Welcome to week 114 of my stock-picking throwdown with Mr. Market. Let's get right to the numbers:
|Akamai (Nasdaq: AKAM)
|Harris & Harris
|S&P 500 SPDR
Source: Yahoo! Finance.
* Tracking began on Aug. 7, 2008.
** Adjusted for dividends and other returns of capital.
Earnings season is in full swing, and Mr. Market enjoyed a good week thanks to strong earnings reports from the likes of Las Vegas Sands (NYSE: LVS), which soared 12% at one point, and Coach (NYSE: COH), which earned $0.08 per share more than the Street consensus estimate.
But good earnings reports will take the market only so far, and given the data, a short-term pullback seems likely. Consumer confidence now sits at its lowest level since last November, Reuters reports. Fears over the health of the U.S. economy are largely to blame, thoughlooming problems with entitlements can't be helping.
Nor can a litany of earnings misses and other spooky Halloween stock stories. Consider the optical networking industry. These makers of equipment for improving the speed and quality of Internet data delivery were crushed last week when Infinera (Nasdaq: INFN) told investors to expect muted growth in the fourth quarter.
In many ways, it's a crazy time to take chances in the market. And yet that's what a lot of people think Warren Buffett is doing in naming Todd Combs, a 39-year-old hedge fund manager, as his successor.
The week in tech
Combs' appointment came just one week after Ray Ozzie announced his intent to leave Microsoft (Nasdaq: MSFT). As tectonic shifts go, Ozzie's disconcerting departure isn't nearly as big as Combs' unexpected arrival. Mr. Softy is performing quite well.
On Thursday, Microsoft reported a 25% increase in revenue and a 55% increase in per-share earnings. Revenue was up in all five of Microsoft's divisions. Server and Tools, the group responsible for its cloud-computing offerings, enjoyed a 12% improvement in revenue and 32% gain in operating profit.
Earlier in the week, rumors surfaced in Japan that Apple (Nasdaq: AAPL) would make a bidfor Sony (NYSE: SNE). I don't need to tell you how crazy that idea is, do I? With more than $51 billion in cash and investments, the Mac maker certainly has the means to make a deal. But there's no reason for CEO Steve Jobs to write a check that size, no matter how nice the PlayStation and TV franchises appear to be.
Besides, as an investor, I think time is better spent researching small-cap tech rumors and opportunities. These, after all, are the disruptors that end up as millionaire-makers.
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.
Now let's move on to the rest of today's update:
- Akamai rose 8.5% for the week after reporting strong third-quarter earnings and projecting better-than-expected 2011 profit growth. The Web's leading deliverer of video, business data, and other applications is officially on track to be a $1 billion business, joining an elite club that includes just nine other Internet software and services companies.
There's your checkup. See you back here next week for more tech stock talk.