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How to Cash In on the Tech That Could Help 50 Million Drivers Save Money

3 | By Michael A. Robinson

Imagine a “dongle” – a plug – hooked up under your steering wheel.

This gadget connects to your car’s computer, where it allows high-tech sensors to analyze and record your driving habits. Your speed… how often you brake… where you travel… what time you drive – this dongle knows and remembers it all.

That may sound like a huge invasion of privacy.

electronicAnd it is.

But in this case, the “invader” isn’t some hacker or Big Brother – it’s your auto insurance company.

If you agree to be monitored this way, your insurer will use the data to better assess your risk level, saving itself money. And if you’re a good driver, this invasion will substantially reduce your premiums, saving you money.

That’s a win-win.

It’s known as usage-based insurance (UBI), and these on-board diagnostic (OBD) dongles aren’t some “on-the-horizon” tech.

Already, 155 million cars in North America can be hooked up to OBD “telematics” devices. And as we trade in our old models for new connected cars, that number grows bigger every day.

Analysts at one firm predict that by 2020 more than 50 million U.S. drivers will be UBI customers – way up from around just a million today.

That makes OBD an enormous tech investment opportunity.

Best of all, you don’t have to gamble on a risky small-cap or waste your cash on some fly-by-night startup to invest in these dongles and the profit opportunity they represent.

You just have to do this…

Grab a Chunk of a $14.4 Trillion Market

CalAmp Corp. (Nasdaq: CAMP) is an Internet of Everything (IoE) company that develops and markets machine-to-machine (M2M) tracking and telemetry sensors, as well as broadband cellular routers and satellite receivers. It serves the construction, energy and public safety markets.

And it’s also the market leader in OBD technology. While not yet a huge portion of CalAmp’s revenue, I believe OBD and UBI will be the Oxnard, Calif.-based company’s key growth driver over the next half-decade and further out. While the company now is primarily a developer of hardware – those dongles – I can see it getting into “UBI as a service,” providing a full suite of auto insurance tools over the cloud.

CalAmp now derives 81% of its revenue from its Wireless Datacom segment. The company’s M2M technology helps clients like Caterpillar monitor equipment for mechanical problems.

M2M and OBD tech are big parts of the IoE market that’s experiencing explosive growth and is expected to top $14.4 trillion in sales by 2022. By 2020, research site Statista projects 50.1 billion devices will be connected to the IoE sector. That’s a 118% increase from the 22.9 billion devices that are expected to be connected this year.

Now, CalAmp is a small-cap stock – with a market cap of just $689.8 million – meaning it has potential for huge growth, but investors could be shocked by frequent and jarring dips along the way. Moreover, the IoE is still in its infancy and will experience its own turbulence along the way to its $14.4 trillion potential.

And that’s why today I want to show you a way to invest in CalAmp and dozens of other high-growth small-caps that exposes you to those skyrocketing profits – and protects you from all that turbulence.

Perfect Timing

Small-cap stocks got hammered in the market’s selloff earlier this year. That’s because Wall Street became convinced that the global growth story was dead.

We know now the Street grossly overreacted to concerns about China’s economy and the price of oil.

Indeed, since the market bottomed out on Feb. 11, the Russell 2000 Index of small caps has gained 14% – 33% more than the overall market.

Plus, these smaller firms are priced to move and represent a real bargain based on a key ratio I use to determine an investment’s relative price.

Long-term growth investors such as myself pay a lot of attention to the forward price-to-earnings ratio (forward P/E). I use this all the time because it tells me how much I’m paying for next year’s earnings.

Right now, the S&P 500 Index trades at 16.55 times future earnings. Bear in mind, this is a broad market with lots of big-cap firms with slower growth. I’m talking about names like Ford Motor Co. (NYSE: F), Kansas City Southern (NYSE: KSU) and Time Warner Cable Inc. (NYSE: TWC).

But the Russell 2000 has a forward P/E of just 16.5. In other words, you can buy a basket of small, hyper-growth companies for roughly the same price as their mega-cap counterparts.

That’s why I think every tech investor ought to own the iShares Russell 2000 Growth ETF (NYSE: IWO), an exchange-traded fund that seeks to mirror the performance of the Russell 2000.

In that regard, this is not a pure play on smaller tech firms. It’s a “twofer” investment that gives you exposure not only to fast-moving tech firms but also other growth sectors and a diversified investment base.

