Grab the Biggest Tech Profits in History While Wall Street Snoozes Away

6 Aug 27th, 2013 | By Michael A. Robinson

Back on Aug. 14, Cisco Systems Inc. (NasdaqGS: CSCO) said it would lay off about 4,000 workers roughly 5% of its staff.

That wasnt the only thing that rattled Wall Street

CEO John Chambers also slightly lowered earnings guidance for this fiscal year. That sent Cisco into a tailspin: The shares dropped 7% that day and are off 9.7% since Chambers announced the cutbacks.

Once again, however, both Wall Street and the mainstream media missed the real story.

You see, Chambers isnt just cutting workers to cut costs and cover a shortfall due to slowing revenue. Hes also trying to reallocate the companys resources to capitalize on a new business opportunity that he sees for Cisco.

And heres the best part.

This emerging business opportunity could be worth $14 trillion meaning its almost as big as the entire U.S. economy.

That makes this high-tech bonanza one of the biggest profit opportunities well see in our lifetime

And were going to get you in on the ground floor.

When all the World is a Network

Its no exaggeration to say Cisco helped build the Internet. The company sells routers, switches, servers, optical components and wireless controllers that have turned the Web into a powerful, simple-to-use and highly practical tool.

So, if any one knows the critical role the Web plays in the worlds global economy its Chambers.

Thats why hes so enthusiastic about this new business opportunity, a tech field known as the Internet of Things, or Internet of Everything.

Simply stated, the IoT, as it is often called, means that nearly every single object in the world will be connected to a vast computer network.

And I mean every single object .

Were talking about a world in which your homes refrigerator, thermostat, windows, hot water heater and even your carpets are all connected and can communicate with you and each other via Web access points, both wired and mobile.

And thats just for starters. On your morning commute, your car or SUV as well as all the vehicles around you will automatically log into a network. Your car will also talk to the other vehicles around it to help create instant traffic updates and to avoid collisions. To do all this, and more, your vehicle will send and receive data through the Internet of Everything.

The potential is staggering, for even now were just beginning to imagine all that could be possible. Youll wear computerized glasses, clothing and smart devices like wristwatches that can monitor your health. They will send vital data and emergency alerts to your smartphone and automatically copy your doctor.

Your prescription bottle will send you an alert when the medicine inside is running low. The pills themselves will contain devices that monitor your vitals from inside your body.

Thus, the Internet of Everything isnt just one high-tech platform. Its an all-encompassing system of systems made possible by special sensors, chips and seamless, wireless connections that enable devices of all sorts to talk with each other.

Follow the Money

From an investment standpoint, this means well be looking at hundreds even thousands of profit opportunities across a plethora of sectors.

And it also means that the IoT will add some real muscle to each of the major profit trends weve been telling you about for months.

The Internet of Everything will push Big Data, medical devices, wearable computers, Cloud Computing, software as a service (SaaS), cybersecurity, broadband components, optical networking, semiconductors and much, much more.

Thats why Chambers puts a $14 trillion price tag on the Internet of Everything. And he says that number is just his estimate for profits. Actual sales generated by IoT will be several times higher.

Honestly, in the history of the human race, weve never seen any piece of technology this all-consuming. As Chambers views it, the IoT will supercharge productivity and vastly increase the profitability of firms one wouldnt normally think of as being tech-centric.

If you want an intriguing example, just look at agribusiness.

While you wouldnt normally look at farms, food suppliers or fertilizer makers as being high tech, the truth is that by harnessing the power of the IoT, agricultural operations will greatly increase their yields while reducing runoff of pesticides that might have damaged streams in the past.

Imagine how much more productive a farm will be if every cow, chicken, pig as well as every corn, soybean, wheat and milo field can provide critical feedback by autonomously connecting to the IoT.

And heres the real key: Were not talking about some futurist vision, or some science-fiction fantasy that might happen a few years from now.

This is a global technological gold rush thats revving up even as you read this.

And while as we said there are several fast moving high profit plays to consider, theres one core stock you need to buy right now as a long-term holding.

Im talking about Cisco.

You see, while Chambers is publicly laying off several thousand middle managers to boost profits, hes also creating the infrastructure he needs to become the King of the Internet of Everything.

The King of the New Internet

Chambers is serious about grabbing and keeping the IoT crown.

In late June, Chambers launched a new Cisco Internet of Everything (IoE) business unit. Right out of the gate he gave this fledgling group a budget of $200 million for research & development and product marketing.

Chambers is jump-starting the division by placing 500 workers there. That equates to about 12.5% of the layoffs he recently announced.

In other words, Chambers isnt just slashing middle managers simply to lower overhead. He is retooling Cisco to get a leg up in the burgeoning IoT sector.

Hes also putting a highly respected executive in charge of the new unit. That exec Robert Soderbery is a senior vice president who formerly headed Ciscos enterprise networking group, meaning he was in charge of network technology sold to large organizations, some of Ciscos most important clients.

Soderbery will be joined by Wim Elfrink. chief globalization officer and executive vice president of emerging solutions. Elfrink previously ran Ciscos India operations, so he knows a growth market when he sees one.

