Tessera Patent Panic: What happens when people don't read *all* the words...

EDIT: I'm now pretty damn confused because only a few were even examined originally; so it may in fact be that all that were re-exed were rejected. We'll see what that means soon enough. Or I'll lose $2k.

Tessera received an initial action today from the Patent Office that some people interpreted, once again incorrectly, to mean that their patent had been invalidated. This was exacerbated by idiots posting "ALL CLAIMS REJECTED" onto Yahoo and Google's Finance boards. Awesome.

In reality, only 7 of the 27 claims of the patent in question were dumped. And the remaining 20 were essentially re-affirmed.

Here's my full rant on the boards:

Alright, a lot of people have been fear-mongering OR unintentionally
misreading the USPTO's office action which became available on PAIR
today. (Available here: http://portal.uspto.gov/external/portal/pair
Control number:90/008,484)

Let's be clear that the SUMMARY OF ACTION clearly states that SEVEN of
the 27 claims were SUBJECT TO REEXAMINATION and subsequently REJECTED
outright.

The remaining 20 claims were "not subject to reexamination," which
actually in force makes them stronger.

Summary of action:
1a. Claims 1,5,6,17,18,21 and 22 are subject to reexamination
1b. Claims 2-4,7-16,19,20 and 23-27 are not subject to reexamination
4. Claims 1,5,6,17,18,21 and 22 are rejected.

Now before we take a look at the claim language from the actual
patent, US Patent Number 5,679,977 (Available here:
http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=P...),

let's consider:
A) The patent is in full-force and effect while the case is being
examined
B) The claim is non-final office action, and Tessera will appear it
anyway

And now let's look at the claims and examine which have been rejected--
mostly the non-specific elements. Now, that's not to say that those
elements don't narrow it down to the scope of exactly what's at issue
here. It's not to say that I even know anything about the specificity
with which the patent examiner has knocked down certain claims over
others. It *is* to say that the specifics have been mostly upheld and
that MOST of the patent is intact and survivable in that form. Not
only that, but before an appeal even, those elements are "not subject
to reexamination" and thus COMPLETELY LOCKED as valid.

Please feel free to correct me if I'm wrong about any of this. I am
not a patent officer, attorney, lawyer or anyone even remotely
intelligent in any of these fields, or in trading in general. I am
just offering the facts as *I* see them, since I'm sick of reading
"ZOMG THE PATENT IS GONE" based on a 10 word wire piece. Seriously,
people.

Pre-Market TSRAing...

Action	Qty	Symbol	Price	Total		Acct Type	Trade Date	Time Completed	Settlement Date
BUY	47	TSRA	$21.46	$1,015.62		CASH	3/31/2008	8:01:30 AM	4/3/2008

Done and done. Back to bed. Happy to have bought below Friday's close, even if just barely. ($21.93)

Dropping Berk for now, but to trail or to stop...

I'm having a bit of an internal struggle with my few dollars here. I can sell Berkshire at market on Monday, and it'll likely open at $4,452 where it closed Friday. Or I can leave my trailing stop in place at 1% and have it fire at $4,407. Basically, it could cost me $45 to stay in, on the hope that it bumps up even further—not terribly likely. I'm expecting it to bounce a little bit lower, or a lot lower. It took on a nice boost on Friday. It'll level out.

So should I just exit now? Or let the TS stand?

Well, I've converted the TS from a 1% to a 31 point stop. This'll let me have a bit more granularity over the TS (on a stock as large as BRK, not being able to subdivide percentage points is a bitch) and let me realize any additional gains that may hit Monday morning.

I'm starting really wish I lived on the east coast. Waking up at 6:20am to catch market open is killing me. If you know me personally, you know that I'm rarely up before 10am, and rarely in bed before 3am, so it's rough.

Once again, just to reiterate: If I were in the market for a long-term investment strategy, I would seriously dump whatever excess cash I have into Berkshire. I just would rather keep liquid on the many other opportunities (and risk) I can play into elsewhere. And being a more active trader definitely makes this blog more interesting.

I still see BRK hitting $5,000+ in the next 6 months and $5,500 in the next year. There's no reason it needs to stop—Warren keeps building its value with solid, well-underpinned, stable growth not attached to anything as volatile as fuel and housing costs. And he always buys on the dip.

A pregnant pause... entering Tessera with no available out for 3 days... (TSRA)

Tessera is a microelectronics company that holds a bunch of patents directly correlated to miniaturization technologies used in the semiconductor industry. They receive lots of royalties and licensing fees from Intel and other major semiconductor manufacturers.

