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Acacia Research Corporation - Meeting Unmet Needs
As an investor in ACTG at these $20 -$30 levels, I'd be a little worried if they aren't "patent trolls."
As I see this investment (and I believe the author does a good job of describing the landscape), there is an evolution with NPE's going from being perceived as "pirates" to fulfilling a less controversial role of simply rationalizing an extremely important economic space.
But...don't be fooled, the big money is in successful, aggressive trolling (not a business model one touts in public) while the more mundane outsourcing in a competitive world requires a more normal business model (i.e. you can't have half your staff being VP's.)
This is a transitional company and may be one of the few big winners that institutionalizes its activities. Someone will do it, but spread your bets. Over time, the dominant players will have a large share of a multi billion market with good prospects for internationalization of their portfolio management and outsourcing for smaller patent holders.
This is an opaque management and reporting leaves much to be desired. This can best be represented by the head scratching when the stock plummeted and the primary response was; "let's use cash and buy up shares to get the price back up!) While it may make sense to buy back shares, it would make more sense for management and professional staff to take little in cash comp and lots in bonus paid in the form of restricted stock. Much of the cash was raised based on a business plan for expanding and buying portfolios (i.e. using the expertise of the high priced talent for growing the business, not playing financial engineer - Goldman and dozens of others are better at that.) The danger is that the transition from pirate to institution never takes place with the crew that has been successful in building the original business.
So, I own it and keep an eye on it. Option action is reasonably good for a firm of this size and can help manage any position you might establish. Now is not the time to cap upside on this stock.
Jan 11 12:12 PM
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