My Top Stock to Buy in September

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Imagine this scenario: You stumbled upon a blockbuster gadget. If you sell your gadget in bulk right now, you'll personally make $500,000 over the next year. However, you have no guarantee that anyone will ever buy the gadget again -- the competition is closing in fast.

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On the other hand, you could give the gadget away for absolutely free right now, but you'd get $40 per month for each one you sold for a very long time -- though the actual duration is not certain.

Which do you choose?

A lot of people would pick the former since it's a guaranteed payday with a lot more certainty. And on an individual level, that may indeed be the savvier choice. But when it comes to running a publicly traded company, the latter makes much more financial sense. If you give your gadget away to just 1,000 people, for instance, you'll make as much as $4.8 million over the next decade.

A real-life example from summers of unrest

This, in essence, is what you get if you buy shares of Axon Enterprises (NASDAQ: AAXN) -- formerly and better known as TASER International. While the company's bread and butter are non-lethal weapon sales, its foray into cameras has me excited about the stock.

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If the past two summers have taught us anything, it's that body-cameras will soon become the standard for every officer. In locations where there was video evidence of what happened during fatal shootings, juries and the general public have a record to judge for themselves what happened. Without that evidence, the seeds of distrust often led to violent rioting.

Axon's body cameras themselves aren't all that special. In fact, the company lost a patent battle against a smaller rival and famously missed out on a huge opportunity in New York when the city sided with VieVu at the last minute.

But that's not the real draw. Instead, it is the company's Evidence.com platform for storing, searching, analyzing, and sharing all of the video its cameras capture. Imagine being a police department with -- literally -- millions of hours of police video categorized and stored on a single platform. The costs of switching away from that platform would be enormous -- financially, in terms of lost time, and with the threat of losing critical evidence in the process.

That's why Axon made the decision to give away body cameras and one year's worth of Evidence.com for free to any police department nationwide that wanted to give it a try. Once these accounts migrate to Evidence.com -- and its newly enabled AI possibilities -- they are likely locked in for the long haul.

A subscription to Evidence.com can run anywhere between $15 per month per user to as much as $79 per month per user. With over 1 million full-time officers nationwide, you can see how capturing even one-quarter of the potential market with a mid-range subscription of $40 per month could be lucrative -- creating a run-rate of $120 million annually.

The two levers I'm watching as a shareholder

For this strategy to be successful, two things need to happen:

  1. Weapons sales need to remain robust enough to provide cash flows to fund all of these free body cameras and one-year subscriptions.
  2. More and more officers need to sign on to Evidence.com.

Even though Evidence.com is what excites me, the company's Taser weapons still accounted for the bulk of the company's sales. Those sales need to continue growing for Axon to have the chance to make the leap toward becoming a software-as-a-service (SaaS) company.

Here are the most important factors, visualized:

Factors to Watch at Axon
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After spending years building up its cash hoard, Axon is now using it to finance its ambitions with Evidence.com and quash the competition. Free cash flows will be important to watch -- that metric has clocked in at negative $14 million over the past 12 months -- but the fact that there's absolutely no long-term debt to speak of is very encouraging.

I'm confident enough in this company and its approach that I'll be buying enough shares to bring the total position to 4% of my real-life holdings. If you're a long-term investor who believes Axon can capture an enormous swath of this field and can stomach some volatility, I urge you to consider buying shares as well.

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Brian Stoffel owns shares of Axon Enterprise. The Motley Fool owns shares of and recommends Axon Enterprise. The Motley Fool has a disclosure policy.