These Tech Stocks Will Make Me Rich

Welcome to week 59 of my stock-picking throwdown with Mr. Market. Let's get right to the numbers:

Company

Starting Price*

Recent Price

Total Return

Akamai (Nasdaq: AKAM  )

$22.23

$19.32

(13.1%)

Harris & Harris

$6.22

$6.48

4.2%

IBM

$126.39**

$121.08

(4.2%)

Oracle (Nasdaq: ORCL  )

$22.64**

$20.86

(7.9%)

Taiwan Semiconductor

$9.81**

$10.45

6.5%

AVERAGE RETURN

--

--

(2.90%)

S&P 500 SPDR

$123.09**

$104.45

(15.14%)

DIFFERENCE

--

--

12.24

Source: Yahoo! Finance.
* Tracking began on Aug. 7, 2008.
** Adjusted for dividends and other returns of capital.

Mr. Market couldn't keep up with my tech portfolio, which added just more than a percentage point to my lead in this three-year contest. (Go back to the beginning if this is the first time you've read this column.)

Wall Street isn't about to have it easier. Debate continues over who's to blame for the financial mess that crippled the financial system a year ago, and which still plagues us today. Congressman Ron Paul is among those who think we ought to abolish the Federal Reserve.

Our Foolish CEO, Tom Gardner, won't go that far. But he is convinced not only that should hundreds of bankers should go to jail, but also that Warren Buffett was right when he called for laddering capital gains taxes, making them more preferential to long-term investments.

"Reward long-term ownership. It's going to add stability to the marketplace, and it will cause much less of a trader mentality both with stock prices and business ownership," Tom said in a Forbes interview published last week.

For the record, I'm not for abolishing traders. Their presence in the stock market creates volatility that works to my advantage as a long-term investor. But I can also see Tom's point. High-ownership cultures are often worth investing in. Long-term winners such as Middleby (Nasdaq: MIDD  ) and Quality Systems (Nasdaq: QSII  ) speak to this truth. Insiders at each company own more than 5% of the outstanding shares as of this writing.

The week in tech
Ownership cultures are harder to find in Silicon Valley. Oracle is one of the few Valley firms whose insiders still own a substantial stake in the business. CEO Larry Ellison maintains a 23% stake in the company he founded in 1977.

Google (Nasdaq: GOOG  ) is another exception to the rule. Co-founders Larry Page and Sergey Brin, combined, still own more than 18% of the business. Yet their stock compensation practices stink. An evil options repricing plan has serendipitously awarded $1.5 billion in gains to employees while offering zero -- that's right: nada, zilch -- to the shareholders whose equity funded the exchange, The Wall Street Journal reported last week.

(Ahem.) Your investors deserve better than this, Google. Pay up.

The Big G wasn't the only member of the Valley vanguard to deal in billion-dollar windfalls last week. Twitter raised $100 million in new equity financing from Insight Venture Partners, T. Rowe Price (Nasdaq: TROW  ) , Institutional Venture Partners, Spark Capital, Benchmark Capital, and Morgan Stanley (NYSE: MS  ) , on what appears to be a $1 billion valuation.

This doesn't surprise me; I've been expecting private equity investors to flock to Twitter for months. But I also didn't expect the microblogger to reach the billion-dollar plateau this quickly. Disruptive technologies don't usually catch on this fast -- unless they're overhyped.

We've seen the damage hype can cause. That's why tech investing is best practiced in a diversified, patient manner. Look at David Gardner. He produced a decade of 20% returns in the real-money Rule Breaker portfolio by sticking with innovators. Tom Gardner's "simpleton portfolio" was also a 10-year winner. I believe that, with these five tech stocks, I will achieve similar success.

Checkup time!
Now let's move on to the rest of today's update:

  • Ellison, apparently growing impatient with European regulators, said in a speech last week that Sun Microsystems is losing $100 million a month while regulators delay approving the acquisition, and that Oracle has no plans to spin off the MySQL database that may be at issue. Prepare for a fight, Fools.

There's your checkup. See you back here next week for more tech stock talk.

Get your clicks with more techie Foolishness:

Akamai, Google, and Harris & Harris are Motley Fool Rule Breakers recommendations. Quality Systems is a Motley Fool Stock Advisor selection. Middleby is a Motley Fool Hidden Gems pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers had stock and options positions in Google stock positions in Akamai, Harris & Harris, IBM, Oracle, and Taiwan Semiconductor at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is tech-tastic.


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