ‘iJunk’.

“But those savvy individuals who HAVE clued into this opportunity are going all-or-nothing into the ONE small-cap company that stands to grow in lockstep with the InterWorld market.”

So yes, finally we get to the hints and teasers about this little stock … or, as we like to call ’em here, “clues”:

“In a small town just North of Seattle, one company isn’t just ‘riding’ the InterWorld wave…

“With every product it ships out the door, it’s making the wave happen.

“Its technology is the final piece of the InterWorld puzzle — much like the internal combustion engine completed the auto industry, and the cathode-ray tube made it possible to put a television in every living room in America.

“Its customers include everyone from city planners to video-game designers… from auto manufacturers to fire departments… from a tiny coffee-machine company all the way up to General Electric and Chrysler Motors.

“It is the definitive leader in its space…

“With a dominant market share and over 350 issued patents…

“In short, it’s a no-brainer for anyone who wants direct exposure to the InterWorld market’s +8,937% growth in the coming years.”

And we’re also told that this stock has already gained 127% this year, so there’s another clue (David Gardner always says he doesn’t really start to like a company until Wall Street is screaming about how “overvalued” it is).

A few other clues roll across the transom, too, including that RBC Capital reiterated it at “overweight” on October 9, and that Royce just upped its holdings to 1.1 million shares, and the Swiss National Bank just started buying.

That’s probably enough to feed into the gaping maw of the Mighty, Mighty Thinkolator and get our answer — but first, let’s just share a little bit of the spiel from the Fool about what this company sells and does:

“… the physical objects that will make up this ‘huge brain’ need to be outfitted with devices that allow them to ‘talk’ about what’s happening…

“That’s where ’embedded wireless modules’ — the flagship product of this exceptional little company — come into play.

“Like the copper wiring that enabled a once-fledgling technology known as “electricity” to cover the globe, wireless modules are at the very center of the InterWorld’s explosive growth trajectory.

“WIRLESS MODULES: The ‘Copper Wiring’ of the InterWorld Era …

“… within every wireless module that this company sells lies the power for it to analyze what’s happening to the object it’s embedded in, and then transmit that data back to the appropriate destination.

“And considering that experts are projecting the number of wirelessly embedded devices to balloon from 1.5 billion to 50 billion by 2020, it’s a safe bet that the demand for these modules is going to be massive for years to come.”

Then we have one final bit that caught my eye in the ad:

“The company I’m writing you about today is that rarest of finds…

“An experienced player, in a niche space set for extreme growth, with an absolute stranglehold over its market.

“As I already mentioned, the fact that this company is the hands-down leader in its space with over 350 issued patents already has some forward-thinking investors (and Wall Street sharks) on the move…

“After all, it’s not every day you see a business with a ‘competitive moat’ that wide!

“But here’s the real icing: even though the InterWorld market is just now taking off, this company has been perfecting this technology for over 16 years…

“Meaning it has all its ducks in a row to fully exploit a once-in-a-century hyper-growth business environment while its competitors are still wondering who turned the lights on! …

“Realistically speaking, if you have a few thousand dollars of dry powder lying around…

“This will most likely be the last stock you — and your family — will ever need….”

Any financial advisor will probably tell you that there is no such thing as “the last stock you will ever need,” and that this kind of thinking is dangerous to your financial health … but still, as every financial copywriter knows, hope springs eternal. We all want those 8,000% gains to make us more comfortable in our golden years (or to make it so we can afford to buy $70 egg trays without blinking an eye).

So after all that, what is our “secret” stock? Secret no more, this is: Sierra Wireless (SWIR)

Sierra Wireless is a small Canadian tech company (yes it’s in a “small town North of Seattle” — Richmond, British Columbia), and they have indeed been on a tear this year, getting up to $20 a share for the first time since the financial crisis (they’ve dipped down a bit recently, shares now just under $18 as I type). They have a market cap of about $500 million, so quite tiny, and they’re expensive based on either trailing or forecasted earnings but do also have a large cash pile of about $6 a share (and no debt).

If you account for the cash, you can say that the shares trade at a forward PE of only about 24 (50 cents in earnings in 2014 expected), which sounds a bit more reasonable than the numbers look at first blush, but it’s still expensive — particularly because analysts are baking in pretty low growth expectations for the future. So it looks like David Gardner is making a big picture argument that SWIR is going to see much higher demand for its products in the coming years, with good revenue and earnings growth, and the Wall Street (OK, Bay Street) analysts are forecasting something a lot more tepid.

Sierra Wireless is going “all in” with this “Internet of Things” with the sale this year of their AirCard business (that’s their mobile broadband product) to NetGear, and that sale resulted in what looks like a huge earnings number this year (that’s why the trailing PE looks amazingly low — most of that $2+ in trailing earnings isn’t operating earnings). That basically allows SWIR to put the full force of the company behind their “machine to machine” products, referred to as M2M, that are a key enabler of this network of intelligent devices. Here’s how they put it in the press release about the sale a few months ago:

“This transaction is the next step in our transformation into a company focused on enabling the ‘Internet of Things’ – a strategy we have been pursuing with great success since 2007,” said Jason Cohenour, President and CEO of Sierra Wireless. “We are the world leader in this dynamic market, with the industry’s broadest product lineup, solutions across the value chain and an extensive, blue-chip customer base. In addition to realizing a solid return for the AirCard business, this transaction will provide significant financial resources and capacity to accelerate our growth in M2M and connected device solutions.”

So … that’s a large part of why the shares have doubled this year — optimism about that “internet of things” and their leadership of the M2M market and ability to get out of the AirCard business with a profit. Analysts haven’t allowed their expectations to boom along with the stock, but clearly David Gardner is all over it as a long term play — so really, your quick reaction to this stock will probably come down to whether you agree with Gardner about the huge growth potential of the “InterWorld” or agree with the analysts in their skepticism about the next year’s earnings. Or you could find both arguments compelling, of course, and think that SWIR will enable amazing things in the future but might be too expensive today.

Me? I dunno. It’s hard to think they could fall more than 50% from here, given their huge cash pile, but I also don’t know much about the business yet or where most of their revenues come from, and I don’t know about any potential competition. I’ve seen estimates that they hold about a third of the market for M2M modules and they have a lot of “blue chip” clients in electronics and automotive and other sectors, but that leaves two thirds of the market to … who? I dunno. I also don’t know anything about their patent position, other than the fact that they do say they have more than 350 patents.

To me it looks like it’s worth researching, but all I’ve done so far is confirm that this is certainly the stock they’re pitching and take my quick gander at their books. What do you think? Let us know with a comment below.

Oh, and a quick P.S. — this is an excerpt from that latest reiterated buy recommendation by RBC’s analyst when they raised the price target to $20 … this came out on October 9, when the stock was between $17.50-$18, just like it is today:

“M2M Comes into Vogue: Raising Target

“We are reiterating our Outperform recommendation and raising our price target on Sierra Wireless from $16 to $20. Investor enthusiasm for M2M and the Internet of Things has raised the valuation multiple on Sierra Wireless and its peers. We see more room for upside and believe Sierra’s leadership warrants a multiple towards the mid-point of M2M peers.”