Tech Portfolio Update: Apple Ignores Amazon, Puts Pandora in a Box

The iPhone 5 launch on Wednesday, Sept. 12, is sure to be the most important event for tech investors this year. The Motley Fool will be hosting a live chat where our top tech analysts will answer your questions and break down what the announcement means for Apple and tech investors everywhere. Be sure to swing by Fool.com at 12:45 p.m. ET this Wednesday for all your coverage of Apple's next big announcement.

With iPhone 5 wWeek now upon us, investors are upping their stakes in Apple (Nasdaq: AAPL  ) . The stock is up nearly 1.5% over the past five trading days, helping my Big Idea Portfolio expand its double-digit lead over the S&P 500 index. I'm going head to head with Mr. Market in a three-year showdown to see who's better at producing returns for investors:

Company

Starting Price*

Recent Price

Total Return

Apple $420.59** $680.44 61.8%
Google (Nasdaq: GOOG  ) $650.09 $706.15 8.6%
Rackspace Hosting $41.65 $64.45 54.7%
Riverbed Technology $25.95 $21.73 (16.3%)
Salesforce.com $100.93 $149.57 48.2%
AVERAGE RETURN -- -- 31.40%
S&P 500 SPDR $126.50** $144.33 14.09%
DIFFERENCE -- -- 17.31

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

My portfolio's lead widened by nearly four percentage points even as the market closed at multiyear highs. Every index rose, with the Russell 2000's 0.52% leading the way. The S&P 500 gained 0.40%, followed by the Dow's 0.11% win. The tech-heavy Nasdaq Composite gained just 0.02%, CNBC reports.

Notable newsmakers
You'd think Apple would have taken a hit given the news out of Amazon.com (Nasdaq: AMZN  ) last week. CEO Jeff Bezos and his team are rolling out a new line of Kindles in time for the holiday shopping season, including a new high-definition version of the Kindle Fire blessed with an 8.9-inch screen. Prices range from $199 to $369. Thus, the highest-end Kindle Fire -- with an HD screen and 32 gigabytes of data storage capacity -- is $130 cheaper than Apple's newest entry-level iPad.

Investors didn't seem to care. I think I know why. Buy the new Fire and you'll able to choose from thousands of books and video titles hosted at Amazon.com. Buy an iPad and you'll be able to choose from the same Amazon library, and titles from most other content distributors, including Hulu Plus, iTunes, Netflix, and more. The e-tailer has no choice but to sell its Kindles for cheaper; investors just don't believe that discounts are enough to disrupt Apple.

And what if the Mac maker is the hunter? Look out below; shares of streaming music specialist Pandora (NYSE: P  ) fell nearly 15% after The Wall Street Journal reported that Apple is preparing a rival service. We don't yet know the details, but I've no doubts the Journal is right; iTunes is an important weapon in that it feeds not only iPhones and iPads but also the Apple TV, and of course, Macs. Anything that makes iTunes more comprehensive is likely to be good for device sales.

Interestingly, what's good for Apple isn't necessarily bad for Google. After months of malaise, the search king has become a solid contributor to the Big Idea Portfolio, ending last week above $700 a share and touching a four-year high, CNBC reports.

On the other hand, rising global demand for handheld devices -- good for both Apple and Google -- is causing trouble for Intel (Nasdaq: INTC  ) , which cut its third-quarter revenue forecast because of macroeconomic weakness coupled with lagging PC and emerging-market demand. The stock is down more than 6% over the past five trading days.

Mr. Market still making good
In spite of Intel's troubles, investors appear confident heading into the fall. The Chicago Board of Exchange's Volatility Index, or VIX -- widely considered the best gauge of fear in the market -- fell more than 17% last week and is down more than 38% year to date, CNBC reports. Strong returns will do that; the S&P 500 is up more than 14% year to date. The Nasdaq is up nearly 20% over the same period.

What's interesting is the gains are coming in a year when, economically at least, there isn't a lot of good news to report. Take the latest jobs report. Non-farm payrolls grew by just 96,000 in August. Analysts were expecting 125,000 net new jobs, CNBC reports.

The Bureau of Labor Statistics also revised cut its initial job-growth figures for June and July by 41,000, bringing the six-month average gain to just 97,000 new jobs per month -- well short of the 300,000 needed between now and 2015 to stabilize unemployment at a healthy-if-imperfect 6%, my Foolish colleague Morgan Housel reports.

What are you buying now?
Make no mistake: This is Apple's biggest week of the year, and as such, it's also the biggest for the capitalization-weighted S&P 500 index that hosts it. So much is riding on the presumed success of the iPhone. Will it be a winner? As a shareholder, I'm hoping so.

And yet you needn't own Apple to profit from the iPhone 5. Foolish colleague Evan Niu is out with new research on the device's most likely component suppliers; it's included as a free bonus to subscribers to the Fool's new Apple research report. Sign up today, and you'll get the initial report plus the iPhone 5 bonus, and a year's worth of free updates. Click here to get started now.

See you back here over the weekend for more tech-stock talk. In the meantime, if you'd like to tell us more about a Breaker in the making you believe is being unfairly maligned or ignored, please do so using the comments just below.

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, Netflix, Rackspace Hosting, Riverbed Technology, and salesforce.com at the time of publication. He also had a long-term call options position in Netflix. 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 Netflix, salesforce.com, Riverbed Technology, Apple, Amazon.com, and Intel. Motley Fool newsletter services have recommended buying shares of salesforce.com, Google, Amazon.com, Rackspace Hosting, Apple, Netflix, Intel, and Riverbed Technology, creating a bear put ladder position in Netflix, creating a bull call spread position in Apple, and shorting salesforce.com. 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. The Motley Fool has a disclosure policy.


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