Welcome to week 51 of my stock-picking throwdown with Mr. Market. Let's get right to the numbers:


Starting Price*

Recent Price

Total Return





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.

A mostly good week for my tech portfolio was ruined by Akamai's poor second-quarter report, and I lost almost three percentage points to Mr. Market as we approach the one-year anniversary of this contest. (Though I'm still well ahead overall.)

But Akamai is the exception. A broad rally in the S&P 500 index has lifted spirits and share prices in a variety of sectors. Look at airlines. A more confident Southwest (NYSE:LUV) today put in a $114 million bid for Denver's bankrupt Frontier, forcing rival bidder and regional powerhouse Republic Airways to up its offer or quit.

Good economic news has also helped fuel the rally. Gross domestic product (GDP) -- a broad measure of economic well-being -- fell just 1% in the second quarter, according to figures compiled by the federal government. GDP had declined by 6.4% in the first quarter and 6.2% in Q4. The U.S. may finally be pulling out of recession.

The week in tech
October's market panic is also a distant memory for most of the tech sector. Consider Western Digital, whose strong results caused my Foolish colleague Anders Bylund to declare that the tech rally is real.

But tech's strongest stories are hidden, obscured by the hand-wringing at Microsoft (NASDAQ:MSFT) and Yahoo! (NASDAQ:YHOO), who this week agreed on a focused search advertising deal that essentially guts all of Yahoo!'s search engine and replaces it with Bing. In exchange, Mr. Softy gets a 12% share of the revenue from search advertising via Yahoo!'s popular digital properties, already some of the best-known and high-trafficked destinations on the Web.

The implication? Even if this Microhoo is better able to take on Google (NASDAQ:GOOG), it'll cost Yahoo! its digital soul.

Still, Mr. Softy is in no shape for a victory dance itself. Confirmed reports at the blog Gizmodo show that Microsoft's retail store strategy intends to emphasize Windows 7 and PCTV, a hopeful competitor to YouTube, TiVo, Apple TV, and the Slingbox.

In telecom, Verizon (NYSE:VZ) confirmed earlier rumors that it would distribute Palm's Pre smartphone. Shoppers will be able to buy Verizon-flavored versions of the Pre in early 2010, Chief Operating Officer Denny Strigl said during Monday's earnings call. So much for Sprint Nextel's exclusive distribution deal.

Yet such shifts are hardly unexpected. History says that tech markets are prone to disruption -- and tech investors do best when they're patient, as David Gardner has been. He produced a decade of 20% returns in the real-money Rule Breaker portfolio. Tom Gardner's "simpleton portfolio" was also a 10-year winner. With these five tech stocks, I believe I'll achieve similar success.

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

  • Akamai reported disappointing second-quarter results. Revenue, at $204.6 million, came in below internal and Wall Street targets. Per-share earnings, at $0.40, were down 2% year over year. In the long term, CEO Paul Sagan likes his company's chances to profit from a looming shift to Web video.
  • Taiwan Semiconductor Manufacturing did better, reporting huge gains in Q2 revenue and earnings. Management also pointed to positive bookings and macroeconomic trends as signs of a good third quarter ahead.
  • IBM bought itself a crystal ball this week when it acquired predictive analytics specialist SPSS for $1.2 billion.

There's your checkup. See you back here in two weeks for more tech stock talk.

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Akamai, Google, and Harris & Harris are Motley Fool Rule Breakers recommendations. Sprint Nextel and Microsoft are Motley Fool Inside Value picks. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers had stock and options positions in Google and stock positions in Akamai, 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.

The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is tech-tastic.