How salesforce.com Saved My Portfolio From Another Loss

Each week, I report the results of the Big Idea Portfolio, a collection of five tech stocks that I believe will crush the market over a three-year period. I've done it before; my last tussle with Mr. Market ended with me beating the index's average return by 13.35%.

Real money was on the line then as it is now, which means any one of the five stocks you see below could cause me a lot of public embarrassment. This week, my portfolio enjoyed huge rallies in shares of Apple (AAPL 0.64%) and Rackspace Hosting (RAX) -- up 11% and 13.3%, respectively. Yet neither of these businesses added so much as salesforce.com (CRM 1.05%), which rallied a remarkable 18.5% from my cost basis after reporting better-than-expected results last week.

The cloud computing star said revenue rose 35% to $788 million while adjusted earnings per share fell a penny to $0.33 a share. Analysts were expecting $776.5 million and $0.32 a share. The stock rallied more than 8% following the report and continued its ascent following the Thanksgiving holiday.

Why such a jump when earnings were actually down? Most signs point to higher deals and continued growth in the core business. For example, deferred revenue -- which measures software and service purchased but not yet recorded on the income statement -- rose 41%. Salesforce also slightly raised guidance for fiscal Q4.

More important for long-term investors, backlog continues to rise steadily. What was $2.2 billion as of last year's fiscal Q4 grew to $2.7 billion in Q1, $2.8 billion in Q2, and now sits at $3 billion of contracted yet unbilled revenue from its various cloud-based applications. Which is to say there's plenty of growth left in this story.

What's the Big Idea this week?
Salesforce's results provided needed tailwind to my portfolio, which had suffered three straight weeks of losses to Mr. Market in our battle for stock-picking supremacy. No longer. My five stocks rose enough to add a combined 9.78% to my average return.

Indexers fared well enough overall but lagged by comparison. The Nasdaq and Russell 2000 led the exchanges with a 3.99% and 3.98% return, respectively, last week. S&P 500 index enjoyed a 3.62% gain while the Dow added 3.28%, according to data supplied by The Wall Street Journal. Here's a closer look at where I stood through Friday's close:

Source: Yahoo! Finance. *Tracking began at market close on Jan. 6, 2012. **Adjusted for dividends and other returns of capital.

Notable newsmakers
Of the other stocks in my portfolio, Google is still sorting out how to meet unexpected demand for its new Nexus devices while giving YouTube even more resources for streaming custom content and movies. Specifically, Syfy -- aka, the Sci-Fi Channel -- launched Battlestar Galactica: Blood & Chrome as a web series ahead of an expected two-hour special due to air on regular cable channels in 2013.

In acquisitions news, Cisco Systems (CSCO 0.37%) purchased wireless network enabler Meraki for $1.2 billion. The deal looks like an effort to bulk up Cisco's service offerings ahead of an expected explosion in wireless Internet traffic over the next several years.

Netflix (NFLX 4.17%) also drew headlines for enabling its software on the new Wii U ahead of not only competitors but also console creator Nintendo (NASDAQOTH: NTDOY), whose TVii service isn't due before next month. Meanwhile, activist investor Carl Icahn exercised outstanding call options in order to create a full position in Netflix shares accounting for about 9.98% of the business. You can bet his next step is to lobby for a seat on the board.