Apple Stock Is Destroying My Portfolio -- Is It Time to Sell?

Each week, I endeavor to 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. But it's Apple (NASDAQ: AAPL  ) stock that has done the most damage, ending down yet another 9% this past week after iPhone parts supplier Cirrus Logic reported poor quarterly results.

Both stocks hit fresh lows after Cirrus announced more than $23 million in inventory reserves, $20 million of which are related to a "decreased forecast" for a high volume product. All signs point to the iPhone. Or, more specifically, the iPhone 5. Thanks to increased competition from Samsung, Apple's newest handset isn't winning over customers as much as prior versions did.

Only Google (NASDAQ: GOOGL  ) impressed. The search king cake in ahead well ahead of first-quarter earnings estimates thanks to a favorable tax rate. Revenue in the core search business rose 22% after traffic acquisition costs. CEO Larry Page also recommitted to expanding his company's footprint well beyond search.

"Companies tend to get comfortable doing what they have always done with a few minor tweaks," Page said in a conference call with analysts. "It's only natural to want to work on the things you know. But incremental improvement is guaranteed to be obsolete over time." 

Tellingly, the comments came just a day after Google announced plans to expand its gigabit fiber optic network to Provo, Utah. Expect more such moves in the coming quarters. All signs suggest that Google will grow into a service provider that uses software, algorithms, infrastructure, and devices to bring us data, apps, and entertainment on-demand, instantly, wherever we may be.

What's the Big Idea this week?
Overall, this marks my portfolio's fifth consecutive loss to Mr. Market. A sharp decline in Apple stock, combined with pullbacks in shares of Rackspace Hosting and salesforce.com, set me back another 205 basis points in our three-year tussle to see who can do better for investors. All four indexes also fell.

This time, the Russell 2000 led the laggards with a 3.22% plunge, followed by the Nasdaq's 2.69% drop, the Dow's 2.14% decline, and the S&P 500's 2.11% dip, 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**

$390.53

(6.2%)

Google

$650.09

$799.87

23%

Rackspace Hosting

$41.65

$45.05

8.2%

Riverbed Technology

$25.95

$14.21

(45.2%)

Salesforce

$25.26**

$40.88

61.8%

AVERAGE RETURN

--

--

8.32%

S&P 500 SPDR

$124.39**

$155.48

24.99%

DIFFERENCE

--

--

(16.67%)

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

Notable newsmakers
Among the other tech stocks making news last week:

  • Yahoo! (NASDAQ: YHOO  ) kicked off tech earnings week by reporting better-than-expected results, though revenue fell 7% year over year. Display ad revenue, long a source of strength for the business, fell 11%. The good news? Yahoo! says there are now 300 million active mobile users of its apps, a 50% improvement from December.

  • Microsoft (NASDAQ: MSFT  ) lifted the Dow on an earnings beat, overcoming disappointing results from the index's top blue chip, IBM (NYSE: IBM  ) . Revenue grew 18%, in line with expectations, while similar profit gains tracked ahead of estimates. Mr. Softy's $0.72  a share of fiscal Q3 earnings beat the consensus by $0.04.

  • On Thursday, Salesforce officially split 4-for-1 and then promptly fell 4%. Investors were apparently looking for an excuse to cash out some of their holdings and waited till the split to do so.

  • Finally, mark your calendars: Apple reports earnings after the bell on Tuesday. Here's what to watch for.

What else caught your eye in the tech world last week? Do you believe Apple stock will rally on surprisingly strong earnings? Let us know what you think in the comments box below.

Want even more Apple stock information? Allow me to introduce you to The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, who has the skinny on the various reasons to buy or sell Apple stock right now. Click here to get his latest thinking on the stock and what opportunities are left for Apple (and your portfolio) going forward.


Read/Post Comments (8) | Recommend This Article (8)

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 April 21, 2013, at 1:18 PM, DanManners wrote:

    Apple will be down 10-20 % this week. Apple will be a buy under $ 100.

  • Report this Comment On April 21, 2013, at 1:18 PM, garysund wrote:

    When it comes to apple I think three things must happen to kick start the stock again. First they will need to have a above average earnings report next week. Above average meaning the earnings must be above what most analyst's expect in sales and earnings per share. Second they need to raise the dividend. People have been waiting in the wings for this to happen and with even more profits being adding to the cash they already have this is a event that must happen. Third they need to come out soon with a refresh of products and even a new product they at least talk about instead of the rumors that have been around. This will help the stock go up quite a few points. I know the june quarter is of a concern to many but if they end up doing well with a great first quarter this will help quite a bit. Of course I if these events do not happen one can only guess what the outcome will be.

  • Report this Comment On April 21, 2013, at 2:37 PM, trajan24 wrote:

    Apple needs to stop the bean counter religion and get back to HALO products in ALL of their lines. Stopping the 17" Macbook Pro was a huge mistake, and competitors are passing Apple products on every front. Jobs would never allow this.

  • Report this Comment On April 21, 2013, at 2:41 PM, jeffreber44 wrote:

    Hedge Apple with Nokia.

    Nokia Lumia's, which are what Nokia has focused as the future of the company, have gained a 27% increase in sales and this is during a traditionally slow quarter for phone manufacturers. This is with all the supply issues that Nokia had. The difference in the 2Q will be that the Lumia 520 & 720 were launched to take advantage of the full 2Q. The 920 is old and pretty much done, unless we get some surprises in China. The 620 will benefit 2Q more than it did 1Q because it's supply took forever to reach India and other countries. So that leaves the 928 which will be promising due to the fact that Verizon's 822 did well. But the 928 will only help 2Q if Nokia gets it to Verizon (in time), hopefully by May. --GET SOME IRGUNCEY NOKIA!--

    Nokia expects the increase in smartphone sales to continue. With that, better margins will help grow the pathetic revenue Nokia posted in 1Q. The entire Asha line is getting a facelift so I wonder if their was not the same availability causing their sales to fall just as Symbians did a few quarters back....

    All in all, 2Q will be better than the lackluster success Nokia showed in 1Q. Yet they are getting closer to their goals and they have good phones. Nokia just need the momentum to keep building. Another thing to note is that their cash balance went up, which has kept the stock above $3. I expect a lot better performance from Nokia in 2Q. I think they'll be able to get their act together.

  • Report this Comment On April 21, 2013, at 3:05 PM, JohnnySunkel wrote:

    As much as I also want to talk about GOOG, RAX, RVBD, and CRM, I think I'll just stick with the question posed in the headline for now: in my opinion, it was time to sell AAPL back in mid-October, and I said as much in my blog (http://johnnysunkel.blogspot.com/2012/10/apple-aapl.html).

    If you have a system that can trade the current chop (which I don't), then that's great, but for a technical/algorithmic long-term trend-follwing trader like me, there is just no point in trading AAPL right now.

    Too bad I didn't short AAPL on that signal back in October...

  • Report this Comment On April 21, 2013, at 3:21 PM, tychicum wrote:

    Dan! you have to quit smoking that stuff!

    If AAPL hit $100, I would take its cash and buy itself out ... privatizing it to my ownership and pocket the change.

    LOL.

  • Report this Comment On April 21, 2013, at 6:14 PM, skleiniv wrote:

    WTH, did I miss something here or did you forget to finish the article! The title ended with the question, "is it time to sell?" yet, I can't find that answer anywhere within your article! Well is it or isn't it?

  • Report this Comment On April 21, 2013, at 8:01 PM, mitstrebor wrote:

    Your portfolio is being destroyed? Draw all your money out right now, invest in silver, .999 pure, get it and put in a STEEL GUN CABINET IN THE CLOSET!

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