If you haven't invested in one of the biggest trends in technology yet, you have another chance today.
In January, I told you about
the new Internet "gold rush." Soon, just about every device you use – including your car, appliances, television, and thermostat – will be connected to the Internet. That means you will be able to control everything through your mobile phone, tablet, or PC.
Networking giant
Cisco Systems Inc. (
NASDAQ: CSCO,
Stock Forum) calls the "connectivity" of these devices and the networks that support them the "Internet of Everything" (IoE). The company believes IoE could be a $19 trillion market. That's about twice the size of the entire U.S. housing market. It's an enormous opportunity.
I said the biggest winners of this trend would be the "nuts and bolts" companies that will help every device get connected.
Several of these companies have already soared double digits. But today, you can buy one of my favorite names on sale...
Nuance is a voice-recognition company we hold in my
Small Stock Specialistportfolio. Its technology powers Siri –
Apple Inc.'s (Nasdaq: AAPL,Stock Forum)"personal assistant" feature that lets users perform tasks on their iPhones (like finding out the weather or a stock quote) by simply talking to it – and other technology like it.
As the IoE trend develops, we'll see this technology make its way into billions of new devices – like appliances and cars. So the company has enormous upside potential.
Plus, in June, shares were cheap... trading at just 13 times forward earnings – a 31% discount to the average S&P 500 company at the time.
Readers who took my advice to buy in June were up nearly double digits on Monday. But on Tuesday, Nuance shares pulled back 10% after the company warned that next quarter's earnings would fall short of estimates.
This is giving investors another great opportunity to buy.
You see, despite the recent pullback, I still see huge gains ahead for the company.
First, Nuance's problems are likely temporary. While Nuance said earnings would fall short of estimates next quarter, bookings – a measure of future orders – were up 25% year over year. That means earnings are likely going to be stronger in the quarters ahead.
Plus, as I told you in June, billionaire hedge-fund manager Carl Icahn owns 19% of Nuance. If the company reports a few more bad quarters, Icahn may look to take a few board seats or urge an outright sale of this cheap growth company to protect his investment.
Nuance also generated nearly $100 million in cash flow last quarter, which was well ahead of estimates. I expect the company to use some of this cash to buy back stock on this pullback. Nuance still has $300 million left to buy back stock from the $500 million buyback program it announced last year. When a company buys back its shares, fewer shares are available in the open market. So existing shareholders get a slightly bigger portion of earnings.
Finally, looking at the bigger picture, almost every car, mobile phone, and electronic device is turning to voice-recognition technology. I saw this firsthand at the Consumer Electronics Show – a global consumer-electronics and technology trade show – in Las Vegas in January.
Tech giant Qualcomm had a special "home" exhibit at the show. It included a kitchen, living room, and children's room. Every single electronic device throughout the exhibit was connected. The television, thermostat, speakers, and light switches... Even a little bear in the children's room had a special chip to help wake up a child in the morning and play songs at night to help the child sleep.
And almost every one of these connected devices was equipped with voice-recognition technology. In short, one day you will be able to walk into your house and tell your coffee machine to make coffee or your thermostat to turn up the heat.
This technology is powered by Nuance. So the company is likely to see a huge boom in business as the world gets more connected.
And today, shares of Nuance are cheap – trading at just 14 times forward earnings. That's a 20% discount to the average S&P 500 company. And Nuance is expected to grow much faster than the average S&P 500 company in the years ahead.
I recommend using the recent pullback to buy Nuance if you haven't already. The stock is dirt-cheap and right in the middle of one of the biggest growth trends in technology. We could easily see 50%-plus returns over the next six to 12 months.