Apple Stock Finally Rallies, but Not Enough to Save My Portfolio

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 tip the scales in my favor. This time, Apple (NASDAQ: AAPL  ) reported strong gains in the wake of its first earnings beat in four tries.

Let's start with the really good news: Profits came in $0.02 ahead of estimates as revenue improved 11.3%. Credit the iPad for those gains. Revenue jumped 40% as unit sales soared 65% year-over year. Average selling prices fell from $530.93 to $449.04, no doubt because of the popularity of the lower-priced iPad Mini. Increasing interest in iTunes content may also be helping boost tablet sales.

CEO Tim Cook also agreed loosen Apple's purse strings. Existing investors will see a 15% bump in the dividend, to $3.05 a share, when the payout arrives next month. More importantly, the board has authorized up to $50 billion extra for repurchasing shares of Apple stock. Overnight, the iEmpire has become one of tech's most interesting value and income plays.

The bad news? Guidance came short of what Wall Street had been hoping for. And while Mac sales are holding up well compared with the PC market, which remains in freefall, Apple's computer sales still dipped 2% year over year.

What's the Big Idea this week?
Investors didn't care enough to stay out of Apple stock, which rallied more than 6% last week. Mixing in a 4% rally in shares of Rackspace Hosting broke a string of losses to Mr. Market, as my five tech stocks reclaimed 38 basis points in our three-year contest to see who can do better for investors. All four indexes also gained.

This time, the Russell 2000 led the indices with a 2.49% jump, followed by the Nasdaq's 2.28% gain, the S&P 500's 1.74% bump, and the Dow's 1.13% improvement, 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**

$417.20

0.2%

Google

$650.09

$801.42

23.3%

Rackspace Hosting

$41.65

$46.87

12.5%

Riverbed Technology (NASDAQ: RVBD  )

$25.95

$14.89

(42.6%)

Salesforce.com

$25.26**

$40.71

61.2%

AVERAGE RETURN

--

--

10.92%

S&P 500 SPDR

$124.39**

$158.24

27.21%

DIFFERENCE

--

--

(16.29%)

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:

  • Akamai Technologies (NASDAQ: AKAM  ) soared as much as 21% as the leading content delivery network served more online media traffic than expected. Both revenue and earnings easily topped estimates.

  • Informatica (NASDAQ: INFA  ) also saw its shares jump after exceeding Q1 revenue targets, a nice switch for a company that had suffered stalling sales in the wake of the European debt crisis. During the quarter, the company signed 19 deals with more than $1 million.

  • Fusion-io (NYSE: FIO  ) also rallied more than 20% after crushing revenue and profit targets. More importantly, CFO Dennis Wolf says customers are once more increasing order sizes.

  • Finally, mark your calendars: Riverbed Technology reports earnings after the bell tomorrow. Investors are expecting heady revenue growth from the company, which recently named co-founder David Wu chief technology officer.

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

Want even more Apple 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 right now. Click here to get his latest thinking on the stock and what opportunities are left for Apple (and your portfolio) going forward.


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