Sierra Wireless: Machine-to-Machine

11/25/2014 8:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Our top current pick is a bit speculative, but has a powerful chart and huge numbers and any shakeout could create a nice buying opportunity, explains Mike Cintolo, growth stock expert and editor Cabot Top Ten Trader.

In most bull moves, there is at least one up and coming networking firm that’s on the cutting edge of a major trend in technology. Sierra Wireless might be that firm in the current rally.

Sierra Wireless (SWIR) is the leader in wireless machine-to-machine (M2M) connectivity products (gateways, routers, and the like), which allow machines to talk to each other through the Internet.

For example, a smartphone could lower your home’s thermostat, a city can turn off unneeded lights around town, or an ambulance device would relay patient information to the hospital so that the ER is up to speed when the patient arrives.

Not only is the use of M2M communications expanding, but there’s a huge upgrade cycle going on from 2G to 3G and 4G, where Sierra dominates.

Of course, in an industry like this, business can be lumpy—but things are coming Sierra’s way now—revenue growth is accelerating (partly due to some acquisitions), earnings are growing at triple-digit rates, and analysts see the bottom line up huge during the next year. If things go right, it could go far.

SWIR is relatively thinly traded (~$30 million per day) and not well-owned (just 76 funds own shares), so it’s a riskier bet. But the chart is very powerful.

After a big run into January of this year, shares built a big base and got going again in September, before the market correction pulled it back.

But it then re-set itself and soared on earnings two weeks ago, and, importantly, has continued higher on big volume since. We think buying dips is your best move.

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