Superior Intellectual Property Predicts Stronger Business Performance and Risk-Adjusted Returns

SANTA MONICA, Calif., May 4 /PRNewswire/ -- MDB Capital Group has shown a predictive correlation between the strength of a company's intellectual property and its revenue growth, gross margin, and most importantly, risk-adjusted investment return.  

For this study, MDB Capital's PatentVest Public Company Screener selected two cohorts of 100 small-cap companies, segmented solely by their PatentVest Tech Score.  One cohort consisted of companies with the highest Tech Scores (HTS) and the other consisted of companies with the lowest Tech Scores (LTS).  The companies in the High Tech Score cohort enjoyed:

• Superior Risk-Adjusted Returns: Mean market return (52 week % price change) for HTS companies was two-times higher than LTS companies and nearly three-times greater than the Russell 2000. One year risk-adjusted return, or alpha, for HTS companies was 44%, compared to -7% for LTS companies with nearly identical measures of market risk, or beta.
• Increased Market Share: HTS companies were able to increase revenue during a period of flat GDP growth, suggesting market share gains at the expense of less innovative peers.  Compared to U.S. GDP growth in 2009 of +0.8%, HTS companies averaged +1.1% revenue growth versus an average of -9.3% for LTS companies during the same period.  
• Increased Pricing Power: Technology leadership appeared to command a pricing premium, yielding 33% higher gross margins for HTS companies versus LTS companies.  

MDB Capital's proprietary patent database and search solution, PatentVest renders patent and IP data for more than 4,000 U.S. public companies in an easily searchable, digestible format.  For instance, PatentVest assigns a Tech Score to each company in the database.  The Tech Score measures the strength of a company's patents based on a quantitative analysis of citations relative to a peer group of patents.  As shown, High Tech Scores are predictive of business performance.  MDB Capital will also publish a white paper containing nearly identical results from a similar study of large-cap stocks.  

MDB Capital Group will host its first Bright Lights Conference on May 11 - 12, 2010 at the Palace Hotel in San Francisco, the first-ever investor conference to focus exclusively on companies with disruptive and market changing IP. The Bright Lights Conference will showcase the untold IP stories of 40 small-cap companies ranked by PatentVest in the 90th percentile for technology leadership from more than 1,600 small-caps with U.S. patents granted. Information about the conference is available here.

"We built PatentVest to help investors assign a tangible value to patents, an otherwise intangible asset that contributes significantly to a company's market value but is inherently difficult to measure," said Christopher A. Marlett, Chairman and CEO of MDB Capital Group.  "Vetting the strength of a company's patents is inherently inefficient.  Before PatentVest, there was no easy way to research, analyze, search, score, and appraise the relational value of a company's intellectual property to that of its competitors.  PatentVest is a valuable screening tool for institutional investors who want to strengthen their investment decision-making process with the ability to identify truly market-leading IP."  

For more information, please visit www.mdbcapital.com and www.patentvest.com.

IP and the Capital Markets

In recent years, patent data mining has become increasingly important to investors seeking competitive intelligence that can generate superior returns. Several studies have been published that support the premise and results of MDB Capital's research.  For instance,

• Hall, Jaffe and Trajtenberg published "Market Value and Patent Citation" for the National Bureau of Economic Research in 2002, showing the impact of patent citations on the market value of stocks.
• Baruch Lev, noted Professor of Accounting and Finance at NYU's Stern School of Business, and colleagues found that firms with higher R&D intensity than their industries have higher future profitability, sales growth and risk adjusted returns with lower future stock return volatility. They published "Stock Market Valuation and R&D Leaders" in 2005.  

Additionally, in 2009 MDB Capital published "Companies with Higher Rates of Technology Innovation Correlate with Superior Stock Price Performance Relative to Market Averages." Based on PatentVest tools, this seven-year retrospective study showed how companies with the highest CAGR of patent applications outperformed the S&P 500, Dow Jones Industrial and NASDAQ Composite averages.

About MDB Capital Group

Based in Santa Monica, California, MDB Capital Group is an investment research and investment banking firm that focuses exclusively on companies that possess market changing, disruptive intellectual property.  MDB Capital built PatentVest to cover more than 4,000 public and private companies, unifying over 4 million U.S. patents granted and over 2 million U.S. patent applications on file.   Beyond a mere software solution, PatentVest is a fully integrated, easy-to-use online searching, analytic and reporting platform, powered by the world's most comprehensive patent database and a dedicated data center - the first and only one of its kind.

SOURCE MDB Capital Group