Motorola has been trying to bitch slap the patent infringement suit Tessera has brought against them, which is kinda a big deal: If the patents are indeed not infringing, there's something to be said in a worst-case-scenario kinda way that they could be overthrown entirely and Tessera could lose their current clients. Bad news.

As a result of this fear, and several USPTO re-exams tossing claims, Tessera's share price completely tanked in February, from $40 to a low of $13 in seriously about a week. Ouch.

An ITC judge issues a stay against them, which killed them further. Tessera clarified that USPTO's claim-tossing was NOT the same as overturning their patents; quite different. This helped them out a bit. But yesterday, the ITC appeals panel unanimously overturned the stay and is allowing them to go forth with their claims. That caused a MASSIVE spike of 33% (+5.44 to $21.93) Friday alone.

Here's the thing: Tessera is a pretty stable company in terms of operation and IP. They have a bunch of major players paying major licensing fees to them for their technology. An analyst at Lehman Brothers is putting a price target of $46. From an intrinsic value standpoint, you're looking around the $40s at least, where it was trading for most of last year.

What's that mean? It's a steal at twice the price, even at $22. I'm going to put my liquid $1,000 into it @ market on Monday.

The only problem is that I free-rode Friday with Red Hat. (Bought in and then sold with unsettled funds.) If I do that twice, I have my account frozen for 90 days. This is why I need to sign my margin authorization. (Margin accounts aren't held to the free-ride stipulations. Even when you're trading in cash.)

So I'm effectively locked into this one for 3 days. But I think it'll be well worth it. I'm not sure how long I'll hold onto it. Any settlement or further upward movement in this court case could cause this stock to absolutely skyrocket. If they "win" in any form, we're talking a HUGE boost. It'll reaffirm their position beyond all doubt (as opposed to the unanimous overturn which simply helped them quite a bit) AND lock in a major cash influx. Huge potential here.

And if the ITC was overturning the stay unanimously, they clearly think there's some merit there. Not to mention the fact that Intel and a bunch of others are already paying the licensing fees without a peep. Some real potential here. Not sure what I want to establish as an exit strategy; if I want to hold medium or wait for a ruling on the case... if they failed to secure a victory on the case, all hell could break loose.

Either way, I'm seeing some decent short-ish term growth on the horizon. Maybe a jump on Monday, but having the free-ride limitation might actually help me out and not panic if it slips a little on Monday. (I fully expect it to go up though; there's going to be major support @ 22 and gnashing of short-covers.)

Open Orders

Status Symbol Action Qty Order Type Duration Order Time Session QUEUED TSRA BUY 47 MARKET DAY 3/29/2008 1:45 AM Regular

Exits Completed: Red Hat

Sold Red Hat, completing my roundtrip with about my commission lost. Stupidly, I had made two initial purchase orders, tacking on another $7 unnecessarily.

It didn't move much more than its initial spike so I think I sold at a loss of $19 or some such.

Berkshire made a big move, my trailing stop is still in effect and that should lock in a tiny profit.

Looking for some new things to play with. We'll see what happens with Berkshire on Monday.

Exits all around... (RHT, BRK/B, V)

Red Hat, Inc. (RHT)
As I feared, Red Hat is a bit too low in volume to really push past a 5% gain. I bought pretty much at market open, and pretty much at its peak thus far of $18.58 and worse still, after it had made its biggest move in after hours yesterday. It's showing strong resistance at $18.80-ish, and I don't think we'll see it move past that. Trailing stop set: 57 @ 1% / $18.4734.

Berkshire Hathaway (BRK/B)
Berkshire is having it's daily spike up, as high as $4,450 when I started writing this. It's at $4,432, with me having bought in at $4,374.50. Trailing stop set: 1 @ 1% / $4,393.55, guaranteed profit of all of $20. (After commission.) Hopefully we can squeeze out just a little more, but I want some big liquidity back. I'll probably keep my eye on it and watch for it to fall to $4,200 to buy in again. It's moving up almost no matter what; buying on the dip of the range is a good call.

Visa (V)
This stock just won't settle down. Everyone expects it to perform exactly like Mastercard—to take off and break out in the next couple of months and skyrocket into the $200s. It took MA four months to move and MA had a lackluster first few months at best, opening at $44 like V, and only hitting the $50s until month 4, when it broke out in a big way:


In the meantime, nothing's moving on it and today, it's taking a bit of a hit, trending downwards and unable to gain any ground on its rallies. We'll see where it lands. Trailing stop set: 35 @ 5% / $60.268

Let's play the earnings call game... Buying Redhat (RHT)

Redhat announced that they bested earnings expectations by 7%. Quarterly earnings calls almost always come with a fun shift in the stock price: up for beat expectations, down for missed expectations. Naturally, this is an oversimplification. A stock's last few quarter's performance, it's market capitalization, the amount by which it missed or exceeded and of course, random market entropy all come into play.

