Adding Acacia Research To My Value Portfolio

Core Viewpoint - Acacia Research (NASDAQ: ACTG) is a business development company focusing on acquiring, managing, and selling small to mid-sized companies across various sectors, including industrial, energy, technology, and healthcare [3][4]. Business Overview - Acacia Research is primarily owned (61%) by Starboard Value LP, an investment adviser [3]. - The company operates in three main business lines: patent licensing, industrial operations, and energy operations [3][4]. - Recent acquisition includes a 50.4% stake in Benchmark Energy II, an independent oil and gas company [4]. Financial Performance - For the most recent earnings release, revenues from the three business lines are as follows: - Intellectual property operations: $13.6 million in 2024 (up from $4.2 million in 2023) - Industrial operations: $8.8 million in 2024 (down from $10.6 million in 2023) - Energy operations: $1.9 million in 2024 (newly reported) [5]. - Patent licensing is the largest revenue source, but growth may not continue as no new patent portfolios were purchased in the recent quarter [5][6]. Cash Position - The company has $438 million in cash and cash equivalents, equating to $4.38 per share, which is approximately 79% of the current share price of $5.55 [9]. - Remaining current assets of about $114 million exceed total liabilities, indicating a strong cash position [9]. Valuation Metrics - Acacia Research has an overall A- valuation grade, with strong enterprise value metrics [11]. - Key valuation metrics include: - EV / Sales (TTM): 0.70 (A grade) - EV / EBITDA (TTM): 2.07 (A+ grade) - Price / Book (TTM): 0.98 (B grade) [12]. Investment Considerations - The company’s performance is characterized by high variability due to its business model, making future performance difficult to forecast [5][16]. - Despite the risks, the significant cash position provides a buffer against potential downturns, leading to a cautious but optimistic investment outlook [16].