5 More Tech Winners I Love Right Now

Welcome to Week 22 of the Big Idea Portfolio. Mr. Market triumphed this time as salesforce.com (NYSE: CRM  ) gave back more than 10 percentage points. Rackspace Hosting (NYSE: RAX  ) also fell, off nearly 7 points in seven days. Details on these companies and more in a minute. First, let's dig into the numbers:

Company

Starting Price*

Recent Price

Total Return

Apple $422.46 $560.99 32.8%
Google (Nasdaq: GOOG  ) $650.09 $570.98 (12.2%)
Rackspace Hosting $41.65 $48.08 15.4%
Riverbed Technology $25.95 $15.82 (39%)
Salesforce.com $100.93 $130.99 29.8%
AVERAGE RETURN -- -- 5.36%
S&P 500 SPDR $127.15** $128.16 0.79%
DIFFERENCE -- -- 4.57

Source: Yahoo! Finance.
* Tracking began at market close on Jan. 6, 2012.
** Adjusted for dividends and other returns of capital.

What drove salesforce.com down? Acquisitions and a shaky market. The company is buying Buddy Media, a consulting firm that helps clients place and measure the effectiveness of ads and marketing campaigns executed via social networks, for $689 million.

Investors aren't pleased. Current-year earnings will come in $0.14 to $0.15 a share lower than expected previously as a result of closing the deal in fiscal Q3, and that's in spite of adding $20 million to $25 million in new revenue. Salesforce.com is paying a premium for access to Buddy Media's impressive client list, which includes Ford, Hewlett-Packard, and several of the world's largest ad and marketing agencies.

That could pay off over the long term. Last year, salesforce.com bid $326 million for social-network monitoring service Radian6. Combined, the two services could differentiate salesforce.com as it seeks to beat Oracle (Nasdaq: ORCL  ) and others in offering a comprehensive suite of on-demand software for social-media sales and marketing. Last week, the database king purchased Vitrue, a Buddy Media peer, for an undisclosed sum.

"Salesforce.com now has the number one players in social listening and marketing -- Radian6 and Buddy Media," CEO Marc Benioff said in a press release. "With [Chief Marketing Officers] surpassing [Chief Information Officers] in spend on technology within the next five years, our Marketing Cloud leadership will allow us to capitalize on this massive opportunity."

And what about Rackspace? We don't really know why it fell. The most likely explanation seems to be market turbulence. With a beta rating of 1.27 -- beta measures how much a stock tends to move in relation to the indexes -- Rackspace is more vulnerable to swings than most. A broad sell-off may have spooked traders who are ignoring the long-term advantages this business possesses.

The week that was
So much for the rally. The Dow Jones Industrial Average fell 2.7% to put the market in negative territory for the first time in 2012. Of the rest, the small-cap Russell 2000 is also in the red year to date, ending the week down 3.78%, while the Nasdaq, off 3.17%, and S&P 500, down 3.02%, remain in positive territory, CNBC reports.

A troubling job report sent stocks crashing on Friday. Payrolls improved by 69,000 last month, according to federal data. Economists had been expecting 150,000 new non-farm jobs and for the unemployment rate to hold steady at 8.1% rather than rise to 8.2%. Stocks sold off in response to the news, raising the question of whether the Federal Reserve should employ more stimulus to stabilize the economy as the European debt crisis lingers.

See you back here over the weekend for more tech-stock talk. And remember to check out the Fool's latest special report -- "Forget Facebook -- Here's the Tech IPO You Should Be Buying" -- 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 Fools:

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple, Google, Rackspace Hosting, Riverbed Technology, and salesforce.com at the time of publication. Check out Tim's Web home, portfolio holdings, and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of salesforce.com, Riverbed Technology, Ford, Oracle, Google, and Apple. Motley Fool newsletter services have recommended buying shares of Apple, salesforce.com, Google, Riverbed Technology, Ford, and Rackspace Hosting, creating a synthetic long position in Riverbed Technology, creating a bear put spread position in salesforce.com, creating a synthetic long position in Ford, and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On June 04, 2012, at 11:47 PM, TadpolesUS wrote:

    Don't fall for CRM's non-GAAP numbers.

    It's just another company run by upstarts that think the accounting rules don't really apply to them.

    Giving away options as employe compensation instead of cash can only work for so long.

    Bought a few CRM puts and expecting to make good money on them.

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