Three Stocks Revealed for Motley Fool’s “The Year the Internet Disappeared”

Checking out the Motley Fool's latest "Internet of Things" pitch for three companies

By Travis Johnson, Stock Gumshoe, June 16, 2014

“An opportunity this good only comes along once twice in a lifetime.

“These 3 quick-action interviews with our Foolish investing experts (below) show how to prepare yourself for the $19 trillion revolution that’s swallowing up the Internet. And how to zero in on the 3 next-generation technology stocks that are best positioned to profit.

“I’m so convinced that I invested $15,000 of my own money on the spot!”

That’s how the latest ad for the Motley Fool Stock Advisor opens — it’s a pitch for the “Internet of Things” which they call the “Monster that Swallowed the Internet.” So not really so much the “internet disappears” as it is “the internet takes over all things,” and we’ve looked at a similar “R.I.P. Internet” pitch from them before … but this one’s pitching three companies (the first one teased just one), so let’s dig in and find out what they are.

The tease this time is not that you’ll earn 89X your money specifically, but that this next phase of the Internet might be 37X bigger than the internet as we currently understand it. The special report they’re flogging is called “How to make $19 Trillion disappear into your pocket” … so they’re certainly still tossing around some big, jaw-dropping numbers.

And as the Fool has been wont to do of late, they’ve gotten newbies to write their ad letters — whether that’s because these folks have compelling stories to tell, or just because they don’t want to soil the reputations of David and Tom Gardner by having them sign the over-the-top promotional hype.

So the letter’s actually signed by Aaron Winter, their “Director of New Member Outreach” … and it takes the form of a series of mini-interviews with Fool folks about what the Internet of Things is (basically, all things becoming connected — not just phones and computers and wearable technology stuff but almost everything you can imagine), and how successful the Gardner brothers have been with Stock Advisor over the years.

We’ll skip over that stuff and get straight into the “interview” with David Gardner, since he’s the one who tosses out his hints about which companies are being teased… we’ll go through the three stocks they tease one at a time:

“Why is the Internet of Things so exciting for investors like us, David?

“David: It’s exciting because what human beings are capable of achieving through technology is exciting. It’s exciting because it means that anything is possible. We can’t even dream of what kind of benefits this is going to bring 5 years from now. Let alone 10 years from now. But even I’ll admit I never thought we’d see an opportunity like this come around again, so soon after the Internet itself reached its tipping point.

“I guess 20 years is pretty soon.

“David: I’m a little older than you. Trust me, it’s very soon.

“So you just told me that your top Internet of Things company for wireless modules is XXXXX. Why does this one stock stand out?

“David: There are a few things that catch my eye. First, this company makes the smallest wireless modules in the industry, and they’re also some of the most durable. Remember, these connections to the Internet of Things have to fit everywhere. Second, even though this company is very small, it’s got an immaculate balance sheet, with zero debt and $151 million in cash….

“They’re already selling their products to major players like Cisco… GE… Ford… BMW… Verizon. And they’re already involved in every area of the Internet of Things. From transportation, to energy, to health care, to retail, to emergency response, to agriculture, to manufacturing.”

So that one is the same stock Gardner teased for that earlier “R.I.P. Internet” starting back in November, Sierra Wireless (SWIR), which is indeed cash-rich with $151 million of net cash on the books — it’s also small, with a market cap of just over $600 million.

Sierra Wireless sells wireless modules, the little doohickeys that let machines connect to cellular networks and therefore get on line and communicate with other machines… and they’ve said in the past that they make the smallest ones, though I don’t know if that’s still true. They do have a large share of the market, roughly a third of the modules being sold are SWIR modules these days.

They’re not profitable just yet on an operating basis (they have reported a profit over the past year, though that was from discontinued operations and from the sale of their Aircard business), but analysts expect them to book a profit this year and the stock is trading for something like 20-25X their expected profits in 2015.

This is another case of a stock that analysts see growing a bit, but pretty much priced for that growth already and in a competitive market… and Dave Gardner sees it having a bigger “story,” he is looking through the foggy future into a company he seems to think will become dominant in a much large