While the rest of the world was focused on the outcome of the “Brexit” vote last week, a couple of our Special Situations Portfolio stocks reported good news that may have been overlooked. Along with the overall decline in the stock market as a result of Great Britain’s decisions to leave the European Union, some of these companies appear undervalued and are worth a second look if you don’t already own them.

Last Tuesday the U.S. Court of Appeals ruled in favor of Immersion Corp. (IMMR), reversing a lower court decision which invalidated three of Immersion’s critical haptic technology patents used in a variety of virtual reality applications. That ruling was the result of a lawsuit filed by Immersion against HTC, a licensing partner which the company believed was infringing on its patents without paying the compensation specified in their original agreement. That claim was rejected by the lower court on the grounds that the technology in question was not covered by Immersion’s patents, thus leading to the appeal.

As a result of this reversal, HTC will immediately pay Immersion all past due amounts. While this amount of money (which neither company has disclosed) is not believed to be substantial, the restoration of Immersion’s claims to these patents has significant value with regard to future licensing revenue from other companies using this technology in their products. Shares of IMMR spiked from an opening price of $6.22 last Monday to an intra-day high of $8.53 on Thursday after the ruling was announced. Since then the share price has fallen below $7.50 as the entire stock market reacts to Friday’s Brexit vote, well below what we feel is fair value for the company so we reiterate our buy rating on IMMR below $12.  

This morning Argos Therapeutics (ARGS) announced it has been added to the Russell 2000 Index, which is the most widely followed benchmark for the U.S. small-cap stock market. To qualify for inclusion a company must have a market capitalization, or the value of all of its outstanding shares of stock currently trading on public exchanges, that ranks it below the largest 1,000 U.S. stocks but above the 3,001 ranking domestic company.

In this case Argos now qualifies for inclusion in the index based on the additional stock purchased by a large investor consortium that has promised to buy up to $60 million of ARGS common stock as the company achieves specified milestones. One of those trigger events occurred earlier this month when the company’s Independent Data Monitoring Committee recommended continuation of its ADAPT Phase-3 clinical trials for its AGS-003 cancer treatment, resulting in this group purchasing an additional $20 million of ARGS stock. Combined with its initial $10 million investment a couple of months ago, the additional $30 million of stock purchased pushed Argos up in the rankings into the top 3,000 thus making it eligible for the index.

Although being added to an index does not necessarily help a company in a direct sense, it does require every index fund tracking the Russell 2000 to buy enough ARGS stock to accurately track the index. Since ARGS is presumably very near the bottom of that index I don’t expect to see a noticeable impact on its stock in the near term, but it should provide greater stability to its share price since these index funds cannot sell the stock so long as Argos continues to qualify for inclusion in the index.

This development is just one more step along the path to success for a company like Argos as it methodically matures from an unprofitable research and development company to a significant player in the biomedical industry, and ARGS remains a buy under $10.