These Tech Stocks Will Make Me Rich

Welcome to week 118 of my stock-picking throwdown with Mr. Market. Let's get right to the numbers.

Company

Starting Price*

Recent Price

Total Return

Akamai $22.23 $51.06 129.7%
Harris & Harris $6.22 $4.49 (27.8%)
IBM (NYSE: IBM  ) $123.46** $145.81 18.1%
Oracle (Nasdaq: ORCL  ) $22.40** $27.74 23.8%
Taiwan Semiconductor $9.35** $11.00 17.6%
AVERAGE RETURN -- -- 32.28%
S&P 500 SPDR $121.20** $120.20 (0.83%)
DIFFERENCE -- -- 33.11

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

After a couple of rounds for Mr. Market, I'm back on the scorecard with a nice week in which my tech portfolio added almost 2 percentage points to my lead in this three-year contest. (See how it all began.)

What's driving the gains? I'd say uncertainty more than anything else. In the absence of clear evidence of a recovered economy -- and let's be honest, there isn't any -- my portfolio of cash-rich techies, three of which pay dividends, is about as good as you'll find. Not that I'm biased or anything. (Grins.)

Yet my stocks may look like laggards over the next two weeks. Black Friday shopping sprees began in earnest Thursday night and continued through the next day, leading to a decent retail rally. In a down market, Pacific Sunwear (Nasdaq: PSUN  ) was up more than 1.8% in intraday trading, Guess? (NYSE: GES  ) was up 1.7%, and Express (Nasdaq: EXPR  ) , one of our Black Friday bargain stocks, was up just less than 2%.

Retailers are benefiting from a newly flush stampede of shoppers. Economists surveyed by the Associated Press estimate that consumer spending will rise by 2.4% in the holiday quarter, following a 2.8% rise in the July-September quarter, BusinessWeek reports.

Credit whoever you want for this renewed sense of growth, but former President Bush and Berkshire Hathaway Chairman Warren Buffett are equally thankful for the widely despised TARP medicine administered at the of 2008. Today's economic malaise, such as it is, would have been a calamity without stimulus, both men argue.

The week in tech
Are they wrong? I don't think so, but as my tech portfolio shows, I'm also unwilling to bet on tech stocks that are too dependent on a broad economic recovery. I'd rather cling to stocks with healthy cash flows and even healthier balance sheets.

Take Google (Nasdaq: GOOG  ) , for example. The leading search-engine operator has more than $33 billion in cash and short-term investments in the bank -- more than enough assets to fund the development of its own tablet to compete with the iPad.

Don't laugh; that's exactly the sort of step The Big G needs to take. Yes, Samsung sold 600,000 Galaxy tablet computers in its first month of release, but that pales next to the 1 million Wi-Fi-only iPads sold during its first 30 days on the market.

There's a simple reason for this: For as functional as the Galaxy tab appears to be, at 7 inches it's too small to effectively compete with the iPad. Video streaming requires a bigger screen.

Will Google do what's necessary to create a bigger Android tablet? I hope so. But even if it doesn't, someone will. An unknown, perhaps. Often, it's the little-known disruptors that grow to become millionaire-maker stocks.

We've seen it happen time and again. 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.

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

  • Further cementing his company's bellwether status, IBM chief Sam Palmisano will join Federal Reserve Chairman Ben Bernanke, Ford’s Alan Mulally, and local business representatives in a panel discussion on the economy at Ohio State University next week.
  • Oracle took another chunk out of SAP (NYSE: SAP  ) when a judge ruled in its favor in a longstanding legal battle. The German software supplier has been ordered to pay $1.3 billion in damages for illegally downloading and profiting from Oracle software. An appeal is under way.

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

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Berkshire Hathaway and Ford are Motley Fool Stock Advisor selections. Akamai and Google are Motley Fool Rule Breakers recommendations. Berkshire and Google are Motley Fool Inside Value picks. Guess? is a Motley Fool Hidden Gems recommendation. Motley Fool Options has recommended that subscribers write Guess? covered calls. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the market-beating Rule Breakers stock picking team. He owned shares of Akamai, Berkshire Hathaway, Google, 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. You can also get his insights delivered directly to your RSS reader. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Berkshire Hathaway, Google, Guess?, IBM, and Oracle. The Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is tech-tastic.


