Welcome to Week 15 of the Big Idea Portfolio. Most of the portfolio sold off this week alongside the broader market, with salesforce.com (NYS: CRM) the notable exception. Even Google (NAS: GOOG) failed to rally despite a strong earnings report. Details on these companies and more in a minute. First, let's dig into the numbers.
S&P 500 SPDR
Source: Yahoo! Finance.
* Tracking began at market close on Jan. 6, 2012.
** Adjusted for dividends and other returns of capital.
Finally, after rising more than 50% year to date, another analyst has taken a bullish stance on salesforce.com. MKM Partners initiated coverage on Tuesday with a "buy." On Monday, JMP Securities, which has yet to rate the stock according to Yahoo! Finance, weighed in by pointing to large deals, according to a report cited by TheStreet.com.
For the most part, Fools aren't buying the bullishness. They give the stock just one out of five possible stars in our Motley Fool CAPS database, and you'd have to rewind all the way to February to find a bullish pitch for the stock.
"This stock will outperform as the duration of CRM's revenue growth in the 20%+ range exceeds expectations, coupled with meaningful operating leverage over time," Foolish investor Kovaliov wrote at the time, when salesforce.com shares were still trading for less than $130 apiece.
Of course, the cloud-computing movement has given rise to many great growth stories. Consider NetSuite (NYS: N) , which has rallied right alongside salesforce.com this year thanks to its terrific prowess at generating cash. Nearly 12% of revenue flowed all through to the company's cash coffers last year. First-quarter earnings are due the afternoon of April 26.
Google's growth story also appears to be getting better. The search king on Thursday night announced a 61% increase in earnings from last year's first quarter. Paid clicks jumped 39%, while overall revenue improved 23%. Cost per click, or CPC, dropped 12%, but that seems irrelevant when viewed through the lens of a 3% beat on profits.
Not everyone agrees. The stock traded down 4% on Friday, or more than double the Nasdaq's 1.45% decline. Concerns over falling CPC probably aided the downdraft, though confusion over a new "C" class of shares couldn't have helped. Google calls the new shares a stock split. Practically, this means that investors who own Google "A" class common stock will be issued an equal number of "C" class shares. No new value is being created, and shareholders gain no new rights. "C" class shareholders will not be granted the right to vote on matters brought before the board.
Why is Google issuing the new stock? Flexibility. "C" class shares allow Google to use stock for incentive plans or acquisitions without fear of diluting the controlling interest held by co-founders Larry Page and Sergey Brin and Chairman Eric Schmidt. Call it a typical, if shareholder-unfriendly, move.
The week that was
As predicted, stocks took a beating for the second consecutive week. The Dow closed off 1.61%, while the S&P 500 came just short of a 2% drop. The tech-heavy Nasdaq Composite index fell 2.25% -- only the small-cap Russell 2000 fell more, down 2.68% -- yet remains up more than 15% for the year, a testament to the durability of tech. Investors nevertheless remain fearful as the CBOE Volatility Index, or "VIX," widely regarded as the best measure of fear in the market, rose a whopping 17%.
See you back here next weekend for more tech-stock talk. And remember to check out the Fool's latest special report -- "5 Stocks Investors Need to Watch This Earnings Season" -- and add the Big Idea portfolio stocks to your Foolish watchlist for ongoing, up-to-the-minute coverage. Both the report and the watchlist as 100% free to use:
At the time thisarticle was published Fool contributorTim Beyersis a member of theMotley Fool Rule Breakersstock-picking team. He owned shares of Apple, Google, Rackspace Hosting, Riverbed Technology, and salesforce.com at the time of publication. Check out Tim'sWeb home,portfolio holdings, andFoolish writings, or connect with him onGoogle+or Twitter, where he goes by@milehighfool. You can also get his insightsdelivered directly to your RSS reader.The Motley Fool owns shares of Apple and Google.Motley Fool newsletter serviceshave recommended buying shares of Google, salesforce.com, NetSuite, Riverbed Technology, Rackspace Hosting, and Apple, creating a bear put spread position in salesforce.com, writing covered calls on Riverbed Technology, and creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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