Here’s Why Billionaire D.E. Shaw Bought 93,000 Shares of SWIR Stock
Sierra Wireless Inc. (NASDAQ:SWIR) is one of my favorite ways to invest in the technology sector. And apparently legendary investor DE Shaw agrees with me.
Sierra stock is an unusual bet. The company has emerged as a pure play in the emerging “Internet of Things,” or IoT. Sales for the company’s wireless modules are exploding, showing up in everyday objects from cars to bathroom scales.
However, the past year has been hard on shares of SWIR stock. While the company’s growth has been impressive, Sierra’s expansion has failed to live up to investor’s lofty expectations. And while the company’s top-line growth has been impressive, higher sales have failed to translate into profits.
The combination has hits shares of SWIR stock hard. The company’s market capitalization has been almost cut in half in 2014, with shares down 45% year-to-date. But the doldrums in Sierra stock may soon be coming to an end.
Chart courtesy of www.StockCharts.com
As regular readers know, the IoT is the connection of people and objects to the Internet. Soon, just about every device you use—from your refrigerator and television to your swimming pool—will be online. In a few years, it’s not hard to envision a world where you will be able to remotely control just about everything from your PC, tablet, or smartphone.
Your home is just the beginning. For instance, traffic lights could be remotely controlled to reduce energy consumption. Sensor-equipped garbage cans could slash waste management costs. Railroads are already being equipped with sensors to improve safety.
Up until now, analysts have predicted the market for IoT products and services to be in the hundreds of billions of dollars. But according to a recent report from McKinsey & Company, the market for IoT products and services could be far larger than anyone predicted. (Source: “Unlocking the potential of the Internet of Things,” McKinsey & Company, June 2015.)
For instance, by 2025:
- The number of connected devices will increase fivefold.
- The market for IoT products and services could exceed $25.0 trillion.
- At the top end of their estimates, that level of value—including the consumer surplus—would be equivalent to about 11% percent of the global economy.
Does that sound like an opportunity? It’s no exaggeration to call the IoT bigger than 3D printing, the personal computer, or even the iPhone. Even if the IoT only lives up to a fraction of the hype, companies that collect and analyze all of this data are poised to make a fortune.
Sierra is well positioned to lead this boom. Its wireless modules allow devices to connect to the Internet and be easily controlled. In essence, Sierra is building the nervous system of the IoT. It’s creating the networks needed for all of these devices to talk to one another.
With McKinsey boosting their forecast for the potential size of the IoT, analysts on Wall Street may soon be forced to bump their profit estimates for Sierra, too. In recent weeks, several firms have downgraded their price targets for Sierra stock. However, this report could force them to revisit those assumptions—a potentially huge catalyst for SWIR stock.
Apparently, DE Shaw is bullish, too. According to recent SEC filings, the billionaire investor disclosed that he owned 73,000 shares of SWIR stock. As of June, that represented an investment stake of $1.8 million, up nearly 50% from the previous quarter.
What’s interesting is that Shaw paid between $30.00 and $35.00 per share for his recent acquisitions, up to 45% above last week’s closing price. If Shaw is buying at even higher prices, then Sierra stock has a lot of upside from here.