These Tech Stocks Will Make Me Rich
By Tim Beyers
Welcome to week 110 of my stock-picking throwdown with Mr. Market. Let's get right to the numbers.
Company
Starting Price*
Recent Price
Total Return
Akamai
$22.23
$50.18
125.7%
Harris & Harris
$6.22
$4.27
(31.4%)
IBM (NYSE: IBM)
$124.01**
$134.14
8.2%
Oracle (Nasdaq: ORCL)
$22.44**
$26.85
19.7%
Taiwan Semiconductor (NYSE: TSM)
$9.35**
$10.14
8.5%
AVERAGE RETURN
--
--
26.14%
S&P 500 SPDR
$121.20**
$114.13
(5.83%)
DIFFERENCE
--
--
31.97
Source: Yahoo! Finance.
*Tracking began on Aug. 7, 2008.
**Adjusted for dividends and other returns of capital.
For both Mr. Market and my tech portfolio, the rally continues. But overall, the market has been stuck in a trading range that's left indexers with little in the way of returns over the past 10 years. "The Lost Decade," we've come to call it.
Investors worried about currency deflation, joblessness, and other forms of economic malaise have taken to commodities, gold in particular. Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) co-chairman Charlie Munger had some choice words for this group in a recent speech:
I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me that's not optional; that's a moral obligation. If you're capable of understanding the world, you have a moral obligation to become rational. And I don't see how you become rational hoarding gold. Even if it works, you're a jerk.
Ouch. My Foolish colleague and commodities investor, Christopher Barker, has since responded:
If you have no interest whatsoever in gold, I am not here to attempt to change your opinion. What I do seek is your recognition for the people who bear the ultimate burden of the persistent currency devaluation and reckless fiscal policies that carry sustainable recovery further from our grasp.
Whom do I side with in this debate? Neither. I'm a tech investor. My interest in gold is limited to its conductive capacity.
The week in tech
Furthermore, I'm convinced that tech isn't as susceptible t to the whipsaw nature of the global economy as it might seem. Too many of the tech elite have flush balance sheets that dwarf the market caps of the industry's up-and-comers. For example, Apple's (Nasdaq: AAPL) $24 billion liquid cash balance is enough to buy Netflix (Nasdaq: NFLX) three times over.
Should Apple buy the DVD-rental king? Fools disagree over the stock's value relative to the broader online video market opportunity. Both industry analyst Dan Rayburn and my Foolish colleague Anders Bylund weighed in this week. I also checked the numbers, and what I found convinces me that Netflix will continue to outperform.
Bears will argue that Netflix boasts a crazy valuation, and they're right. There's no way to call a stock priced at more than 60 times trailing earnings cheap. Yet both Dan and Anders concede that Netflix is in the early stages of disrupting the business of video delivery. According to history, it's the disruptors that end up as millionaire-maker stocks.
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:
•Although there's no way to correlate the two events, it's at least interesting that IBM, a fervent supporter and user of open-source software, is on the rise just as Oracle is losing some of the key open-source advocates it acquired with Sun Microsystems. Specifically, several members of the team shepherding the OpenOffice productivity suite broke away from the company this week.
•Taiwanese regulators have approved Taiwan Semiconductor's application to upgrade technology in its plant in Shanghai, Reuters reports. The move could help TSMC better compete with its peers based on the mainland, including Semiconductor Manufacturing International.
There's your checkup. See you back here next week for more tech stock talk.
Get your clicks with more techie Foolishness:
•Is this dot-com superstar about to retire from the market?
•Goodbye, DVDs.
•Here are a few good reasons to avoid BlackBerries in your portfolio diet.
