My Tech Portfolio Will Crush the Market

I am a tech stock addict.

I blame Silicon Valley for my condition, which, according to my portfolio profile at Fidelity.com, is more than one-third weighted toward hardware and software. See, before I was a Fool, I was a PR consultant to some of the tech industry's top firms.

And I can't let go. I follow the Valley's best from the friendly confines of the Rockies for Fool.com and David Gardner's Motley Fool Rule Breakers service, happily committing capital when I find growth giants and misunderstood multibaggers in the making. Here are five I own right now:

Company

Average Cost Basis

Recent Price

Total Return

Akamai Technologies (Nasdaq: AKAM  )

$12.57

$22.23

76.8%

Harris & Harris (Nasdaq: TINY  )

$5.72

$6.22

8.7%

IBM (NYSE: IBM  )

$93.79*

$129.05

37.6%

Oracle (Nasdaq: ORCL  )

$12.20

$22.75

86.5%

Taiwan Semiconductor (NYSE: TSM  )

$8.22*

$10.34

25.8%

Sources: Personal data, Yahoo! Finance. *Adjusted for dividends.

Put up your dukes, Mr. Market
You can see from the chart links that, with each pick, I'm already ahead of the S&P 500. I believe the winning streak will continue, and I'm content to hold all of these stocks for at least the next three years, barring any change in the underlying business that materially alters my investment thesis. Let's review my thinking for each stock briefly:

Akamai is far and away the leader in content delivery. Upstarts are apparently making it difficult for the firm to win new business in media and entertainment, yet it's Akamai and Limelight Networks that will tonight be delivering the Olympics to Web viewers around the globe.

Harris & Harris is a publicly held venture capital firm whose specialty is nanotech, which I consider to be an inevitable technology for manufacturing semiconductors and advanced industrial materials. Yet the stock trades near the net asset value of its holdings -- $5.95 per share at the end of the second quarter. The implication? Harris & Harris may never see a liquidating event, such as an IPO or a buyout, for any of its holdings. I think that's nuts. So, apparently, do the partners, who are investing right alongside me.

IBM is the top dog in tech services globally, winning big even in India, home to services stars such as Infosys. But Big Blue is also a player in software, chips, storage, and servers; it’s virtually a proxy for the entire tech industry. And still the stock is on sale.

Oracle dominates the database market despite tough competitors and open-source alternatives. Plus, in applications software, the company's acquisition strategy has allowed it to grow at the expense of SAP.

Taiwan Semiconductor, otherwise known as TSMC, is the world's largest chip foundry. Translated from tech-speak, this means that TSMC builds chips for designers such as NVIDIA (Nasdaq: NVDA  ) . I can't see demand for this sort of service waning; a digital world needs more chips, and it's cost-prohibitive to build new chip-manufacturing facilities.

I am, therefore, challenging Mr. Market as any other portfolio manager would: My picks against yours, sir. If the blended average return of my five stocks beats the return of the S&P 500 SPDR (AMEX: SPY  ) over the next three years, I win. If not, well ... it'll be a huge helping of public humiliation for me, I'm sure.

Other rules:

  • If I choose to either buy or sell, I have to announce my intent here first and then abide strictly by the Fool's disclosure policy and trading guidelines. Principally, this means no trading within 10 days of mentioning the stock, in any story or discussion board post, at Fool.com.
  • If I change my investing thesis in any stock on this list, for any reason, I have to announce it here immediately. No fudging.
  • I get to make as many bad jokes as I like, so long as all of them are at the expense of Mr. Market.

OK, hamsters, bring out the ticker tracker:

Company

Starting Price

Recent Price

Total Return

Akamai

$22.23

--

0%

Harris & Harris

$6.22

--

0%

IBM

$129.05

--

0%

Oracle

$22.75

--

0%

Taiwan Semiconductor

$10.34

--

0%

AVERAGE RETURN

--

--

0%

S&P 500 SPDR

$126.73

--

0%

And if I lose? Well, like I said, it'll be a bucketful of crow for me. Let the battle begin.

Get your clicks with related Foolishness:

NVIDIA is a Stock Advisor selection. Akamai and Harris & Harris are Rule Breakers recommendations. The Motley Fool owns shares of SPDR. Try either of these market-beating services free for 30 days. There's no obligation to subscribe.

Fool.com contributor Tim Beyers, who is ranked 20,344 out of more than 114,000 participants in CAPS, also writes for Rule Breakers. Get access to all of his writings here, or enjoy a daily dose of his Foolishness via this feed for your RSS reader.

Tim owned shares of Akamai, Harris & Harris, IBM, Oracle, and Taiwan Semiconductor at the time of publication. The Motley Fool owns shares of S&P 500 depository receipts and has a tech-tastic disclosure policy.


Read/Post Comments (1) | Recommend This Article (7)

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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 August 21, 2008, at 12:32 AM, Internettech wrote:

    Actually, I think out of the 20 or 30 CDN startups some may combine and at least get 15-20% of Akamai's business since their client list in posted on their website and price is a major issue right now. Another 20 or 30% of Akamai's revenue may churn and will go to Level 3's new CDN and Limelight's CDN and AT&T new CDN offering. As an aside; they are getting their butt kicked on the Olympics with NBC's use of Limelight for all the major videos. Thus leaving Akamai with a few major misses on their revenue targets and the stock will fall to 10 or 12 a share by the end of the year. It's just not worth 3.9 billion. I've read the 6 or 7 major patents they have and the new CDN's are finding their way around them because Akamai's major patents and architecture are based on the needs is of dialup users and small ISPs not broadband. Once customer's realize this they will flock to the lower cost new broadband CDNs and Cloud Computing CDNs to get better page counts, not page misses.

    Please don't forget to take a US$280 million write down on the balance sheet for worthless auction rate securities they hold which the CEO and CFO don't want to talk about. There were only soft ball questions on the conference call. Write down the securities to fair market value, I say...if you can find someone to buy them since the market place is gone.

    See Tim's Quote:

    http://www.fool.com/investing/high-growth/2008/07/31/can-aka...

    "Then there's the balance sheet. Akamai has $287 million in cash and short-term investments and $453 million in long-term securities holdings, $280 million of which are auction-rate securities that aren't likely to be sold soon. Still, that's a ton of buying power that Limelight and especially Level 3, encumbered with more than $6 billion in net debt, don't possess. And be assured, Sagan and his team have every interest in investing that capital. Here's how he put it during the conference call:"

    How is he going to invest if the auction rate securities are worthless? And Akamai has to hoard cash to stay fit for the rough waters ahead. Meanwhile AT&T and IBM have recently announced they are both spending several 100 million each on new cload datacenters which can do cloud based CDNs which is a better CDN architecture.

    Yes I'm a bear on Akamai, but go long on AT&T, IBM, Verizon, Level 3 and if you want a rocket, Limelight. See my post on the cost to duplicate Akamai's servers, it's not a 4 billion market cap it's a 9 to 40 million build depending on the server type for 32000 servers. And Limelight will prevail in court, I've downloaded the opinion. No matter how you cut it Limelight, AT&T, IBM, Verizon, and Level 3 are a going to have a field day in the next few years and Akamai will fall like Internap unless they sell out or invert their architecture.

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