Chambers wouldnt install these two high-profile execs in such a slot and give them 500 employees and $200 million to spend if he didnt believe that IoT technology will add significantly to the parent companys bottom line.

Heres another reason to like Cisco: Despite the layoffs and the skidding stock price we mentioned earlier, this is actually a financially healthy corporation. For fiscal 2013, Ciscos earnings came in at $10 billion a 24% increase from the previous fiscal year. The fourth quarter alone when profits zoomed 18% was the 10th straight quarter with record earnings.

Those numbers tell a story. For Chambers, you see, its all about the bottom line.

And hes repeatedly demonstrated that hell make whatever changes are needed to keep Cisco on a growth track.

From Leader to Laggard to Leader Again

After spending time at International Business Machines and Wang Laboratories, Chambers joined Cisco in 1991 as a senior vice president. Since becoming CEO in January 1995, the company has grown from $70 million in annual revenue to $49 billion.

And Chambers knows how to bring it to the bottom line.

Cisco has profit margins of 20.5% and a return on stockholders equity (ROE) of 18%. From that $49 billion in revenue, Cisco generates $7.4 billion in free cash flow (FCF).

So the Chambers-run Cisco is a well-run firm and has the numbers to prove it. But the stock remains a laggard.

No doubt, its done well over the past year, up roughly 24% even after the recent selloff. But over the past five years, it has remained basically stuck in neutral, with a loss of 0.17% not counting dividends. (The current payout represents a 2.8% dividend yield.)

This is a very different story from the Internets early days in the 1990s when Cisco was the darling of tech investors. For the five years ending in late March 2000 when the dot-com bust began, Cisco gained an astounding 3,550%.

So we know Cisco has shown explosive gains in the past. And I believe that Ciscos realigned focus on IoT technology will awaken this tech giants snoozing share price.

The question, of course, is should you buy Cisco today?

You could, of course, so long as you understand that the shares are going to run in place for a time.

This isnt because Cisco is a has been or a lousy business, as Wall Street might have you believe. The problem, at the moment, is that Wall Street just doesnt yet understand whats really happening here.

And so soon after the big investors claim to be disappointed by Ciscos latest news, I dont yet see any catalysts or other developments that might change their bearish collective mindset.

Here at Strategic Tech Investor . we dont follow Wall Streets lead.

But we do want Wall Street to follow ours.

Heres what I mean by that statement:

Once weve made a recommendation, and youve had the opportunity to make your investment, were happy to see the analysts up on Wall Street start pounding the table on the very same stock. Upgrades like that attract the liquidity needed to drive that stock much higher in price.

So the investment pros serve a useful purpose for us.

And the trouble is that as much as I like the companys fundamentals and its aggressive push into IoT I think those catalysts are still some time away.

This soon after a bad news announcement by the tech heavyweight, the upgrade cycle is still somewhere in the future, meaning the stock is going to be idle for a time.

But let me be clear: Even though Im not formally recommending it today, I do believe that Cisco will become a great stock to own. Otherwise, I wouldnt have spent so much time analyzing the firms new focus and its potential.

So be assured that Im going to watch the company closely, and will let you know when my signals tell me that its time for you to make your move.

By giving you this heads-up now, youll be able to move fast and strike quickly when I report back to you. Besides, I wanted you to know about the Internet of Everything and I wanted you to know about it now before it starts to show up in the mainstream media.

As we look for that chance to pull the trigger on Cisco, well continue to make good use of our time here. Well continue to monitor the other big trends weve been following together trends like Big Data, the Mobile Wave and Cloud Computing. And now that weve added the Internet of Everything to that list, you can be sure that a whole host of new profit plays will reveal themselves to us.

In fact, as I mentioned earlier, there are several fast moving plays that, thanks to the Internet of Everything, can give you a chance to bag massive profits from the biggest opportunity in tech-sector history from right under the nose of a snoozing Wall Street.

And theres one huge opportunity Ive been tracking in particular. In fact, since releasing my research on this play, the buzz has been astounding.

If you havent seen my presentation yet, please go here now. Youll be amazed at how this new technology can change our lives.

See you later this week.

[Editor’s Note. I welcome your comments, questions and suggestions. Post a comment below. I look forward to hearing from you.]

6 Responses to Grab the Biggest Tech Profits in History While Wall Street Snoozes Away

Mr. Robinson, after reading your many email posts, I do believe that your knowledge in the areas you love and embrace is deep and on the mark. Do you think the resulting effect will be sudden and explosive or gradual?

Security is the Achilles heel holding back IoT. Until IoT is proven reasonably

hack proof it will enjoy limited application as users will not trust it.

Im sure this problem will be overcome, but it may take a couple of years. The software side will take longer to develop than the hardware side by Cisco et al.

Thanks for the info. This is very interesting, how many other companies are involved in this iot business? re: intel or microsoft etc. Thanks Ken

Tell me more about this product.

will you give us an insight on your suggested buys as to a percentage of our investment portfolio we should put on each reccomendation?

very very exciting and intriguing news!