Welcome to week 129 of my stock-picking throwdown with Mr. Market. Let's get right to the numbers.
|Akamai (Nasdaq: AKAM )
|Harris & Harris
|Taiwan Semiconductor (NYSE: TSM )
|S&P 500 SPDR
Source: Yahoo! Finance.
*Tracking began on Aug. 7, 2008.
**Adjusted for dividends and other returns of capital.
What a difference a week makes, eh? Mr. Market remained positive as my five techies wavered, giving back 574 basis points in this three-year race to see who can make investors the most money.
Earnings are fueling the rally. So many big-name companies are blowing away estimates that I'm expecting CNBC anchors to start dishing them like a SportsCenter anchor making a home-run call. (And here's the Apple report ... Yahtzee!)
Shares of Whole Foods Market (Nasdaq: WFMI ) rose by 13% yesterday after the green grocer beat earnings estimates by $0.05. Polo Ralph Lauren (NYSE: RL ) hit a fresh 52-week high after crushing estimates and doubling its dividend payment.
And bargains are still out there. As my Foolish colleague Morgan Housel reports, a number of big-name companies still trade a discount to their historic multiples of cash flow-to-enterprise value (EV). Verizon (NYSE: VZ ) , in particular, trades for nearly 50% of its five-year average when evaluated in this manner.
The week in tech
Don't expect this discount to last long. This week's addition of the iPhone to Verizon's network should make for a nice earnings catalyst. Mix in a healthy 5.4% dividend yield reinvested over decades, and you have the makings of a no-brainer tech multibagger.
At Nokia (NYSE: NOK ) , earlier reports of a tie-up with Microsoft have been confirmed. The Finnish phone giant will adopt Mr. Softy's Windows Phone 7 as its primary smartphone platform, putting a crimp in plans to introduce devices on the MeeGo OS that Nokia had been developing in concert with Intel.
So it was a big week in Redmond. Yet the big winner may be Rackspace Hosting (NYSE: RAX ) , a two-time Motley Fool Rule Breakers recommendation that blew away Street estimates for revenue in reporting results on Thursday night. Rackspace's top line grew by 27% in the fourth quarter. Profits improved by 50%. Investors like how the growth story is developing; they'd bid up the shares by more than 8% as of this writing.
Color me unsurprised. Rackspace's relentless commitment to outstanding service has become a disruptive innovation in the hosting business. I'd add the stock to my watch list, if I were you. History says it's the disruptors that remake industries and in the process unleash millions in shareholder wealth.
But don't take my word for it. 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.
- I’m not one for finger-pointing, but if there's a stock to blame for my losing to Mr. Market this week, it's Akamai. Shares of the leading provider of Web-content delivery services fell by as much as 17% after management failed to meet analysts' expectations for first-quarter guidance. So be it. As a shareholder since 2004, I've seen this pattern before.
- On Thursday, Taiwan Semiconductor reported an 18% gain in January sales, stemming from increasing demand for smart devices that use advanced chips. By contrast, TSMC peer United Microelectronics grew its sales by just 11% last month. This is no anomaly: Analysts quoted by Reuters said they expect TSMC to continue to set the pace in the market for contract chip manufacturing.
There's your checkup. See you back here next week for more tech-stock talk.
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