How can insights from patent data improve your investment decisions?
by Goran Stanković, on Mar 27, 2020 10:44:06 AM
Intangible assets hold center stage in the S&P 500 market capitalization
In a technology-driven global economy, where organizations are heavily reliant on emerging developments in artificial intelligence, robotics, big data and cloud computing, intellectual property assets have grown to represent the lion's share of the market value. In less than 50 years, intangibles have evolved from a supporting asset into a major consideration for investors, making up 84% of the S&P 500 market capitalization (Intangible Assets Financial Statement Impact Comparison Report, 2019).
Innovation is a main driver of business growth, as companies race to outperform one another. Global R&D expenditures have continued to rise, more than doubling between 1996 and 2017 (The Global Innovation Index 2019). In 2017, over $2.2 trillion were spent in global expenditures on research and development (R&D). Companies from virtually all industries be it pharmaceutical, chemical, tech, automotive or engineering – use patents to safeguard their substantial investments in R&D, protect their products and ensure competitive advantage.
Patents are future-oriented and have high predictive power. Since the average time from patent to product is 2-5 years, patent data is frequently used to identify technology trends and disruptive innovations early on. It can also be applied to identify potentially impactful start-ups or to assess the risks and opportunities that technology-driven companies are likely to face in the future.
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The Brand Finance Global Intangible Finance Tracker report of 2019 reveals the world’s most intangible companies and those with the highest levels of intangible asset disclosure.
As we can see, share of intangible assets within overall enterprise value of the world’s top publicly traded companies vary from 65% (Alphabet) to 93% (Amazon).
Unveiling true competitive landscape with advanced patent analytics
When analyzing competitive landscape based on patent portfolios, the PatentSight innovation analytics platform, besides revealing world renowned giants, also allows to spot the small, yet very promising players.
In the following case, we looked at the field of big data. From the perspective of portfolio size, IBM shows up to be the industry leader. Yet the picture changes drastically, when we shift to account for the qualitative indicator – Competitive Impact™, which measures the average innovative strength. With this approach we discover industry disruptor – Palantir. Its modest, yet highly relevant, portfolio stands out, remarkably outperforming its peers in innovative strength. Our innovation analytics reveal the high relevance of Palantir’s big data analytics patent portfolio. The average innovative strength of Palantir‘s patents has tripled since 2015. As a technology leader, Palantir is likely to increase its competitive advantage in the future.
Companies, like Palantir, appearing in the upper left corner tend to have the potential to disrupt whole industries. Firms with similar positioning in the past were Tesla (in electric cars), Dyson (in consumer goods) or Apple (in smartphones).
PatentSight provides comprehensive solutions for investors, allowing them to better understand the competitive environment, spot industry disruptors in advance, assess the risks and opportunities that technology-driven companies are likely to face, and as a result make smarter investment decision.
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