{"id":101624,"date":"2017-02-02T11:23:44","date_gmt":"2017-02-02T16:23:44","guid":{"rendered":"http:\/\/countingpips.com\/?p=101624"},"modified":"2017-02-02T06:24:11","modified_gmt":"2017-02-02T11:24:11","slug":"patent-filings-the-next-great-leading-indicator","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/02\/patent-filings-the-next-great-leading-indicator\/","title":{"rendered":"Patent Filings: The Next Great Leading Indicator"},"content":{"rendered":"
February 2, 2017<\/div>
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By WallStreetDaily.com<\/u><\/a> \"Patent<\/p>\n

For most of my career, I\u2019ve been a tireless advocate of a single investing principle: that stock prices ultimately follow earnings.<\/p>\n

By that I mean if a company continues to increase its earnings quarter after quarter, its stock price is bound to trade higher, too. And vice versa.<\/p>\n

My faith, mind you, is well founded. Ironclad studies demonstrate that the price performance of the S&P 500 index does indeed track profit growth.<\/p>\n

As a result, I consider earnings growth a reliable\u00a0leading indicator\u00a0when evaluating stocks. But more and more, I\u2019m becoming convinced that an even better leading indicator may exist \u2014 patent filings.<\/p>\n

Here\u2019s why\u2026<\/p>

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The IP Factor<\/h2>\n

Before a company can book a single penny in profit, it needs a product to sell. Yet in today\u2019s fiercely competitive global economy, before a company can produce something to sell, it needs to patent the idea.<\/p>\n

Otherwise, it\u2019s too easy for competitors to knock off the product and steal market share.<\/p>\n

In other words, being first to market is no longer enough of a competitive advantage.<\/p>\n

Companies need to be first to market\u00a0and<\/i>\u00a0have patents protecting their products to ensure sales and profit longevity.<\/p>\n

Groupon\u00a0(GRPN) and\u00a0Apple\u00a0(AAPL) serve as good examples of this new paradigm at work.<\/p>\n

As you\u2019re well aware,\u00a0Groupon\u00a0invented the daily deals market in 2008. All it took was a novel idea to connect consumers and businesses in a new way \u2014 via coupons over email.<\/p>\n

But guess what?<\/p>\n

Groupon didn\u2019t have even\u00a0one\u00a0patent protecting its novel business model. And within four years, over 300 competitors emerged. Now Groupon doesn\u2019t stand a chance to keep booking higher profits, let alone surviving.<\/p>\n

Contrast Groupon\u2019s experience with the details behind\u00a0the meteoric rise of Apple\u00a0and you\u2019ll definitely get the connection between patent filings and stock price performance.<\/p>\n

We can all agree that Apple took the world by storm with its iPhone launch in June 2007. Before it sold a single one, though, it secured as many patents as possible. And it continued to do the same thing on every next-generation device.<\/p>\n

So what happens if we chart Apple\u2019s patent filing activity against its stock price performance?<\/p>\n

Well, a clear connection emerges:<\/p>\n

\"AAPL<\/p>\n

As you can see, the number of patent filings increased significantly\u00a0before<\/i>\u00a0Apple\u2019s stock price increased significantly.<\/p>\n

Coincidence? Hardly.<\/p>\n

The uptick in patent filings signaled an uptick in innovation at\u00a0Apple. And the patent filings proved to be a reliable indication of new, potentially game-changing products in development.<\/p>\n

Once the products hit the market, their market potential was realized, which showed up in increased sales and profits.<\/p>\n

Bottom line: While earnings growth remains a reliable indicator, we\u2019d be well served to add patent filings to our repertoire, too. It\u2019s an even earlier indicator of stock price performance.<\/p>\n

Good investing,<\/p>\n

Louis Basenese
\nInvestment Director, Wall Street Daily<\/i><\/p>\n

The post Patent Filings: The Next Great Leading Indicator<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com For most of my career, I\u2019ve been a tireless advocate of a single investing principle: that stock prices ultimately follow earnings. By that I mean if a company continues to increase its earnings quarter after quarter, its stock price is bound to trade higher, too. And vice versa. My faith, mind you, is […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-101624","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/101624","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=101624"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/101624\/revisions"}],"predecessor-version":[{"id":101631,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/101624\/revisions\/101631"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=101624"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=101624"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=101624"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}