Top Picks 2019: Quarterhill (QTRH)

01/24/2019 5:00 am EST

Focus: TECHNOLOGY

Benj Gallander

President, Contra the Heard

Quarterhill (QTRH), our Top Pick for growth stock investors in 2019, operates in two areas. The enterprise focuses on the internet of things and has been acquiring technology companies, explains Benj Gallander, editor of Contra the Heard.

The bread and butter though has been licensing patented technologies and engaging in lawsuits when companies are violating those patents.

Quarterhill won a lawsuit against Apple (AAPL) for $145 million. Apple is appealing and under normal circumstances if the process goes the distance, it could take about 18 months. It is possible that a settlement will be reached, eliminating the need for further legal activity.

Meanwhile, the corporation is engaged in another 40 lawsuits or so. It does license technology to over 350 companies. Recent licensing deals have been with Cisco (CSCO), Doro, Etron, Brother, MediaTek, Panasonic, Ricoh and ESMT.

Quarterhill continues to be on the prowl for acquisitions. With almost $60 million in the kitty and a minimal debt load of about $6 million, one or two are expected in 2019.

In our long conversation with the relatively new CEO Doug Parker, he made it clear that he is seeking deals that would be immediately accretive. In his previous position as a Senior VP of Open Text Corporation, he was a key driver in the takeover or businesses with revenues of around $2.5 billion.

One particular reason that the firms that Parker chases appreciate him is that he leaves decision-making authority largely in the hands of the management of the obtained firms.

Doug Parker feels that gives Quarterhill a good skill set and makes for a functional corporate family. It is akin to Buffett’s methodology at Berkshire Hathaway (BRK.B). The stock currently trades at around $1.00 USD. It is our feeling that it could become a $5.00 stock. Back in its heyday it traded well above that level.

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