Information technology and healthcare, which includes biotech and medical equipment, make up 51% of the fund. Other industries represented include industrials, financials and consumer discretionary.

But make no mistake, IWO is a fund composed of some very exciting tech leaders.

A Killer List

I already told you about CalAmp.

IWO also owns medical tech firm Abaxis Inc. (Nasdaq: ABAX). The company sells portable blood-analysis systems used by physicians and veterinarians.

The company’s Picolo Xpress chemistry analyzer can provide results in as little as 12 minutes. It also covers 31 blood chemistry tests that include liver, kidney, metabolic and other functions. With a $964 million market cap, Abaxis has 19% operating margins and recently grew quarterly earnings by 35%.

Silicon Graphics International Corp. (Nasdaq: SGI) is a leader in high-performance computing that plays a leading role in Big Data. Moviegoers may remember SGI from the 1990s when it helped produce the computer-generated dinosaurs for Jurassic Park.

It has an impressive array of clients who need access to high-speed computers that can crunch through massive amounts of data. SGI counts NASA, the Department of Defense, the Genomics Analysis Center, Boeing Co. (NYSE: BA) and 3M Co. (NYSE: MMM) as clients.

IWO is a good low-risk way to own SGI. With a market cap of $242 million, SGI is in turnaround mode. Last quarter, it lost 1 cent a share, down from 30 cents in the year-ago quarter.

The fund also owns specialty software and services firm Blackbaud Inc. (Nasdaq: BLKB), which caters to research foundations and universities.

Some 29,000 nonprofit clients rely on Blackbaud for help in managing their fundraising, accounting, online marketing and payment services. With a market cap of $2.6 billion, Blackbaud has a 13% return on equity and recently grew its quarterly earnings by some 33%.

In all, IWO provides investors access to nearly 1,200 stocks in a single, cost-effective ETF.

IWO trades at $129, giving it a market cap of $6.03 billion.

And it’s one of the best ways to get in on disruptive technologies like OBD before they go mainstream and take off.

I Need Your Help

I’m now working on an in-depth special report on artificial intelligence and the job losses it could cause in the near future. In it, I’ll show you some ways you can prepare yourself and your family for this potentially “jobless future.”

To help me with this report, I want to hear about your own experiences with automation on the job.

If you or a loved one has lost a job to automation, I want to hear your story. Get in touch by leaving a comment here on Facebook, sending me a message on Twitter or leaving a comment below.

3 Responses to How to Cash In on the Tech That Could Help 50 Million Drivers Save Money

  1. prdoucette says:

    I do not disagree that OBDs and the IoTs is going to grow but while you extol how ones good driving habits might save a driver money on their insurance you fail to mention the very real privacy issues the use of OBDs is creating. Insurance companies are pushing OBDs as a way to save on insurance but what they are not telling insureds is that they are expecting to boost their profits by selling the data they collect for their insureds OBDs, in the same way that Google is making huge profits from the data they collect from anyone who uses Google. I do not begrudge companies making money but without a legal framework that protects the privacy of individuals and gives individuals the right to review and contest any information a company collects using an OBD in at least the same way an individual can now review their credit history, the unrestricted use of OBDs is opening Pandora’s Box. I suspect their are lawyers licking their chops thinking of the legal fees they will make from leaks or hacks of data companies collect via OBDs.

  2. Gloria H. Lyon says:

    I need to study this longer. I better get back to you this weekend. How much time shall I allow for your part of the work? What I read was interesting but I need to read it all, but not now. I am in favor of the protection phase of it. The question is, can I absorb it all? Is this the best plan for me? I will contact my grandson for advice in the meantime. He is an Engineer with Apple Computers. Thanks for opening my eyes to the possibilities.
    Gloria

  3. natesh india says:

    Mike, These stories of job losses due to technology is open secret.I have been reading stories of how jobs are lost due to shut down – Walmart, , burger king franchise(Buffet stock) In New York area, a retailer (heinz)closing one of it’s plants in wisconsin and a public radio station is shutting down in Canada. the reason is obviously fallout of rising e-commerce, streaming online vidoes, news, and B2c retailers. However in my country no job losses yet.
    Because Robotics, M2M is slow adoption in third world countries.
    But goes without saying that it is only the middle class and labourers in Developed nations are really losing their share of income pie. Only CEO’s are making tonnes.
    Modern technology will create newer jobs for millenials while Gen X and Y (40s and 50s age group) will lose unless their employees are kind enough to subsidise their skill development expenses.

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