But it's typically one of the safer bets you can make.

I'm hoping for a 5-10% bump and I'll roundtrip it if it gets anywhere near to that. After hours pushed +1.27 / 7.24% already, so the most of what we'll see may have already come and I could be buying into a sell off. Or we could see some shorts covered and a nice spike that nets me a small profit.

I'm only buying $1,000 worth, since that's all I have in "liquidity". In fact, I don't even have that; I have $500 in settled funds and another $500 in unsettled, pending funds. (From today's GOOG & AAPL sales.) The Federal Reserve's Regulation T requires me to have the funds settled before I can buy and then sell a new set of securities with the proceeds of an earlier sale.

Example: While I can buy 29 shares of RHT with the proceeds from my GOOG/AAPL sales, I cannot sell the position until the sales have settled, in three days. If I do, it's considered "free-riding" and it's a no-no; two instances locks an account for 90 days. I'm willing to take one instance to get a nice profit in.

I'm also completing a margin application, since you can get around this provision with a margin account.

The other thing I need to watch out for is the pattern day trading rules. If I perform 4 roundtrips (in and out of a position in the same day) within any 5 day period, my account converts to a "pattern day trader" account, which requires a minimum equity amount of $25,000. The punchline? They issue a fucking trading equity call for the difference if you don't have the $25,000. Or they close your account. Woo regulations.

Trailing stops triggered: GOOG & AAPL sold

SELL	1	AAPL	$141.47	$134.46			3/27/2008	1:38:28 PM	4/1/2008
SELL	1	GOOG	$446.00	$438.99			3/27/2008	9:30:01 AM	4/1/2008

The trailing stops I had established for both Google and Apple triggered today, at $446.00 and $141.47 (or $438.99 / $134.45 after commission.) I had purchased GOOG at $435.94, leaving a whopping profit of $3.05, and AAPL at $130.35 leaving a profit of $134.46. I specifically set the trailing stops to trigger once I had hit my near-breakeven point, after commissions.

In the end, Scottrade made more on these than I, with $28 in total profit. This is why I need to be entering in at more than one share a trade volume.

Visa's next on its way out and then we'll see what happens with Berkshire. My extra, boosted deposit cleared its withdrawal after settlement, putting me firmly at $7,687.24 / $7,500.00 or up about $187.24 or nearly 2.5% in about two weeks. Not bad. Need more plays like Bear Stearns. In. Out. Quick turnaround. Closer to day trading. But that also brings a lot more risk with it. We'll see what happens.

And I'll make an AAPL/GOOG play before their earnings calls later next month. Which way I'll bet is anyone's guess. Hearing some scary things about Google's Q1 results, but AAPL might be hot. On a day with exceeded expectations, you can always expect a 5%+ gain. Likewise a loss on failed expectations, for certain.

Nothing much.

Some nice gains today. No trailing stops triggered. I'm bumping up my V trailing stop I think. (I actually converted it to a straight stop.)

It's still finding its place in the world, so to speak, and that place is probably under $70. Needed more liquidity to play that right but alas.

I'm keeping this one short—huge presentation in just a few hours. Wishing Berkshire would bounce back and still considering canning it for now and playing around with a bit more liquidity in the short term.

Thoughts? Worth the maybe-it'll-hit-$5,500 (gain of about $1700) within a year to hold onto it? Or can I make more with a bunch of smaller, high-octane, higher risk plays?

Am I too young, so to speak, for Berkshire?

Preparing my exits...

Symbol	Last price	Change	Shares	Cost basis	Mkt value	Gain	Gain %	Day's gain
AAPL	140.98	1.45	1	123.35	140.98	17.63	14.29	1.45
GOOG	450.78	-9.78	1	428.94	450.78	21.84	5.09	-9.78
BRK.B	4300	-41	1	4367.5	4300	-67.5	-1.55	-41
V	63.1	3.37	35	2273.95	2208.5	-65.45	-2.88	117.95
				$7,193.74	$7,100.26	($93.48)	-1.30%	$68.62

Someday, I'll figure out how to accurately represent my performance in the market. The above Google Finance output, for instance, doesn't much care about my BSC deal which netted me $280, instead highlighting that I've lost on V and BRK.B.

