These Tech Stocks Will Make Me Rich

Welcome to week 138 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 $38.09 71.3%
Harris & Harris $6.22 $5.18 (16.7%)
IBM $122.97** $166.21 35.2%
Oracle $22.33** $34.18 53.1%
Taiwan Semiconductor $9.35** $12.21 30.6%
AVERAGE RETURN -- -- 34.70%
S&P 500 SPDR $120.04** $132.04 9.99%
DIFFERENCE -- -- 24.71

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

Last week's action was better for my tech portfolio than it was for Mr. Market, but only by 145 basis points. The days of my leading by 30 or even 40 percentage points in this contest seem to be over.

Blame it on the hurry-up-and-go-nowhere market we're in right now. The S&P 500 performed the worst of the three major indexes, down 0.64% last week. The Nasdaq fell 0.57% while the Dow held up best, off just 0.31%. Perhaps the investing populace was preoccupied with tax day?

Corporate management teams faced no such distractions, and a few used the extra time to go shopping. Shares of Silgan Holdings surged as much as 17% last Wednesday after the company bid $4.1 billion to acquire plastic container maker Graham Packaging (NYSE: GRM  ) . Graham's owners enjoyed a 37% rally on the news.

On Monday, Endo Pharmaceuticals (Nasdaq: ENDP  ) announced a deal to acquire incontinence specialist American Medical Systems (Nasdaq: AMMD  ) for $2.9 billion. Shares of Endo moved up 5% on the deal, but AMS' shareholders saw a near-instant 30% pop. American Medical closed the week up 32%.

The week in tech
But it was a bold move to bolster Web streaming that drew the week's biggest gains. Shares of Global Crossing (Nasdaq: GLBC  ) soared 74% when Level 3 Communications (Nasdaq: LVLT  ) agreed to pay $1.9 billion to acquire the company.

Whether the deal makes sense isn't the issue, my Foolish colleague Anders Bylund writes here. What matters is that both companies have failed to produce consistent profits. Cash is flowing, sure. But Level 3's $101 million in levered free cash flow pales compared to the $523 million in interest the company paid in 2010. Global Crossing paid $157 million in interest over the same period. The best outcome for both companies is for a cash-rich, fiber-hungry suitor to come calling. Google (Nasdaq: GOOG  ) remains my top choice.

Chances are it'll be awhile before The Big G dips into its war chest to expand its fiber network from Kansas City to other parts of the country. Google has bigger problems. Or at least that's how Wall Street sees it.

Late Thursday, the search king reported $8.08 in adjusted earnings. Wall Street was expecting closer to $8.13. New CEO Larry Page made an appearance during the quarterly call with analysts, but in many ways the financial statements spoke volumes. Huge increases in research, administrative, and payroll spending accounted for the miss -- investments The Big G sees as necessary to win the social-search war.

This is as it should be. Disruptive innovation destroys as it creates, and Google and its investors want to be on the right side of the equation. Getting there won't be easy, of course. But the payoff could be billions in new stock market wealth.

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:

  • Akamai struck a deal to embed IBM's WebSphere middleware technology into its application delivery network the same week that upstart peer EdgeCast announced its own app network had cleared the beta stage. Shares of Akamai have fallen sharply so far this year because of concerns over the rise of EdgeCast and its peers, yet 66% of more than 480 Fools polled last week say they believe the company will not just survive but lead in the market it helped to pioneer.

There's your checkup. See you back here next week for more tech stock talk. In the meantime, don't forget to keep up with my tech portfolio by adding these stocks to your watchlist today:

Akamai and Google are Motley Fool Rule Breakers recommendations. Google is also a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the market-beating Rule Breakersstock picking team. He owned shares of Akamai, 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 may not 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 Google, IBM, and Oracle and is also on Twitter as @TheMotleyFool. Its disclosure policy is tech-tastic.


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