However I am of the opinion that at the present price IDCC is overvalued. It is based on future potential. Without some ground breaking news to sustain it the price will fall. We can not justify the present price without news
I think this was true before the settlement, but I think this is changing now. If nothing else, IDCC's stock appreciation during the last two years indicate a broadening of its ownership base at the individual and institutional levels.
Let me put some numbers behind this. As of 4/7/2003, IDCC had a total O/S of 55.5M. Insiders and 5%+ owners control approximately 10% or 5.5M leaving 50M shares as the float.
Institutions currently own 28% or 15.5M shares. Individuals or Private Investors currently own 72% or 34.5M shares.
1) The private investors who bought this stock before the 1995 Motorola debacle and during the survival stage (1995-1998) probably have the highest tolerance for risk and are probably driven more by instincts than by the empirical evidence. Capital is akin to gambling chips for these, uhm, swashbucklers.
2) The private investors who bought this stock during the turnaround stage (1999-2003) like me probably have a higher than average tolerance for risk too but instincts are ultimately grounded by the empirical evidence.
3) The private investors who bought this stock after the 3/14/03 settlement, or what I call the start of IDCC's growth stage, probably have the lowest risk tolerances and the highest requirements for empirical evidence from a high beta stock like IDCC.
One can intuit that these 3 basic types of private investors have different expectation levels which inform their buy and sell strategies so I don't think one can generalize too easily about their sensitivity to news after the settlement.
Most are still pure "buy and hold." Many are "core and trade." Some are pure "mo mo." The latter is the most sensitive to news and tends to have the hair-triggers. The pure "buy and hold" crowd tends to be the most vocal about the news or the lack of it. The "core and trade" crowd is just, ahem, damn cool.<g>
At the institutional level, all one has to do to appreciate the widening range of investing disciplines is look at the one of the leading fund families like Fidelity and Vanguard. A look at the charters of its speculative funds, growth funds, balanced funds, index funds and income funds would suffice to sensitize one to this widening range of investing disciplines.
Again, it is the mo mo fund crowd that tends to react right away to news or the lack of it.
What IDCC needs to keep absolutely clear amidst that noisy sea of expectations is this: If IDCC succeeds in making x amount per 2G handset and at least 2x amount per 3G handset then it is perfectly capable of generating at least 20% consistent sales and earnings growth for the rest of the decade no matter how slow or how fast the migration from 2G to 3G. When backed by useful financial milestones, this investment thesis is compelling.
This is why IDCC has to keep on investing heavily to manage the various expectations of its broadening ownership base.
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