Buy, Sell, or Hold: Vringo

When considering any stock for your portfolio, don't be swayed by just the positives. Examine its pros and cons, and decide whether it's possible upside outweighs its risks. Let's take a look at Vringo (NASDAQ: VRNG  ) today and see why you might want to buy, sell, or hold it.

The company develops mobile technologies and intellectual property and boasts more than 500 patents and patent applications related to telecom infrastructure, Internet search, and mobile technologies. It also "operates  a global platform for the distribution of mobile social applications and services including Facetones and Video Ringtones which transform the basic act of making and receiving mobile phone calls into a highly visual, social experience." Video Ringtones is a platform  permitting users to share video ringtones for cell phones, while Facetones lets them share animated slideshows, drawing on Facebook (NASDAQ: FB  ) photos. It also offers Video ReMix, permitting remixing of music videos on smartphones or tablets, and Fan Loyalty, a platform involving  reality TV shows and stars.

Buy
One plus for the company is the industry it's tied to -- smartphones and tablets. These items are proliferating at an amazing rate, making many companies and shareholders wealthier.

Companies such as Zynga (NASDAQ: ZNGA  ) , despite their struggles, are demonstrating how powerful the mobile arena can be and have many investors looking at others in the industry, such as Vringo. Zynga, by the way, is now looking at entering online gambling, which could pay off well, though it will face competition there, too, such as from International Game Technology (NYSE: IGT  ) and Bally Technologies (NYSE: BYI  ) .

There's great potential here, as the company has served more than a million downloads of its Facetones offering and is involved in some patent-related legal wrangling that might generate hundreds of millions of dollars for the company. Be careful with all these possibilities -- speculation can burn investors.

The company has been spending heavily, which isn't necessarily a good thing, but it has been boosting its patent portfolio, in part via a $22 million purchase from Nokia (NYSE: NOK  ) and also via a merger with Innovate/Protect, which held some patents from Lycos. There seems to be a living to be made in licensing patents and litigating against alleged patent violations, but some disparage such activities as "patent trolling." In a dispute with Google (NASDAQ: GOOGL  ) , Vringo was hoping to win nearly half a billion dollars but ended up with about $30 million. That's far from nothing, but the result does show the unpredictable nature of such "earnings."

Insider ownership is another draw, with a sizable percentage of shares outstanding recently held by insiders and heavily invested owners. It's generally a plus to have those running or influencing a company own a sizable stake in it, as it aligns their interests with those of smaller shareholders. On the other hand, insiders have been doing much more selling than buying of shares recently. That's not necessarily a bad thing, as sometimes that's just how they extract needed capital from their compensation. But it also can be because they see a price decline in the future or see the shares as fairly or overvalued.

The company has, and has had, some big fans, though, such as billionaire Mark Cuban, who bought more than 7% of the company earlier this year.

Finally, some like Vringo simply because they see it as an acquisition target, eventually to be bought out at a premium price for its valuable patents.

Sell
The stock's price, recently around $3.10 per share, is a big concern. That's clearly penny stock territory, and penny stocks are generally risky, often tied to unproven companies, often manipulated by pump-and-dump schemers, and often able to fall sharply, despite seeming "cheap."

If you're not too tolerant of volatility, you might also steer clear. A glance at its stock history will show you why: Within its less than three years trading on the market, its price has been as high as $5.73 and as low as $0.68 per share and has recently been in the middle of that range, roughly. Its beta of 2.21 reflects a stock that's more than twice as volatile as the overall market. Volatility isn't a purely bad thing, but it can be hard for some to deal with.

Meanwhile, the company's financial statements  are a concern, too, featuring rising costs, rising losses, and a sharply rising share count, which dilutes the value of older shares. Debt is negligible, which is good, but cash has been negligible, too (though at the moment its coffers are reasonably full ), and free cash flow is negative.

Hold (off)
Given the reasons to buy or sell Vringo, it's not unreasonable to decide to just hold off on it. You might want to wait for growing revenue and earnings. You might wait for a big patent dispute win that fills the company's coffers with opportunity. You might want to see more products, and sales of them.

If you like the idea of investing in a patent-heavy company, you might also consider some alternatives, such as the very profitable Qualcomm (NASDAQ: QCOM  ) , which makes about a third of its revenue from licensing and the rest by selling chips and circuits. It recently sported a P/E ratio  under 20 and a dividend yield of 1.6%.

