Welcome to Week 11 of the Big Idea Portfolio. Once more, Apple (Nasdaq: AAPL ) led the way with a better-than-9% gain last week. Rackspace Hosting (NYSE: RAX ) also added to the tailwind with a better-than-6% rally. I'll have more on why in a minute. First, let's dig into the numbers.
|S&P 500 SPDR||$127.15**||$140.30||10.34%|
Source: Yahoo! Finance.
*Tracking began at market close on Jan. 6, 2012.
**Adjusted for dividends and other returns of capital.
After the bell today, we found out the impressive iPad launch totals: 3 million iPads have been moved so far.
If you multiply out an average selling price of $590 last quarter and factor in that consumers are upgrading to costlier the LTE model, Apple could have brought in more than $1.8 billion in iPad sales this weekend alone. Applying a 20% cash flow margin results in roughly $360 million in levered free cash flow. No wonder institutions were buying this past week; no company in the world is better at turning enthusiasm into profit.
But this isn't just a sales-day phenomenon. Motley Fool Rule Breakers teammate Karl Thiel and I saw hundreds of iPads substituting for laptops at last week's South By Southwest (SXSW) Interactive conference in Austin, Texas. Attendees we talked with -- including some of our own fellow Fools -- said they wanted to travel lighter. The iPad offered that, while also boasting enough apps to stay productive.
Or, at the very least, connected. SXSW saw the rise of new social-media tools and technologies. The most successful -- Highlight and Glancee, in particular -- blended location and other contextual data to make it easier to find and connect with acquaintances. Think of them as using the virtual to enhance the physical. Is the idea investment-worthy? That's a tougher question; Karl and I debated the merits.
Interestingly, neither of us disputes the rising tide of data created by these new social-media apps and its impact on those whose services are necessary for continued growth. I'm talking specifically about Facebook and Google (Nasdaq: GOOG ) . Nearly every app we saw required Facebook to login, while every location-aware app used Google Maps as its default. Two systems, two databases, both increasing in value with every new app created. They'll become even more valuable when computational systems improve enough to draw meaning from the morass.
Yet of all the things I saw in Austin, the two most interesting were ancillary participants in SXSW Interactive. Foolish colleague Evan Niu and I interviewed HomeAway (Nasdaq: AWAY ) CEO and co-founder Brian Sharples at company HQ our first day. We came away with a better understanding of his team's hypergrowth strategy. (Hint: there's a lot to like.)
My last day began pre-dawn in Austin. About 80 miles later I arrived in San Antonio at the ugly exterior of an abandoned shopping mall, otherwise known as "The Castle" and home to two-time Rule Breakers pick Rackspace Hosting. Long rows of open cubicles, hung banners, family photos, and pop-up conference rooms and play areas, plus the occasional bell-ringing to signal a problem solved, gave the place a very relaxed and Foolish feel and helped explain why those who work there refer to themselves not as employees but as "Rackers." Call it culture as competitive weapon -- it's a rare but proven tactic for producing outsized shareholder returns.
The week that was
Score one for the large caps. Both the Dow Jones Industrial Average and S&P 500 soared more than 2.4%, followed closely by the Nasdaq, which ended up 2.24%, CNBC reports. The small-cap Russell 2000 lagged its larger cousins with a 1.61% gain, while the CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell another 15% as investors grow increasingly bullish.
Are they justified? Tune in next week, and I'll see you back here in seven days for more tech-stock talk. Meanwhile, remember to check out the Fool's latest special report -- "3 Stocks That Will Help You Retire Rich" -- and add the Big Idea portfolio stocks to your Foolish Watchlist for ongoing, up-to-the-minute coverage. Both the report and the Watchlist as 100% free to use:
- Add Apple to My Watchlist.
- Add Google to My Watchlist.
- Add Rackspace Hosting to My Watchlist.
- Add Riverbed Technology to My Watchlist.
- Add salesforce.com to My Watchlist.