Yesterday SA published my article, Google Flip Flops, Concedes Vringo Entitled To Ongoing Royalties, in which I discussed recent statements made by Google (GOOG) in its ongoing patent infringement case with Vringo (VRNG) relating to the parties potentially negotiating an ongoing royalty for Google to pay Vringo for continued infringement of Vringo's patents.
At the time I submitted the article yesterday morning to the SA editors, VRNG was trading at roughly $2.90, which I believed was well below my value of the company in light of the issues addressed in my article. I thus took a long position, which I disclosed in my article yesterday.
Little over 24 hours later, VRNG is up roughly 25%, to about $3.60 as of the time of submission of this article to the SA editors. This is well above my value of the company. Therefore, I closed my long position and have now reestablished a short position.
My current belief, which I held yesterday as well, is that VRNG is worth roughly $3.15-$3.25, but is likely to fluctuate between $3.50 and $3.00 due to its high volatility. Thus, I may continue to buy VRNG when it is below $3.00 and sell when it is above $3.50. Of course, things will change in the litigation, as the parties continue to file post-trial papers and the judge begins making decisions on various motions. Therefore, my value of the company will almost certainly change as those events unfold.
Many have criticized me for flip flopping on my position regarding VRNG. However, I strongly believe it is a mistake to fall in love or hate with a stock no matter its price. It is my investing strategy to determine what I think a particular company is worth at any given moment and then be willing to both buy if the market undervalues the company and sell if the market overvalues the company. Yesterday morning I believed the market undervalued VRNG. This morning I think it is overvaluing VRNG. The difference is that the market price has changed 25%, not my opinion of its current value.
Disclosure: I am short VRNG.
Additional disclosure: Please see the body of this article for my disclosure and also reference the disclosure made in my article yesterday, which is linked to in this article.