Read/Post Comments (5) | Recommend This Article (6)

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 November 27, 2010, at 1:16 PM, alansloan wrote:

    Big deal - take out Alkamai and your picks are below average.

  • Report this Comment On November 27, 2010, at 8:11 PM, TMFMileHigh wrote:

    @alansloan,

    Thanks for writing.

    >>Big deal - take out Alkamai and your picks are below average.

    Not if you do the math:

    Market return = (0.83%)

    IBM return = 18.1%

    ORCL return = 23.8%

    TSM return = 17.6%

    In fact, if you take out AKAM and add in my lone loser, TINY, the portfolio's average return becomes 7.93%, still more than 8 points up on the market. I'll take that every time.

    On the other hand, I'm also just one Fool. What are you investing in right now?

    Thanks again and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On December 01, 2010, at 2:22 AM, PacificSunwear wrote:

    You recommended to short PSUN back in Sept. The company is up over 50% since then. How are you allowed to ignore your past predictions. Nothing wrong with making a bad call, but how about taking some responsibility for costing people a missed opportunity or lost money.

    Someone has to take responsibility. When AKAM runs into an issue you apparently are not yet familiar with, I am wondering if you will simply remove it from your list?

  • Report this Comment On December 01, 2010, at 2:31 AM, PacificSunwear wrote:

    Your second misrepresentation is that you have taken technology stocks and compared them to the S&P 500. It is only appropriate to compare your selections to a high tech index.

    I am disappointed that MF does not police its' contributors more vigilantly. There are people who invest for health care, education and retirement. This is not some contest. This is real life.

    If you are at all interested, I will happily direct you to a money management group that has outperformed the S&P by over 120% over the last 8 years after fees and expenses. I receive no commission or compensation of any type from the firm.

    The gentlemen managing the fund are former members Harvard Endowment. They are not in it for wild rides.

  • Report this Comment On December 01, 2010, at 11:05 PM, TMFMileHigh wrote:

    @PacificSunwear,

    >>Nothing wrong with making a bad call, but how about taking some responsibility for costing people a missed opportunity or lost money.

    With due respect, no, that is not at all what you are saying. Each comment you've made in prior threads amounts to grave dancing on a pick I made that has gone bad.

    You'll have to forgive me if I'm skeptical of your newfound altruism.

    >>Your second misrepresentation is that you have taken technology stocks and compared them to the S&P 500. It is only appropriate to compare your selections to a high tech index.

    The reason I don't do this is because the S&P 500 is easy and cheap for the common investor to index. For those who choose not to invest in stocks, we believe an S&P index fund is the right place for at least a portion of retirement assets.

    Having said that, if you're really dying for an apples-to-apples tech comparison, then I give you the Nasdaq 100 ETF (QQQQ). It's dividend-adjusted return since Aug. 7, 2008 is 16.31%. I'm up almost double the average return.

    Reference: http://finance.yahoo.com/q/hp?a=07&b=7&c=2008&d=...

    >>There are people who invest for health care, education and retirement. This is not some contest. This is real life.

    Indeed, I'm one of those people. I don't write these columns for sport, sir. I write to feed my family, and I invest to fund my family's long term needs: education for the kids, retirement for my wife and I.

    >>If you are at all interested, I will happily direct you to a money management group that has outperformed the S&P by over 120% over the last 8 years after fees and expenses.

    Sure, pass it along. I have a similar record in my real-money portfolio, but I enjoy learning from other approaches.

    Finally, let me be clear: I don't like it when I make a bad pick. I never intend to make a bad pick, but that's where we are with my PSUN short call. The egg is on my face, and my pick is up on the web for all the world to see, still:

    http://www.fool.com/investing/general/2010/09/15/these-stock...

    And that, sir, is what makes your comment ridiculous. Of course I wouldn't remove Akamai from my list were an issue to arise. Did I remove Harris & Harris when the CEO changed strategy to begin investing in Pink Sheet penny stocks?

    No, I didn't. Thanks for writing. Moving on to more productive conservations.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

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