These Tech Stocks Are Soaring -- Here’s Why

Early reviews of the iPhone 5 are in, and the verdict is mostly positive. Investors see that as a precursor to a massive upgrade cycle, resulting in another huge rally in Apple’s (Nasdaq: AAPL  ) share price. The stock closed above $691, after briefly touching $696 during Friday’s trading action.

Salesforce.com (NYSE: CRM  ) also outperformed in lifting the Big Idea Portfolio, which is now up nearly 20% on the S&P 500 index. The cloud-computing king added more than 6% in anticipation of news coming out of next week’s Dreamforce customer conference.

CEO Marc Benioff teased what’s to come at TechCrunch’s Disrupt confab in San Francisco, announcing plans for a file-sharing service similar to Dropbox, and a single sign-on app for cloud applications. It's called Salesforce.com Identity, and users may find it reminiscent of Facebook’s (Nasdaq: FB  ) Connect service, which has proven popular with developers of mobile apps.

What’s the Big Idea?
For those unfamiliar with this weekly series, I’m going head-to-head with Mr. Market in a three-year showdown to see who’s better at producing returns for investors. Here’s where I stand as of this writing:

Company

Starting Price*

Recent Price

Total Return

Apple $420.59** $691.28 64.4%
Google $650.09 $709.68 9.2%
Rackspace Hosting $41.65 $65.83 58.1%
Riverbed Technology $25.95 $22.82 (12.1%)
Salesforce.com $100.93 $159.43 57.9%
AVERAGE RETURN -- -- 35.50%
S&P 500 SPDR $126.50** $147.24 16.39%
DIFFERENCE -- -- 19.11

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 another two percentage points, outperforming the broader market, despite strong gains from every index. Once more, the Russell 2000 led the pack, this time rising 2.66%, as the Dow added 2.15% and the S&P 500 gained 1.94%. Only the tech-heavy Nasdaq failed to get within spitting distance of a 2% gain, ending the week up a still-impressive 1.52%, CNBC reports.  

Notable newsmakers
Partial credit for the rally has to go to the Fed. The central bank announced plans for "QE3," a quantitative easing program that involves purchasing $40 billion of mortgage-backed securities per month until there are noticeable improvements in the labor market and overall economy.

Ratings agency Egan-Jones lowered its rating of U.S. sovereign debt in the wake of the news -- from AA to AA-minus -- but it didn’t matter. Investors dove back into equities on higher volume Friday, bidding up industrial stocks such as United Technologies and Caterpillar, both of which ended the week up more than 3% each.

Is this much bullishness warranted? Perhaps. At the very least, it’s instructive to consider the math. My Foolish colleague Morgan Housel went back and looked at three models for investing. The one built around buying stocks only during recessionary periods did best.

While the data didn’t specify which types of equities did best, today’s investors appear to be hungry for social media names. Shares of Facebook and Zynga (Nasdaq: ZNGA  ) are up 15% and 10%, respectively, over the past five trading days. Zynga rose after filing a counter-claim against Electronic Arts (Nasdaq: EA  ) , which last month sued the social game maker for copyright infringement.

How to profit from the iPhone 5
Social stocks may be on the rise now, but it’s Apple and the iPhone 5 that will occupy the spotlight for the foreseeable future. Will the new device 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 next weekend for more tech stock talk. In the meantime, if you’d like to tell us more about a Breaker in the making that 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, 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 Apple, Riverbed Technology, Facebook, and salesforce.com. Motley Fool newsletter services have recommended buying shares of Apple, salesforce.com, Riverbed Technology, Rackspace Hosting, Facebook, and Google. Motley Fool newsletter services have recommended creating a stock position in Riverbed Technology. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended shorting salesforce.com. The Motley Fool has a disclosure policy. We Fools may not 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 September 15, 2012, at 8:50 PM, Mike34343 wrote:

    Interesting comparing stock fluctuations against social media buzz on apps like ChatterStock. As stock buzz increases on social media sites, the market seems to react soon afterwards. Apple was a great example.

  • Report this Comment On September 16, 2012, at 12:11 PM, Gardenius wrote:

    As to recent tech stock rally, "A Rising Tide Lifts All Boats".

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