Quarterhill Inc (QTRH.TO)

They came in with earnings that were higher than expected. They don’t have any litigation costs at present so are going higher. But he feels it is a momentum move and should be a growth play. It should be flat for now.

Had this rated as an A-. It is now down to a B because they kept screwing up and missing earnings estimates. They also had a huge run-up in legal costs. Have signed quite a few deals. The big problem is that when they announce these deals they don’t disclose financial terms, and you have to wait for the next quarter to see if there is any significance to that deal. He likes the deals. Raised dividends 25% a few months ago, following the failed takeover. He thinks this has now transferred into just an income stock. It’s lost that exciting big deal takeover potential.

This is in a sub sector of technology where they get intellectual properties and then trying to enforce those patents. This industry was in its glory back in 2010-2011. Since then there have been a number of rulings out of the US that has sided more with the companies that were infringing patents. He has recently bought some stock, and thinks the prospects over the next year are pretty good.

Stock has been trading in a channel. It needs to break out past $3.50ish. The longer the base, the greater the case. Don’t trade until it breaks through.

They are looking at a strategic review as to whether they will sell assets. But they don’t have a robust pipeline. He doesn’t know where the growth will come from.

(A Top Pick April 3/13. Down 7.14%.) It has been a tough environment for this company. They put themselves up for strategic review and the stock has had a bit of a move over the last little while.

(Top Pick May 16/13, Down 18.72%) He still believes the story and has added to his position. They got hammered twice on trials they lost. The second one against Apple was big, but they are appealing. Came out with phenomenal earnings a few weeks ago. Thinks there is opportunity here and also they could get acquired here.

This is a better retail stock than an institutional stock because they own a large portfolio of patents. As an institutional investor, it is really a black box as he can’t tell how strong their patents are. Last year was supposed to be a very big year for them, but they only had about 1 in 6 catalysts that worked in their favour last year. He still has a small position, but has lost patience. Yield of about 5%.

Does not screen well. Numbers are lumpy. It is a difficult business. It always looks like it will be better when a lot of law suits settle. He thinks it will sell to another patent portfolio company.

Thinks there is an opportunity for this. Recently reported reasonable numbers. Expected to earn $0.41 this year, which against a $3.30 stock gives a fairly reasonable PE multiple. Expected earnings of $0.41 from $0.13 last year is almost a triple. Unfortunately the industry is out of favour at the moment but over the next 12 months there may be reasonable opportunities. Ranks 402 in his model so is in the middle of the pack.

(A Top Pick May 16/13. Down 19.9%.) Sitting on $100 million in cash, about $1.35 a share. Not for the faint of heart. They go after large corporations for patent infringements. Have over 2000 patents. Pretty much settled and licensed with every single firm that they’ve gone after, however Apple (APPL-Q) decided to go to court and the company lost in a jury trial and stock got hammered. Thinks they will be appealing the decision. In the meantime, the company is up for sale and he thinks the stock is worth $5-$6 on a sale. If a US company acquires the company, it might be a little easier to fight the likes of Apple in court. Great upside at this level, and very little downside.

Had a good run to 2011 and anticipated the good things happening now. Bas building may start to happen soon but it needs a long period of time before it will go up.

It’s choppy. It is difficult to figure out. Hard to forecast. You would think the yield would hold it over better. It’s too hard to analyze.

He took quite a bit of his position off of the name. They lost some litigation and there is some momentum out of the stock. There are better places to put your money. You are getting a good yield, though.

Part of the problem is that they own a patent portfolio and it is very hard for anyone externally to judge the quality of it. Recently lost a court case against Apple (AAPL-Q) and had a series of setbacks this year. Have announced a strategic review. Very easy to see a valuation of $5-$6. If you believe that there is going to be a potential sale coming, it would be good to stick around.