Want to know what separates a mid-level financial advisor from a major Wall Street hedge-fund manager?
The ability to discern opportunity before the rest of the pack...
It's something not many can do, especially when it comes to investing... It takes a curious alchemy of financial understanding, subject-matter expertise, curiosity, synergetic aptitude, creative imagination and good, old-fashioned entrepreneurship...
If you want insight from this sort of brilliant mind, then I suggest reading Andy Kessler, the former hedge-fund manager.
But if you want to watch an entire firm with these sorts of qualities, the best place to look is Kleiner Perkins Caufield & Byers -- one of the most successful venture capital firms in the world. (A venture capital firm provides financial capital to early-stage, high-potential growth startup companies)
I won't talk too much about Kleiner Perkins, the firm's track record speaks for itself... It was an early investor in Amazon (Nasdaq: AMZN), AOL (NYSE: AOL), Compaq, Electronic Arts (Nasdaq: GS), Genentech and Intuit, just to name a few.
Then in 1999, long before "Google" was even a verb, Kleiner Perkins paired with Sequoia Capital and paid $25 million for 20% of the search engine -- Google (Nasdaq: GOOG) is now worth about $200 billion today.
All told, if you add up all of Kleiner Perkins successful ventures, they have produced 250,000 new jobs, brought in more than $100 billion in new revenue, and created more than $650 billion in market cap.
As the chief investment strategist behind Game-Changing Stocks, I like to see where firms such as Kleiner Perkins are parking their cash -- their long history of savvy investment success is chief among its several areas of distinction.
Right now, Kleiner Perkins invests in four distinct areas: Greentech, China, Digital and Life Sciences... But an overwhelming number of their success has come from high-flying tech start ups.
And after looking through some of Kleiner Perkins most recent investments, I think they may have found another future success story in RPX Corp. (Nasdaq: RPXC), or "Rational Patent."
Rational patent is ultimately a response to the growing trend of patent litigation. If you follow financial news, then you're likely aware of how important having access to the right patents has become, especially for tech companies.
In fact, the need for patents led Google to buy out telecommunications giant Motorola for a whopping $12.5 billion in 2011. By purchasing the telecomm leader, Google gained access to Motorola's roughly 25,000 patents.
All-in-all, in 2010, a total of 2,727 patent lawsuits were filed, according to Rational Patent. In the first quarter of 2011 alone, another 918 hit the courts, which works out to annualized growth of 35% in one year. It's a messy business with an extreme amount of risk.
Companies with patent concerns can manage this risk by buying a membership in Rational Patent.
RPX holds a portfolio of some 1,600 patents -- nearly all of them from marquee names from the high-tech sector -- and clients pay RPXC $60,000 to $6.6 million a year to license all of the patents and thus avoid trampling on anyone else's proprietary technology, whether inadvertently or on purpose.
Rational Patent then uses its revenue to buy more patents, which attracts more members, and so it goes.
There are about 2,500 companies that could benefit from a membership, which gives RPX a huge amount of growth potential. That is reflected in its top line: Revenue is growing at a phenomenal pace.
What's more, happily, the company is profitable and has no long-term debt. With a market cap of $640 million and annualized 2011 net earnings of about $30 million, RPX is trading at 21.3 times earnings, or roughly equal to the Nasdaq Composite Index.
Risk to Consider: Let me warn you though, like any growth stock, investing in Rational Patent carries significant risk, because the company trades as a small-cap, you can expect greater volatility when the market roils.
Action to Take -- > But, if you're an aggressive investor looking for a stock with big upside potential, then I think Rational Patent could be a smart play.
The patent war has only just begun... And with a firm like Kleiner Perkins Caufield & Byers backing its finances, Rational Patent could be primed to take full advantage of this growing trend.