Guest Post!- "A Small Company You Probably Haven't Heard of That Could Make You a Lot of Money"

Virnetx Holding Corporation, VHC, is a company that holds a number of patents in the 4G telecom industry. The patents they own are for a technology they call Gabriel. Gabriel is a complicated software that allows for automatic encryption of data in order to prevent hackers and thieves for stealing data from people. Millions and millions of dollars are being stolen from people every year through these devices and others, and thus the demand for bullet proof security is going to increase tremendously if 4G communications continue to grow. And that’s exactly what we are seeing: Cisco and IBM estimate that the amount of 4G devices will be 25 times the size by 2020.

These patents theoretically make it impossible for any other company to use the same software if it is not bought from Virnetx or used through them in the form of royalties.  So yes, to clarify, Virnetx Holding Corporation is just a small company with only a small patent portfolio. Yet it is poised for incredible growth in the future, or is a likely acquisition target for a larger company in the industry of 4G technology.

    So big companies entering the 4G industry need what Virnetx has. More or less, when a large company such as Google(:GOOG), Apple(:AAPL), or Cisco(:CSCO) want to obtain the ability to create a product that uses similar or the same technology as a smaller competitor owns, they either try to find a way around it through lawsuits and new patents, or they simply buy the patent or company. The valuation of Virtnex is thus based on the demand for 4G security in the future, and as seen above the demand is massive. These companies will continue to wait and try to find a way around companies with patents such as Virnetx and others, but there is a good chance they won’t, and as they wait the demand only increases.

    What it sounds like so far is that a company like Virnetx will be bought out and that’s the only reason to buy the company. However, the company has made a substantial amount of money through winning suits against companies such as Microsoft. They won a lawsuit against Microsoft in 2010 and settled for close to 200 million dollars. Currently, they are entering a suit with Apple. So, now it’s obvious that they can make money through lawsuits too. Virnetx could also be profitable in the future by licensing their technology (Gabriel) to other companies and receiving royalties for use of VHCs product.

It may be impossible for this company to lose. The reason I say this is because they have little or no operating costs, less than ten employees, and all of their technology is stored digitally and thus has a very minimal cost. The only way this company would become worthless is if larger companies who would need this technology find a way around Virnetx’s patents. We have seen thus far, however, that companies like Microsoft (and perhaps soon, Apple) are having trouble getting around VHC’s patents.

Now the last thing someone should know before they decide to buy shares of Virnetx is how perfect the technicals are right now. Currently, the stock is slightly overbought(as of 12/28) and will correct down to around 25.00 dollars before once again gaining momentum to make the 200-50 day moving average cross, or the “Golden Cross”. The stock’s future looks like it can hit 40 dollars a share by June of next year, or maybe sooner. Below is a chart of VHC:

 

-Guest post by Brian Morton