Welcome to week 116 of my stock-picking throwdown with Mr. Market. Let's get right to the numbers:
|Akamai (Nasdaq: AKAM )||$22.23||$49.77||123.9%|
|Harris & Harris||$6.22||$4.40||(29.3%)|
|S&P 500 SPDR||$121.20**||$120.20||(0.83%)|
Source: Yahoo! Finance.
* Tracking began on Aug. 7, 2008.
** Adjusted for dividends and other returns of capital.
Mr. Market wins this round, but it was a turbulent week for all. Investors appear discombobulated in the face of the world's reaction to Fed Chairman Ben Bernanke ordering $600 billion in fresh greenbacks for new stimulus spending. I can't blame them. You know it's getting weird when Fidel Castro sounds like the reasonable one.
"Apparently the U.S. government, with its traditional anti-crisis measures, resorted to another desperate decision," the former Cuban leader wrote in an op-ed shortly after Bernanke ordered the printing presses on.
He has a point. A weaker dollar lends further credence to inflation fears even as it boosts the attractiveness of U.S. exports. It's also a startlingly hypocritical move in the face of the administration's criticism of China over purported currency manipulation.
Expect the administration to brush aside blowback from Castro, the G20, and Congressional conservatives. Global suppliers such as Intel (Nasdaq: INTC ) and Deere & Co. (NYSE: DE ) will sell more goods as a result of the weaker dollar.
And it's not the like the president doesn't have bigger problems. Last week, his bipartisan commission on deficit reduction introduced 50 proposals for cutting close to $4 trillion in federal debt. A cursory review of the week's editorials suggests liberals and conservatives were virtually united in their opposition to the plan.
Color me unsurprised. The nature of the fix we're in economically -- lagging growth, low corporate investment, in danger of needing permanent stimulus -- requires tough medicine for all. Whether Washington will give it to us is an open question, and one that continues to weigh on investors.
The week in tech
Those betting on a more digital future have less reason to worry. Demand for high-performance microprocessors and cloud-computing services continue to rise at a blistering pace.
Last Monday, Rackspace Hosting (NYSE: RAX ) reported a 23% revenue increase and a 50% per-share earnings improvement. The company also continues to produce prodigious levels of free cash flow -- more than $100 million over the past year despite a high rate of capital investment. Returns on those investments are also rising. Rackspace earned 12.5% on its deployed capital in the 12 months ended in September, up from 10.9% in the year ended in June. We'll be talking more about this on Friday, when we host a live chat with Rackspace CEO Lanham Napier here at Fool.com.
In the meantime, Advanced Micro Devices (NYSE: AMD ) executives said last week they're aiming to deliver between 44% and 48% gross margins in 2011. Though that's still well below where Intel rates, AMD has shown improvements in its ability to deliver chips profitably.
It's a feel-good stock story and a reminder that it's the upstarts and disruptors such as AMD that have the best odds of becoming millionaire-maker stocks.
Look at David Gardner. He produced a decade of 20% returns in the real-money Rule Breaker portfolio by betting on a collection of innovators, and then holding them for the long term. Tom Gardner's "simpleton portfolio" was also a 10-year winner. I believe that, with my tech portfolio, I will achieve similar success.
Now let's move on to the rest of today's update:
- Shares of Akamai are down more than 10% over the past week on concerns that negotiations with Netflix (Nasdaq: NFLX ) will result in lost revenue and depressed margins. But the concerns are overblown. While competitor Level 3 (Nasdaq: LVLT ) will now be taking on duties once thought to be Akamai's, Netflix's streaming business is growing so fast Akamai may earn more revenue now with a smaller slice of the pie than it was before Level 3 entered the picture.
There's your checkup. See you back here next week for more tech stock talk.
Get your clicks with more techie Foolishness:
- Suddenly, high-tech cars are all the rage.
- This management team is creating more value than you think.
- Call in the Special Forces. This gamer needs a rescue.
Did you know the Fool changed its disclosure policy? Read all about it here.