Each week, I endeavor to 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 me 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 here could cause me a lot of public embarrassment. This time, most of my stocks fell as Google Inc. (NASDAQ:GOOG) made a series of interesting moves.
First, over a six-hour span at South by Southwest (SXSW), the search king showed off wearable technology, including 12 pairs of talking shoes hacked together in three weeks to demonstrate the potential of connecting gear (and brands) to the Web. A Google X engineer also showed up to demonstrate the Glass interactive spectacles.
Source: Google.
Cool as these devices are, they’re also only part of Google’s growth story. Imagine using search to index and retrieve data about your energy usage compared to average temperature. Then imagine paying your energy bill through Google Wallet and cross-referencing that. Orwellian possibilities abound when you index, well, everything.
Google Inc. (NASDAQ:GOOG) wants all of us thinking this way. A new service called Keep proposes to challenge Evernote by providing a simple system for archiving anything. Think of it as a slimmed-down productivity tool that does for Google Apps what OneNote does for Microsoft Corporation‘s Office Suite.
Other Googlers pitched access to information as a humanitarian need at SXSW. In one session, Amit Singhal, who oversees search for the company, told the story of an African farmer who hiked several miles to an Internet cafe to search for ways to halt an ant infestation of his potato crop. Google held the answer.
Add it up, and I wonder if the search king isn’t fitting itself to be the chief data aggregator and distributor in a hyperconnected world. As Singhal put it: “[E]ven a farmer in Africa, or a mother in an Indian village, or a fisherman in Malaysia, will have as much access to knowledge as kings used to.”
Why not? Google Inc. (NASDAQ:GOOG) is already the original Big Data company. It was the search king’s early efforts to boil an ocean of online data efficiently that led to MapReduce and the Google File System, two mechanisms for crunching multiple terabytes of data concurrently across a vast array of cheap servers. Today, these breakthroughs undergird an open-source technology called Apache Hadoop that’s used in a number of Big Data projects.
Google, meanwhile, sticks to its own knitting for the biggest Big Data project of all: indexing the Web, every minute of every day, continuously. Mix in Android and Chrome OS devices and a heaping helping of broadband, and Singhal’s dream soon becomes a reality.
Of course, there’s a business purpose here, too. More networks and devices also mean more data, and Google — a data processor — profits by monetizing a portion of those new bits. No one else can do that at the scale Google Inc. (NASDAQ:GOOG) can, and that’s a truth that investors finally seem to understand.
What’s the Big Idea this week?
Flagging fortunes at both Rackspace Hosting, Inc (NYSE:RAX) and Riverbed Technology, Inc. (NASDAQ:RVBD) took a toll as my five tech stocks once more fell against the broader market, giving back 570 basis points since my last report.
Indexes also slipped. This time, the small-cap Russell 2000 led the laggards with a 0.65% decline, followed by S&P 500’s 0.24% drop, the Nasdaq’s 0.13% dip, and the Dow’s 0.01% slip, according to data supplied by The Wall Street Journal. Here’s a closer look at where I stood through Friday’s close:
| Company | Starting Price* | Recent Price | Total Return |
|---|---|---|---|
| Apple (NASDAQ:AAPL) | $416.26** | $461.91 | 10.9% |
| $650.09 | $810.31 | 24.6% | |
| Rackspace Hosting | $41.65 | $51.23 | 23% |
| Riverbed Technology | $25.95 | $14.57 | (43.9%) |
| Salesforce.com | $100.93 | $176.06 | 74.4% |
| AVERAGE RETURN | — | — | 17.80% |
| S&P 500 SPDR | $124.39** | $155.60 | 25.09% |
| DIFFERENCE | — | — | (7.29%) |
Source: Yahoo! Finance.
* Tracking began at market close on Jan. 6, 2012.
** Adjusted for dividends and other returns of capital.
Notable newsmakers
Among the other tech stocks making news last week:
Apple Inc. (NASDAQ:AAPL) is rallying but it may take a while for the Mac maker to get back to $500 a share. An IDC report of third-quarter smartphone sales in China showed less interest in the iPhone there. Cheap alternatives may be a factor, as might a recent report that says Apple Inc. (NASDAQ:AAPL) isn’t making progress in persuading China Mobile Ltd. (ADR) (NYSE:CHL) to carry the iPhone 5. Here in the U.S., the latest margin-crimping rumor — thus far denied — says Amazon.com, Inc. (NASDAQ:AMZN) would consider releasing a $99 version of its Kindle Fire HD to challenge the iPad Mini.
