Welcome to week 122 of my stock-picking throwdown with Mr. Market. Let's get right to the numbers.


Starting Price*

Recent Price

Total Return

Akamai (Nasdaq: AKAM) $22.23 $48.10 116.4%
Harris & Harris $6.22 $4.63 (25.6%)
IBM $123.46** $145.89 18.2%
Oracle (Nasdaq: ORCL) $22.40** $31.54 40.8%
Taiwan Semiconductor $9.35** $12.23 30.8%
AVERAGE RETURN -- -- 36.12%
S&P 500 SPDR $120.57** $125.60 4.17%
DIFFERENCE -- -- 31.95

Source: Yahoo! Finance.
*Tracking began on Aug. 7, 2008.
**Adjusted for dividends and other returns of capital.

Stocks returns come and go, and this time it was Mr. Market's turn to stick it to my tech portfolio. I'm down five points in less than a week. Some Christmas present, eh?

Index investors had a better time of it, but it was small caps that led all gainers. The Russell 2000 index rose by 1.21% for the week and is up by 26.15% for the year. No other index has performed as well during 2010. Yet the S&P 500's rally is nothing to mock. The benchmark rose by 1.03% for the week and is up by 12.7% year to date. The Nasdaq and Dow Industrial indexes lagged the S&P, up by 0.86% and 0.71%, respectively, during the week.

What's sparking the gains? More economic optimism, apparently. CNBC quotes Kaufman Brothers CEO Benny Lorenzo as saying he expects 100,000 new additions to non-farm employment rolls by the end of the month. Investors are acting as if it's already happened. Financial stocks such as Bank of America (NYSE: BAC), Citigroup, and JPMorgan Chase (NYSE: JPM) have rallied over the past month on the presumption of improved macroeconomic conditions in the wake of a federal tax deal.

The week in tech
Hardware, software, and Internet companies haven't been as fortunate. The Nasdaq 100 has underperformed the S&P 500 over the past 30 days thanks to lagging performance by several tech components.

Consider Netflix (Nasdaq: NFLX), which is down by 1.7% for the month as I write this. CEO Reed Hastings believes these losses to be temporary. He said as much in an open letter to investor Whitney Tilson this week. In it, he implored his fellow philanthropist to close his funds' short position in Netflix.

"Whitney is such a big-hearted donor to causes that I care about that I am writing this open letter for him to try to get him to cover his short now," Hastings wrote. "My desire is to increase his odds of making money next year so he can donate even more to the charter public schools that we both think are important to our country's future."

Whether or not you think Hastings is being coy, he's right to suggest that shorting Netflix could prove hazardous. The numbers don't justify it. Netflix has a history of outgrowing its valuation and throttling analyst estimates.

In 2011, I'm expecting more of the same. Consumers will continue to turn to Netflix to supplement their regular TV diet, and Hastings will land an economical streaming deal with a major movie studio. Earnings will soar as a result.

And those are just two of my 12 tech predictions for the coming year, released this week at Fool.com. I'm also forecasting larger tablet computers, more market-share gains for Google's (Nasdaq: GOOG) Android operating system, and big returns from overseas upstarts such as ChinaCache (Nasdaq: CCIH), which mimics Akamai in how it delivers content to Chinese Web businesses.

Whether or not ChinaCache succeeds, small-cap tech is likely to treat investors well in 2011. Very often it's these disruptive innovators that grow to become millionaire-maker stocks.

We've seen it happen time and again. Look at David Gardner. He produced a decade of 20% returns in the real-money Rule Breaker portfolio by betting on a collection of innovators, and then holding them for the long-term. Tom Gardner's "simpleton portfolio" was also a 10-year winner. I believe that, with my tech portfolio, I will achieve similar success.

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

  • Watching Oracle is like watching a soap opera. This week, the SEC confirmed an investigation into the circumstances surrounding co-president Mark Hurd's departure from Hewlett-Packard over the summer. Yeah, let me show you my shocked face.

There's your checkup. Merry Christmas and see you back here next week for more tech-stock talk.

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Netflix is a Motley Fool Stock Advisor selection. Google is a Motley Fool Inside Value pick. Akamai and Google are Motley Fool Rule Breakers recommendations. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the market-beating Rule Breakers stock-picking team. He owned shares of Akamai, Google, 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. You can also get his insights delivered directly to your RSS reader. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Bank of America, Google, IBM, JPMorgan Chase, and Oracle. Via a separate account in its "Rising Stars" series, the Fool is also short Bank of America. The Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is tech-tastic.