How Apple Failed Me Again -- and Why I Couldn't Be Happier About It

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 my 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. Apple (AAPL +1.39%) gets the spotlight this time. Shares of the Mac maker fell sharply for the second consecutive week amid fears of tepid demand for the iPhone 5 in China and the impact of Google's (GOOG +0.34%) release of a popular new version of Google Maps for iOS.

Bearish analysts may have kicked off the selling. Analysts at UBS and Jefferies cut their price targets from $780 to $700 and $900 to $800, respectively. Besides the possibility of lower iPhone 5 sales, these Wall Streeters suggest that strong iPad Mini sales are coming at the expense of larger and more expensive iPads.

Would that really be so bad? The iPad Mini isn't that much cheaper than its larger format cousins. A new 32-gigabyte Wi-Fi-only Retina iPad costs $599; a comparable Mini costs $429. A noticeable difference, to be sure, yet some reports say the Mini commands a higher profit margin. Some cannibalization could drive margins, cash flows, and the stock higher.

If only investors could say the same of the arrival of Google Maps for iOS. While good for consumers, the app's popularity proves that, despite all efforts to the contrary, the Mac maker needs good software partners, and Google is one of its best. The search king supplies three of the top 5 free iPhone apps as of this writing.

But that isn't surprising. We've become accustomed to cloud operators providing more of our software. Just this week, analysts at Susquehanna and FBR Capital Markets raised price targets on shares of salesforce.com (CRM 0.10%), leading the stock to a new 52-week high.

In a report cited by Investor's Business Daily, FBR said Salesforce is on track to join Microsoft (MSFT +0.30%) and Oracle (ORCL +3.11%) as the only software companies to grow from $3 billion to $8 billion in revenue in four years. Analyst Daniel Ives sees Salesforce's market value blossoming to roughly $50 billion over that span, more than double today's $23.7 billion price tag.

What's the Big Idea this week?
Salesforce's rally more than compensated for Apple's freefall. As a group, my five stocks gained 79 basis points. Most other tech names didn't perform as well.

Indeed, the Nasdaq fell 0.23%, second only only to the S&P 500's 0.32% decline. Blue chips also fell as the Dow edged down 0.15% while small caps stood out thanks to a 0.18% gain in the Russell 2000, 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, Rackspace recovered some lost gains while Riverbed once more went nowhere. Barring unforeseen catalysts, they'll end the year right about where they are now. I still strongly believe in their ability to outperform.

In other tech news, investors are beginning to believe in Adobe Systems (ADBE 0.23%) again. Shares surged nearly 6% Friday, after the company reported better-than-expected fiscal-fourth-quarter earnings. Guidance came in light, however, so whatever gains Adobe investors earned this week may prove transient in the closing days of 2012.

Yahoo! (NASDAQ: YHOO), another recent winner, announced changes to its board of directors this week. Former Akamai Technologies (AKAM +3.12%) executive David Kenny left, as did Brad Smith, while ex-Google engineering executive Max Levchin joined. Yahoo! has 11 board members.