Apple Tanked This Week -- Should I Be Betting on Facebook Instead?

Each week, I report the results of the Big Idea Portfolio, a collection of five tech stocks that I believe will crush the market over a three-year period. I've done it before; my last tussle with Mr. Market ended with me beating the index's average return by 13.35%.

Real money was on the line then as it is now, which means any one of the five stocks you see in the following table could cause me a lot of public embarrassment. This week, Apple (Nasdaq: AAPL  ) -- which had been one of my portfolio's top performers -- cost me the most.

The Mac maker is down about 10 percentage points from my last update. Why? Lower-than-expected iPhone 5 sales may have something to do with it. Early estimates had Apple moving as many as 8 million of the new handsets during its first weekend on sale. The final figure came in closer to 5 million.

More recently, investors sold after an appellate court lifted a preliminary injunction banning Samsung from selling its Galaxy-branded smartphone here in the United States. The sell-off suggests the Big Money fears Apple's ability to compete with its South Korean rival, but fresh data says that's an overreaction. In a new report, ChangeWave Research found that roughly one-in-three, or 32%, of consumers surveyed said they were either "very likely" or "likely" to buy the iPhone 5:

Source: ChangeWave Research.

The same survey taken at the time of the 4S launch found that only 21.5% were likely to buy, yet the handset went on to set sales records. The message? Don't be surprised if today's sellers are tomorrow's buyers.

What's the Big Idea this week?
Mr. Market's slump didn't quite match Apple's, but it was also plenty steep enough to cause investors pain. The tech-heavy Nasdaq fell 2.77% as the blue-chip Dow Jones Industrial Average pulled back 2.08% and the S&P 500 declined 1.92%. Small caps did best as the Russell 2000 slumped a more reasonable 1.55%, according to data supplied by The Wall Street Journal.

Yet indexers can take at least some (admittedly cold) comfort in knowing that as bad the markets performed this week, my five stocks did worse. Here's where I stood through Thursday's close:

Company

Starting Price*

Recent Price

Total Return

Apple

$420.59**

$628.10

49.3% 

Google (Nasdaq: GOOG  )

$650.09

$751.48

15.6% 

Rackspace Hosting (NYSE: RAX  )

$41.65

$67.04

60.9% 

Riverbed Technology (Nasdaq: RVBD  )

$25.95

$22.10

(14.8%) 

Salesforce.com (NYSE: CRM  )

$100.93

$152.61

51.2% 

AVERAGE RETURN

--

--

32.44% 

S&P 500 SPDR 

$125.83**

$143.36

13.93% 

DIFFERENCE

--

--

18.51

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

Notable newsmakers
None of my stocks rallied. Even Google, a cloud-computing powerhouse that should be benefiting nearly as much as Apple from sharp declines in the PC market, saw its stock slide after Microsoft (Nasdaq: MSFT  ) said it will add the search king as a defendant in its patent battle with Motorola Mobility. The fight has thus far been limited to the German courts.

Meanwhile, additional work to boost its product line has done little to move Riverbed's shares higher. This week, the company announced a partnership with VMware (NYSE: VMW  ) that will bring tools to Riverbed's Steelhead WAN Optimization gear. The goal: make virtualized environments more efficient and cost-effective.

Facebook (Nasdaq: FB  ) , too, is improving. The social network this week launched gift-giving in its Android app and plans to add similar functionality to its iOS app within weeks. It's a bold stroke for the company, which had publicly struggled to develop a mobile strategy. No longer.

You'd think getting gifts into the hands of hundreds of millions of users so quickly would get more investors interested in the stock. Instead, Facebook shares remain off about 50% from their IPO price. Is this really a go-nowhere strategy? Is there nothing the social network can do to boost the $1.28 of revenue it generates per average user?

To answer this question, one of our own star analysts has developed a premium report on whether Facebook is a buy right now, and why. Click here to get your copy instantly. And see you back here next weekend for more tech stock Foolishness.

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 Google, Apple, Facebook, VMware, Microsoft, and Riverbed Technology. Motley Fool newsletter services have recommended buying shares of Rackspace Hosting, Apple, VMware, Google, Riverbed Technology, salesforce.com, and Facebook, as well as creating a bull call spread position in Apple, creating a synthetic covered call position in Microsoft, 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.


Read/Post Comments (3) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 14, 2012, at 2:09 AM, kbear2 wrote:

    The article's title is a fool's bait...and I'm embarrassed to say I bit. Ridiculous, of course.

  • Report this Comment On October 14, 2012, at 8:32 AM, TMFMileHigh wrote:

    @kbear2,

    How so? I'd appreciate additional comments so I can not repeat the mistake.

    Thanks much and Foolish best,

    Tim

    --

    Tim Beyers

    TMFMileHigh, Motley Fool Rule Breakers Analyst, Supernova Odyssey I Portfolio Contributor

    Web: http://timbeyers.me

  • Report this Comment On October 14, 2012, at 12:40 PM, oceanbluela wrote:

    I appreciate your approach in this portfolio. I keep an outsized portion of 'Big Idea' stocks in my portfolio and since 2003, they have helped to contribute to my 12.49% annual average. I'm enjoying following your portfolio's progress.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2056287, ~/Articles/ArticleHandler.aspx, 12/21/2014 10:57:03 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement