How to Invest in Patent Litigation stocks (such as WDDD)
For the sanity of newcomers, here are some general guidelines which should prove helpful down the road (I wish I knew these when I began):
1. Enter on the dips. 10-20% dips always happen. Wait for them, and when they occur, buy massive amounts of shares. The dips usually do not last very long, and they are usually followed by large runs North.
2. Don't believe hype. Read and digest Pacer documents and PR's, but don't buy into the comments of commentators. If you are unable to interpret Pacer documents, locate someone who can accurately interpret them for you (such as JJ Seabrook on VRNG's message board) and lean heavily upon their interpretations. These must be people you can trust.
3. Be patient. If you're in a patent play to make a quick buck in a week, you'll probably end up losing a quick 10 bucks in a couple weeks. Know what you own, and then own it for months and years, adding to your position on the dips. Don't try to play the flipping game; if you do, don't be surprised if you get flipped and end up with fewer shares.
4. Do not panic sell. Again: DON'T panic sell. Things are almost never as bad as they sound at first. When others are panic selling, I make it a rule to buy at those times. You can get shares at clearance prices amid panic selling. Another way of putting it is this: "Buy when others are selling; sell when others are buying; hold and add when others are holding." That mantra almost always works in these stocks.
5. Invest, don't trade. Many might disagree with me on this, but these stocks are best invested in rather than traded. Read through the posts (some of them are mine!) detailing the frustrations of traders who entered to make a quick buck, only to leave frustrated after a week or a month. Learn the case and invest in the company, and then sit on your investment until the case is finished.
6. These stocks are volatile. One day you'll be up 30%; another day you'll be down 30%. Don't panic.
7. Learn to live without news. If you are unable to live without constant news and re-affirmation that your investment is a good one, then don't invest in these stocks. The silence is deafening. Get used to it. Companies in litigation won't say much; when they do speak, you should listen carefully to what they say and to what they don't say.
8. Call Investor Relations YOURSELF. Call the CEO of Worlds or the IR departments of VRNG and BCYP. They are real people who really know some things which will prove helpful to you. I cannot emphasize this enough: call the company yourself and ask them your questions!
9. Keep your eyes on the end goal. The end goal of these stocks is settlements, buyouts, and trial victories (MSJ hearings, Markmans, actual trials). As long as one of these exists as a viable option, then drown out all the peripheral "noise" and keep your eyes on what really matters (i.e. Worlds has an MSJ hearing on October 17 based on the issue of the dating of their '045 patent. This is the next scheduled event. Pay careful attention to any issues surrounding it.)
10. All patents were NOT created equal. News of what other companies are doing, the developments of other patent cases, variables of other patent companies' licensing agreements/settlements, etc. almost always are irrelevant to your investment.
11. Capital structure matters. Don't trust the number of shares you see at Yahoo Finance or MSN. Go read the SEC filings yourself to see the fully diluted capital structure of your investments.
12. News that does not affect a company's ability to earn future revenue should be heavily discounted. News that does affect a company's ability to earn future revenue should be considered weighty and important.
