3 Stocks Ignoring the Fiscal Cliff

Even after the Speaker of the House said he'd be willing to consider tax hikes to help stave off the fiscal crisis looming at year's end, the Dow Jones Industrial Average (INDEX: ^DJI  ) still tumbled 121 points yesterday, or almost 1%. While Bank of America (NYSE: BAC  ) may have recovered a bit from the drubbing it took, most financial stocks were still down for the day as the country moved one day closer to the cliff.

Yet not every stock was depressed by the portents of doom. Some managed to go the other way and score big gains, even rising by double-digit percentages. Below are three that bucked the trends pushing the Dow lower.

Company

Gain

EZchip Semiconductor (Nasdaq: EZCH  )

14.6%

Alcatel-Lucent (NYSE: ALU  )

10%

Vringo (NYSEMKT: VRNG  )

8.0%

Yet resist the urge to high-five everyone in the cubicles next to you. Smart investors won't celebrate until they know why their stock surged, because without a fundamental basis for the bounce, these stocks could just as quickly make the return trip down.

EZ peasy
Ethernet is a relatively low-cost means of delivering fiber-optic connections to businesses and shuffling traffic around large metropolitan areas. EZchip Semiconductor, as the dominant provider of high-speed network processors for Ethernet switches and routers, stands to benefit from the growth of that trend, and third-quarter results prove it's taking hold. While revenue and profits were down sharply from the year-ago period, they were ahead of analyst expectations, and the chip maker said it was signing on large customers that will bring in greater revenue going forward.

I believe that announcement is all part of a broader trend among wireless carriers to build out their 4G and LTE networks. AT&T's (NYSE: T  ) plan to use small-cell technology in a big way will build on that capability, particularly if (as suspected) Alcatel-Lucent (NYSE: ALU  ) will be a primary equipment provider. Its backhaul products make good use of the capabilities Ethernet network processors like those made by EZchip. It was Ma Bell's big news that had the wireless equipment maker moving higher itself.

Cisco (Nasdaq: CSCO  ) has been adding EZchip's platform to its designs, and last quarter telecom equipment maker ZTE became its second-largest customer, adding the latest technology to its production. I'd look for EZchip to reverse recent weakness and move forward from here, much as I'm expecting Alcatel to finally reward investors for their patience, but let me know in the comments box below if you think either company has really changed course.

A patently absurd result?
Two days ago VirnetX Holding (NYSEMKT: VHC  ) won a patent infringement lawsuit against Apple (Nasdaq: AAPL  ) and was awarded $368 million, and Vringo won a significant battle against Google (Nasdaq: GOOG  ) , AOL (NYSE: AOL  ) , Target (NYSE: TGT  ) , and others for violating patents related to sorting ads based on click-throughs.

It's been an up-and-down saga for the past month for Vringo on whether it was winning its lawsuit or not and whether it would collect royalties or not, but a jury ultimately sided with Vringo that the Internet giant had violated the patents. The only problem is the damages are far, far below what the video ringtone maker was seeking. Instead of the $500 million to $1 billion, the judge limited the damages to the single year since it filed the lawsuit -- or $30 million -- arguing a claim should have been filed as soon as the infringement began.

Google was ordered to pay the lion's share of the claim, about $16 million, with AOL footing another $8 million and the others lesser amounts . While Vringo's stock initially fell after the verdict, it bounced back no doubt as investors likely figured some gain was better than none and it will get a "running royalty" of 3.5% a year, which amounts to about $125 million annually for the next five years . Analysts think it may ultimately receive as much as $600 million through 2014 .

Although some have accused Vringo of being a patent troll for having acquired Innovate/Protect earlier this year to gain access to the patents, protecting intellectual property is essential for companies and I/P launched the lawsuits prior to the bid. It also sets up Vringo as a potential takeover candidate itself.

Let me know below if you think Google, AOL, or someone else will use this decision as a reason to acquire the ringtone maker.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 09, 2012, at 12:08 PM, dragonslayer888 wrote:

    "the judge limited the damages to the single year since it filed the lawsuit -- or $30 million -- arguing a claim should have been filed as soon as the infringement began." you write with covert persuasion. You squeeze in "or 30 Million" as though it is the number the judge ordered. I see what you are trying to do. I hope others see too. There is alot more pertinant and controversial info regarding the damages number. You should have mentioned it, to be fair.

  • Report this Comment On November 10, 2012, at 6:07 AM, dcalv wrote:

    dragonslayer888 is right. Rich Duprey is only telling half the story... Why would he be doing that, knowing the full story. He should at least have mentioned that the jury probably made a error when they where calculating the penalty. Googles 15.8mil should have been 158mil. When you count in all royalties that VRNG will recieve in the comming years VRNG will get at least 700mil dollar. when they whare asking for 500mil to 1bil. I say the market is missing a great oppertunity. And RICH DUPREY is only telling half a story.

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Related Tickers

10/23/2014 11:39 AM
ALU $2.59 Up +0.10 +4.02%
Alcatel-Lucent (AD… CAPS Rating: ***
EZCH $21.43 Up +0.31 +1.47%
EZchip Semiconduct… CAPS Rating: ***
VRNG $0.96 Up +0.03 +3.42%
Vringo, Inc. CAPS Rating: ***
CSCO $23.64 Up +0.38 +1.63%
Cisco Systems CAPS Rating: ****
VHC $5.48 Up +0.30 +5.79%
VirnetX Holding Co… CAPS Rating: *

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