My Tech Portfolio Will Crush the Market

Welcome to week 6 of my stock-picking throwdown with Mr. Market. Let's get right to the numbers:

Company

Starting Price

Recent Price

Total Return

Akamai (Nasdaq: AKAM  )

$22.23

$18.08

(18.7%)

Harris & Harris (Nasdaq: TINY  )

$6.22

$7.46

19.9%

IBM (NYSE: IBM  )

$129.05

$119.20

(7.6%)

Oracle (Nasdaq: ORCL  )

$22.75

$19.35

(14.9%)

Taiwan Semiconductor (NYSE: TSM  )

$10.34

$8.80

(14.9%)

AVERAGE RETURN

--

--

(7.24%)

S&P 500 SPDR (AMEX: SPY  )

$126.73

$125.51

(0.96%)

DIFFERENCE

--

--

(6.28%)

Source: Yahoo! Finance close of 9/11/2008.

The Wall Street Panic of 2008 is still pummeling my tech portfolio. The good news? We Rule Breakers investors have seen this sort of carnage before.

And we'll see it again. Tech stocks were getting crushed late last year over concerns that spending on new hardware, software, and chips would sharply decline in 2008. So far, those concerns have been mostly unfounded. Nevertheless, increased competition and general economic malaise have taken a toll on many techies, including Akamai.

All I can do is be patient and take comfort in knowing that it's durable gains that matter most -- like when David Gardner produced a decade of 20% returns by buying and holding the likes of Amazon and eBay in the real-money Rule Breaker portfolio, or when Tom Gardner selected a "simpleton portfolio" to hold for a decade, with market-crushing results. I think these five tech stocks will produce plenty of durable gains.

This week's checkup
If there's one thing I've learned in a decade of investing it's that those who quest for long-term returns do best when they closely watch the companies they commit capital to. It's in that spirit that we check in weekly with my top techies. This week's update:

  • Taiwan Semiconductor said that August sales rose 6.2% to $972 million, its smallest annual gain in 11 months, Reuters reports. The good news? TSMC is outperforming peers; United Microelectronics saw its August sales decline 22%.
  • Akamai provided more details about its technical advantages in a recent interview and looks to be one of the big winners from Apple's (Nasdaq: AAPL  ) "Let's Rock" event.

There's your checkup. See you back here next week for more tech stock talk.

Get your clicks with more techie Foolishness:

Apple, Amazon, and eBay are Stock Advisor selections. Akamai and Harris & Harris are Rule Breakers recommendations. Try either of these market-beating services free for 30 days. There's no obligation to subscribe.

Fool contributor Tim Beyers, who is ranked 21,059 out of more than 115,000 participants in Motley Fool CAPS, also writes for Rule Breakers.

Tim had positions in Akamai, Harris & Harris, IBM, Oracle, and Taiwan Semiconductor at the time of publication. The Motley Fool owns shares of S&P 500 depository receipts and has a tech-tastic disclosure policy.


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  • Report this Comment On September 18, 2008, at 10:55 PM, Internettech wrote:

    Sorry Tim,

    With all due respect, you mean well. But it's contradicted by the evidence. Like I said in previous posts Akamai's architecture was designed for dialup users and the patented techniques of splitting up the html webpage code from the embedded graphic objects and CSS style sheets is not required anymore. Microsoft and NBC and ATT and others have realized this. It's just better and faster to send the whole webpage from multiple points on the Internet with far less problems with nested DNS, overloaded edge servers, and missed cache hits. This is what the new CDNs are doing and what Microsoft, Amazon, and Google are doing.

    So the king is naked and isn't wearing any clothes. The king should buy some new clothes with a new design instead of trying to convince us that hardware router speed doesn't have an impact and lower the need for splitting up the html code and the graphic elements in the Akamai model.

    Carrier CapEX is real for a reason. If math software could do it all then Cisco wouldn't be in business. Here's the real math:

    The actual maximum capacity of Cisco's top of the line router in use at ATT and Verizon's ISP backbones is the Cisco CRS-1

    See:

    http://www.cisco.com/en/US/products/ps5763/index.html

    Notice in the first paragraph where it says "it is designed for always-on operation while scaling system capacity up to 92 Tbps."

    Translated that means that the router will route up to 92 Terabits per sec which equals 92,000 gigabits or 92, 000,000 megabits.

    Which is well past the 1 terabit/sec you mention.

    Also don't overlook when ISPs stream they can use a hardware based multicasting to stream a HD file so 10 megabit stream will support 10,000 viewer-users at the edge or premise and a 10 gig connection would support 1000 times that. The edge router creates the last mile duplicate copies and the core routers only send the original stream. Since some streams (like youtube videos) only have one user this isn't really 1000 times that, but you get the idea.

    100 gigabit network interface connections will be in ISP router networks late this year from Cisco, Juniper, Foundry and others. The 1 terabit/sec=1tbit/sec number you refer to is an aggregate number equal to 10 100 gigabit network interfaces. The bigger routers can hold 100's of network interfaces.

    I have real problem with the left/right analogy; it not even close to that simple. That analogy just doesn't work. ISP's manage networks and connect their networks to an upstream peer like ATT, Level 3 or Verizon or connect at peering points with other equal sized ISPs. As the new version of IP (IP version 6) becomes more available here in the US, the ISP connectivity and cyber defense issues will become more complex and will impact Akamai's older edge model.

    I say that Akamai is not even a billion market cap company based on revenue and net, so it still has some room to fall to be priced right. I figure 6 or 7 dollars a share. They really need to do what Microsoft did when they made an about face in 1995 and focused on the Internet. Akamai needs to get away from the original math method/split html/objects from the dialup days and start working on something new.

    I don't think they will and one day they will miss their earnings and the stock will fall to 2. I said it was over priced at 32 and I say it's still very over priced.

    And please get them to fix their DNS servers so that their inverse addresses work properly. This is a real issue in proper national CYBERDEFENSE and they need to fix it ASAP.

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