Welcome to week 39 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 |
$21.28 |
(4.3%) |
|
Harris & Harris |
$6.22 |
$4.40 |
(29.3%) |
|
IBM |
$126.97** |
$102.59 |
(19.2%) |
|
Oracle (NASDAQ:ORCL) |
$22.69** |
$18.42 |
(18.8%) |
|
Taiwan Semiconductor (NYSE:TSM) |
$10.34 |
$10.39 |
0.5% |
|
AVERAGE RETURN |
-- |
-- |
(14.22%) |
|
S&P 500 SPDR |
$124.37** |
$90.86 |
(26.94%) |
|
DIFFERENCE |
-- |
-- |
12.72 |
Source: Yahoo! Finance.
*Tracking began on Aug. 7, 2008.
**Adjusted for dividends and other returns of capital.
How fast can returns evaporate? As my tech stocks muddled through the week, Mr. Market roared, reclaiming six percentage points in this contest. Whoa.
Blame better-than-expected bank news and a lagging Nasdaq index. But the banks were the big story. American Express (NYSE:AXP) was among the handful that passed the government's so-called balance sheet "stress test," and was thereby deemed fit for investment. Traders are responding today by bidding bank stocks higher. Even Bank of America, which fell $34 billion short of its capital goal, is up as I write.
The stress test is meant to be a gauge of solvency. Had the industry failed, it would've produced disastrous results. Since it didn't, investors are betting (rightly, I think) that careful capital management from here should lead higher future returns.
Yet there are no guarantees. "After a monstrous seven-week run, I am starting to wonder if one should not look for a pullback in the broad market, too," wrote Foolish colleague Ivan Martchev. "This year, 'sell in May and go away' isn't sounding so bad."
The week in tech
But sell tech? I'm not so sure. Nor, interestingly, is Warren Buffett. He and partner Charlie Munger gushed about Google's (NASDAQ:GOOG) giant moat during last weekend's annual meeting of Berkshire Hathaway shareholders -- known in investing circles as "Woodstock for Capitalists."
"Google has a huge new moat. In fact, I've probably never seen such a wide moat," Munger told the audience in attendance. A tip of the hat toward cloud computing? Or the durability of Big G's search engine? Both, perhaps. Google's search-engine market share rose to 72.7% in April, up 4.8 percentage points year over year, researcher Hitwise reports.
Yet even Google fails from time to time. Its latest miss: a failed try for Twitter. Apple (NASDAQ:AAPL) is reportedly now closest to a deal. On Tuesday, blogger Valleywag said that the Mac maker plans to offer Twitter $700 million cash. Color me skeptical.
Meanwhile, Sirius XM Radio (NASDAQ:SIRI) proved me right when it bled more than 400,000 net subscribers in the first quarter. Most of the defections were once-passionate retail listeners who've been stung by the recession. The good news? Sirius took in more than $100 million in pro forma operating income, and cash flow growth appears to be on track.
Nevertheless, tech investors are still best served by exercising prudence in picking stocks -- stick to the very best -- and patience in waiting for gains. That's how David Gardner produced a decade of 20% returns in the real-money Rule Breaker portfolio. 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:
- Oracle now says it will keep the hardware business it is acquiring from Sun Microsystems (NASDAQ:JAVA) for $7.4 billion. Skeptical? You should be. The database king has little history or experience with selling hardware.
- Earlier today, Taiwan Semiconductor said that April sales were up 60% sequentially, further evidence that a global tech turnaround could be under way.
There's your checkup. See you back here next week for more tech stock talk.
Get your clicks with more techie Foolishness:
- Here's why the new Kindle DX is a winner.
- And here's why it could fail.
- Are you bullish or bearish when it comes to Apple?
