I'm always on the lookout for the next home run stock.
At the end of each year, I like looking back to see what I can learn from the past year's best and worst performing stocks. I also key in on the tech sector since I'm the Internet and technology editor for The Motley Fool.
While we are three weeks away from the end of 2010, I had to take a peek early. Look at this year's list:
52-Week Price Change %
Source: Motley Fool CAPS.
IDT is currently the top tech stock of 2010 with a one-year return of 682.9%. It would take something truly extraordinary for it to be unseated. So why did it do so well?
As of last December, over the past five years, IDT had struggled and lost more than 90% of its value. It began to turn things around last year when it decided to restructure the firm. The company first spun off CTM Media, a leading distributor of print and online advertising and information in North American tourist markets.
After the spinoff, IDT now operates in two primary markets: telecom and energy. The spinoff and restructuring turned around IDT's earnings, something investors were ecstatic to see. The company declared a dividend last month payable out of its newfound cash flow. At the same time, the company announced it would spin off its energy business, Genie Energy, further unlocking shareholder value. The firm also got a big boost Friday when it crushed its first-quarter earnings. Last year was a real bottom for the company, and investors who had been following along could have made a ton of money.
Reviewing the top five, you see that there are many ways to have top stock performance:
Isilon, a maker of network-attached storage, is the second top-performing stock of 2010. On Nov. 15, the company announced it is being acquired by EMC for $33.85 a share.
Acme Packet is a leader in the online telephone industry. It makes devices called "session border controllers," which greatly increase the quality of Internet phone calls. The devices allow VoIP clients to talk to one another, bypass firewalls, and use some of the familiar features of regular phones. This past year, Acme Packet has added a few large new clients and more than doubled its profit from last year.
MIPS Technologies, a designer of microcontrollers for digital TV and other consumer devices, is the fourth top-performing stock of 2010. CEO Sandeep Vij believes MIPS is well-positioned for huge growth through the smartphone market. This past quarter, MIPS beat Wall Street's earnings expectations by 70%. The Street expects earnings to grow 19% a year for the next five years.
VirnetX, an Internet security specialist, rounds out the best five tech stocks of 2010. This summer, the firm won a $200 million settlement against Microsoft, which subsequently became a licensee of VirnetX. Following that, the firm sued four more companies, including Apple and Cisco. With this year's buyout of security specialist McAfee by Intel, many investors are hoping the firm is bought out.
The coming year
While we can't know for sure what the best tech stocks this year will be, we can make some educated guesses. Last December, Motley Fool writers chose Our Top 5 Tech Stocks for 2010 and crushed the market by an average of 70%.
If you want Our Top 5 Tech Stocks for 2011, check back at Fool.com 11 a.m. ET tomorrow, when we announce our five picks for the new year.
Can't wait for some picks? Click here to access the Fool's free special report, The Top 2 Plays for the Coming Tech Boom.
Dan Dzombak recommends you read I Will Tell You How to Become Rich. He does not own shares in any of the companies mentioned. His musings and articles he finds interesting can be found on his Twitter account: @DanDzombak.
Intel and Microsoft are Motley Fool Inside Value recommendations. Acme Packet is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor recommendation. The Fool has written calls (bull call spread) on Cisco. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended buying calls on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Apple, and Microsoft. Try any of our Foolish newsletter services free for 30 days. 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 has a disclosure policy.