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 below could cause me a lot of public embarrassment. This time, Apple (AAPL 0.07%) slumped as salesforce.com (CRM -1.11%) soared.
Let's address Salesforce first. Shares zoomed more than 7% to a new all-time high after the company reported better-than-expected fourth-quarter results. Revenue came in nearly $4 million ahead of estimates while per-share earnings beat the consensus by more than $0.11.
Salesforce also reported a 59% year-over-year increase in contracted work in the pipeline -- now $3.5 billion, up from $2.2 billion at this time last year. Current deferred revenue (i.e., work billed but not yet recognized on the income statement) rose 39% as a growing number of large companies deploy software in the cloud.
And yet Apple remains the bigger story. The stock touched a 52-week low Friday only to see even lower prices in Monday trading. Skeptics have taken to the markets to proclaim the end of Apple's dominance of the smartphone and tablet markets. Others simply disapprove of CEO Tim Cook's tightfistedness when it comes to the Mac maker's growing cash pile.
I've no complaints. In fact, I've been thinking of adding to my Apple stake for a while. If I've yet to pull the trigger it's because there are so many interesting opportunities right now. And yet I can't help wondering if I'm missing out: at just 8.4 times next year's average earnings estimate, today's buyers may be getting the earnings potential of Apple's "Next Big Thing" -- whether it's a TV, a watch, or a cheap iPhone -- for free.
What's the Big Idea this week?
Fortunately, Salesforce's surge more than compensated for Apple's apathy last week. My five tech stocks cut Mr. Market's lead by 118 basis points from the week prior. Not bad for these turbulent times.
Indexes mostly improved. All but the small-cap Russell 2000 moved higher, led by the Dow Jones Industrial Average and its 0.64% gain. The Nasdaq and S&P 500 eked out gains of 0.25% and 0.17%, respectively, as the Russell fell 0.16%, according to data supplied by The Wall Street Journal. Here's a closer look at where I stood through Friday's close:
|
Company |
Starting Price* |
Recent Price |
Total Return |
|---|---|---|---|
|
Apple |
$416.26 |
$430.47 |
3.4% |
|
|
$650.09 |
$806.19 |
24% |
|
Rackspace Hosting |
$41.65 |
$56.11 |
34.7% |
|
Riverbed Technology |
$25.95 |
$15.15 |
(41.6%) |
|
Salesforce |
$100.93 |
$182.00 |
80.3% |
|
AVERAGE RETURN |
-- |
-- |
20.16% |
|
S&P 500 SPDR |
$124.94** |
$152.11 |
21.75% |
| DIFFERENCE |
-- |
-- |
(1.59)% |
Source: Yahoo! Finance. *Tracking began at market close on Jan. 6, 2012. **Adjusted for dividends and other returns of capital.
Notable newsmakers
Among the other tech stocks making news last week:
- LinkedIn (LNKD.DL) touched a new all-time high last week, and is still rallying today on news of the platform seeing increased use in sales engagements and for content marketing such as company whitepapers and sponsored posts. All signs point to LinkedIn growing to become much more than it is today.
- Groupon (GRPN 1.80%) enjoyed gains after its board fired co-founder Andrew Mason as chief executive. His departing letter to staff has since been made public, and offers no apologies for a strategy that seemed to me doomed from the beginning. Instead, Mason said he was "in the way" of the market giving his company a second chance to execute.
- Finally, at the annual Mobile World Congress conference in Barcelona, Spain, the non-profit Mozilla Foundation made good on threats to transform its browser into a mobile operating system while LG Display announced plans to purchase webOS for creating an interactive television experience. Incumbents may find it tougher to grow in 2013.
