Rackspace Hosting, Inc. (RAX), TiVo Inc. (TIVO): Why My Investment Strategy Is Failing

Page 1 of 2

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 my 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 below could ruin my investment strategy. None has fit that description more in recent weeks than Rackspace Hosting, Inc. (NYSE:RAX). The stock recently set a new 52-week low amid concerns over intensifying competition.

Rackspace Hosting, Inc. (NYSE:RAX)

Interestingly, International Business Machines Corp. (NYSE:IBM)– once thought to be a suitor — may be to blame for Rackspace Hosting, Inc. (NYSE:RAX) ‘s most recent troubles. Big Blue last week announced a deal for privately held SoftLayer Technologies worth a reported $2 billion in consideration. The company’s 13 data centers stretch across three continents and serve more than 21,000 customers.

In a press release, International Business Machines Corp. (NYSE:IBM) said it would combine SoftLayer’s business with its SmartCloud group to create a new Cloud Services division whose aim is to supply the infrastructure for services born on and delivered through the Internet. Big Blue sees the group producing $7 billion in annual revenue by 2015.

What’s the Big Idea this week?
Rackspace Hosting, Inc. (NYSE:RAX) wasn’t my only problem stock. A sharp decline in salesforce.com, inc. (NYSE:CRM) has also hurt my investment strategy. The stock is down more than 14 percentage points since my last update, mostly because of fears that the company overpaid in bidding $2.5 billion for digital marketing firm ExactTarget Inc (NYSE:ET). The Big Idea portfolio surrendered another 342 basis points to Mr. Market in our three-year contest to see who can do better for investors.

All four indexes gained. The Dow led the way with a 0.88% jump, followed closely by the S&P 500′s 0.78% gain, the Nasdaq’s 0.39% bump, and the Russell 2000′s 0.35% improvement, 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 $413.52** $441.81 6.8%
Google $650.09 $879.73 35.3%
Rackspace Hosting $41.65 $35.52 (14.7%)
Riverbed Technology $25.95 $16.01 (38.3%)
Salesforce $25.26** $39.61 56.8%
AVERAGE RETURN 9.18%
S&P 500 SPDR $124.39** $164.80 32.49%
DIFFERENCE (23.31%)

Source: Yahoo! Finance.
* Tracking began at market close on Jan. 6, 2012.
** Adjusted for dividends, splits, and other returns of capital.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!