The verdict
I'm holding off on Vringo for now. But everyone's investment calculations are different. Do your own digging and see what you think. Vringo may perform spectacularly in the coming years, but remember that there are plenty of compelling stocks out there.

After the world's most-hyped IPO turned out to be a dud, most investors probably don't even want to think about shares of Facebook. But there are things every investor needs to know about this company. We've outlined them in our newest premium research report. There's a lot more to Facebook than meets the eye, so read up on whether there is anything to "like" about it today, and we'll tell you whether we think Facebook deserves a place in your portfolio. Access your report by clicking here.


Read/Post Comments (9) | Recommend This Article (5)

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 December 08, 2012, at 7:04 PM, Bgdtx wrote:

    I don't mean to be presumptuous but, I don't think you've done quite enough DD here to make a decision much less express it on such a platform.

    The case is not over and final ruling has not been made. The latest motion was released yesterday regarding actual damage amounts. Vringo will likely be awarded 170 million in past damages And a future royalty rate of 3.5% of 20.9% of 96% of Google's total revenue. Also considering Google's future growth, this dwarfs your figure of 30 million.

    In Vringo's latest motion it also appears that they may be setting them selves up for injunctive relief as they are claiming they are not a NPE. While I don't think injunctive relief is in order here, I believe Vringo is using he threat as leverage in settlement talks if they take place or aren't already.

    God Bless.

  • Report this Comment On December 09, 2012, at 12:02 AM, rudolphrnr wrote:

    WOW. Check out that disclaimer at the bottom. That is all I need to know, will not be reading this article.

  • Report this Comment On December 09, 2012, at 7:57 AM, CarolePaint wrote:

    Selena Maranjian you are not an honest contributor.

    Your article reads like someone who is trying to drive vringo down. This is by far the worst, and most intentionally inept article I have ever read on Motley Fool.

    You should be thrown off this forum.

    In addition, your writing style is a junior high school quality at best.

    You could better serve the planet behind the counter of McDonald's!

  • Report this Comment On December 09, 2012, at 1:13 PM, HappyEndingz wrote:

    In addition, your writing style is (of) junior high school quality at best.

    You've stuck your 'a' where is doesn't belong...

  • Report this Comment On December 09, 2012, at 1:54 PM, NuclearSteve wrote:

    The trial is not over. The judge needs to decide on future royalties which will run through the life of the patents (2016). These royalties could be as high as $800 million based on 3.5% of 20.9% of Googles annual revenue. Big potential.

  • Report this Comment On December 09, 2012, at 3:52 PM, vrng wrote:

    The Motley Fool owns shares of Facebook, Google, and Qualcomm and has long.

  • Report this Comment On December 09, 2012, at 3:53 PM, vrng wrote:

    $800 million based on 3.5% of 20.9% of Googles annual revenue. Big potential.

  • Report this Comment On December 10, 2012, at 10:48 AM, Green1Destiny wrote:

    Confucius say: Fine words and an insinuating appearance are seldom associated with true virtue.

  • Report this Comment On December 14, 2012, at 11:48 AM, SamFreedom wrote:

    "Hmmm, lets see...

    1. I own shares of Google....

    2. Vringo sued them and won...

    3. We're waiting for damage amounts to be corrected...

    4. I've got nothing better to do today....

    I think I'll write a jr high school level article on them!"

    DREAM SEQUENCE OVER

    Now, usually, i just skip these articles and go right the comment section because the investors usually know what the heck they're talking about.

Add your comment.

DocumentId: 2145504, ~/Articles/ArticleHandler.aspx, 4/23/2014 9:38:53 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 22 minutes ago Sponsored by:
DOW 16,501.65 -12.72 -0.08%
S&P 500 1,875.39 -4.16 -0.22%
NASD 4,126.97 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

4/23/2014 4:01 PM
BYI $62.90 Down -2.70 -4.12%
Bally Technologies… CAPS Rating: **
FB $61.36 Down -1.67 -2.65%
Facebook CAPS Rating: **
GOOGL $537.51 Down -7.99 -1.46%
Google (A shares) CAPS Rating: ****
IGT $12.62 Down -1.45 -10.31%
International Game… CAPS Rating: ****
NOK $7.30 Down -0.17 -2.28%
Nokia CAPS Rating: **
QCOM $80.71 Up +0.10 +0.12%
Qualcomm CAPS Rating: ****
VRNG $3.81 Down -0.01 -0.26%
Vringo, Inc. CAPS Rating: ***

Advertisement