Time and again I am reminded what an important asset patents can be to company's growth or continued existence. For example, I was reading an article in the Motely Fool today and their review of Green Mountain Coffee Roasters, the owners of the "K-Cup" for coffee. The author quoted:
"My Foolish colleague Rick Munarriz says he'll be buying shares of Green Mountain by week's end because the Keurig machine remains popular, the patent expiration battle is overblown, and the stock is cheap. I think what he's doing amounts to balancing a steaming cup of coffee in his lap. The K-cup is popular because it's patent protected; that expires next year."
In many cases, the existence or nonexistence of a single patent can determine the fate of a company, especially in crowed market with many competitors waiting to get a piece of the pie that you created.
A number of other factors complicate matters, however. For one thing, investors generally buy stocks according to their expectations about the unpredictable future, not according to current earnings. Expectations can be influenced by a variety of factors, many of them not necessarily rational or justified. As a result, the short-term connection between prices and earnings can be tenuous...............
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