Visa had a decent day today and didn't hit my STOP for it. I've established 3% trailing stops for both GOOG and AAPL, which will put me at an extremely meager profit for each of them; it's stupid to be playing with that cost with such low volume. The commissions make it completely inefficient. Lesson learned.

I'm also considering pulling out of BRK.B. It's not underperforming or anything; I expect in a year or less it'll be breaking $5,000 or more. It's just boring and I think tying up that much capital is a bit of a pain when I have such little to work with. It's a decent hedge though, and keeps me from blowing everything at once. But if I play smart and keep my eggs in separate enough baskets at all times, I'll be fine. I may exit once it pushes past my commission-break even. Meh.

Visa stings, BSC turns out to be a good call...

AAPL	139.53	+6.26	(4.70%)
GOOG	460.56	+27.01	(6.23%)
BRK.B	4,341.00	-6.88	(-0.16%)
V	59.73	-4.62	(-7.18%)
BSC	11.28	+5.32	(89.24%)
Value:	7,031.64	-135.31	(-1.92%)

Some confusing numbers up above, due to Google knowing I was only holding BSC for the day and neglecting to report any of my profits on it because it's technically no longer in my portfolio. At the very least, you can see that the market had a strong day in general with Google leading the charge up $27.01. Apple was healthy as well at $6.26/4.70%. But Visa met with some nasty downtrending with someone apparently selling heavy into the rallies that would've otherwise drove it up.

As a result, I've gotten dangerous close to my 15% trailing stop. And as a result of that, I think I'm going to switch it to just a flat stop at $57 to buy myself some cushion (about 50 cents worth) tomorrow. I'm predicting it bounces heavy tomorrow—a lot of people want this for a long term buy and were waiting for it to drop below $60 before buying in. Now will be their time and hopefully I can exit the position around $70 or $75, or at least establish a nice and healthy trailing stop there.

I won't let it drop below $55 at the VERY least though, and I'm going to set the stop loss at $57 right now. It'll suck to lose just about as much as I made today on BSC, but that's how things work. (It's more or less just frustrating because I think a bounceback is imminent, but waiting and wishing doesn't make it so.) (Okay, I lied. $56.75.)

Symbol	Action	Qty		Order Type	Order Price	Duration
V	SELL	35		STOP	$56.75	GTC

Bear Stearns bump & the exhiliration of day trading: Buy at open, sell at resistance, make 27.7% profit!

Action	Qty	Symbol	Price	Total			Trade Date	Time Completed
SELL	74	BSC	$12.64	$935.34			3/24/2008	10:24:52 AM
SELL	130	BSC	$12.6674	$1,639.74			3/24/2008	10:24:52 AM
BUY	204	BSC	$9.85	$2,016.40			3/24/2008	9:57:54 AM

To summarize, in for $2,016.40, out at $2,575.38 for a shared profit of $558.98 or $279.49 (27.7%) for my brother and I, each. Woot.

I couldn't get in to pre-market trading levels; by the time I woke up at 6:20a (9:20 EST), it was trading at ~$9.91. (And my money transfer hadn't completed yet.) Was forced to enter in at $10.70 because that's where the ask was, so I placed my order for 204 shares at market. Trading was halted on BSC for the first 27 minutes, which completely freaked me out, since I placed my market order at exactly 9:30:00 and just saw it hang.

I know I said I wouldn't buy above $8.50, but I knew there would be covering shorts and other excitement. I didn't expect the halt and that scared me a bit, but then they lifted it and my trade went through at $9.85. I watched it start to bounce and news came through that the deal with JPM seemed solid at $10/share. Good, I made at least 15 cents a share in almost any event. At the very least, we weren't going to see another offer come through at less than that value, or at less than my $9.85.

Then something interesting started happening: the stock upticked like crazy. I'm guessing a combination of covering shorts, an even slightly (or immensely) bigger deal coming or some insanity pushed the stock all the way up to the $13 range. I saw it start to dip and bounce off of a resistance point of about $13, so I exited the position at market, which was fulfilled in two blocks: 74 @ 12.64 and 130 @ 12.667. (It *briefly* spiked to $13.85, which means that if you had gotten in at pre-market around $6.40... well, damn.)

All in all a good showing of $279.49 on $1,008.20 invested, *after* commissions.

I'm going to pull my $1,000 back out since it was from my savings and not part of my active trading cash. I'll ask my brother what he wants to do with his. Good times. I can see how this is addictive. Now, if an offer comes through for $25/share or some such, it'd have been crazy to still be in so I won't feel bad. There are far too many "what ifs" in this game to beat yourself up over it for more than just a few minutes. It's trading around $12.05 now (8:14/11:14a) but I'm happy where I exited.