Know your stocks. If you're hanging on to various companies without really understanding them or knowing what they're up to, you leave yourself more vulnerable to nasty surprises. The more you know, the better able you'll be to decide whether to hang on or move your money into something more promising. (And believe me, there are lots of promising companies out there!)

Today, let's take a look at VirnetX Holding (AMEX: VHC). It specializes in software and technology for real-time, secure, online communications such as instant messages, smartphones, videoconferencing, and voice over Internet protocol (VOIP). It also provides its technology to the communication industry's original equipment manufacturers. Founded only in 2005, it had a good 2011 -- at least judging by its stock performance.

Stats on VirnetX

Year-to-Date Stock Return 34%
Market Cap $1.07 billion
Revenue, Trailing 12 Months $41,180
1-Year Revenue Growth 159.2%
1-Year Profit Growth NM (loss of $41.5 million over past 12 months)
Dividend Yield None
CAPS Rating (out of 5) *

Sources: Motley Fool CAPS, Morningstar, Yahoo! Finance. NM = not meaningful.

Let's go over a quick lesson in mathematical thinking. Note that a revenue growth rate of 159% may seem huge, but it's good to look closer at exactly what kinds of numbers we're looking at. Lo and behold -- annual revenue is measured in the thousands, not millions. Odds are, you took in more money over the past year than VirnetX did!

What happened to VirnetX Holding this year?
VirnetX bulls are excited about the company's potential, as it licenses its security intellectual property to 4G mobile-phone manufacturers, infrastructure providers, and operators. The success of 4G is expected to propel VirnetX.

But VirnetX has its detractors. My colleague Anders Bylund, when opining that Rambus (Nasdaq: RMBS) might have kept lawsuits from Micron Technology (NYSE: MU) and others at bay by charging more reasonable licensing fees, brought up VirnetX as having a similiar problem: "The company hopes to make big money on security patents for 4G wireless services, but it talks more about legal actions than signing royalty deals. How fair and reasonable can the licensing terms be if nobody wants to sign on the dotted line?"

Still, such a strategy could work. Already, VirnetX has collected some $200 million from Microsoft in a settlement and has brought suits against companies such as Apple, Cisco Systems, and Siemens.

It's not for faint-of-heart investors, though. If you can't handle risk and volatility, consider looking for greener pastures. VirnetX dropped more than 26% on a single day recently, when news broke that on Apple's request, the U.S. Patent and Trademark Office was re-examining a major VirnetX patent related to wireless security. The stock then jumped more than 10% on two consecutive days, after VirnetX received a new patent, one related to the Apple lawsuit. A glance at the company's news nook reveals lots of press releases, the vast majority of which are either announcements of new patents granted or updates on lawsuits.

If you're thinking of buying into VirnetX or you already own it, learn more about it and be sure you're confident in its potential. If you've decided it's not one of your best ideas, then look elsewhere, such as in our free report detailing The Motley Fool's pick for the top stock for 2012. It's free only for a limited time, so check it out today. Meanwhile, you can add VirnetX to My Watchlist, which can help you zero in on all of our Foolish analysis on it and all your other stocks.