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Apple Inc. (AAPL) Is Killing My Portfolio

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 below could cause me a lot of public embarrassment. But it’s Apple Inc. (NASDAQ:AAPL) stock that has done the most damage, ending down yet another 9% this past week after iPhone parts supplier Cirrus Logic reported poor quarterly results.

Both stocks hit fresh lows after Cirrus announced more than $23 million in inventory reserves, $20 million of which are related to a “decreased forecast” for a high volume product. All signs point to the iPhone. Or, more specifically, the iPhone 5. Thanks to increased competition from Samsung, Apple’s newest handset isn’t winning over customers as much as prior versions did.

Only Google Inc (NASDAQ:GOOG) impressed. The search king cake in ahead well ahead of first-quarter earnings estimates thanks to a favorable tax rate. Revenue in the core search business rose 22% after traffic acquisition costs. CEO Larry Page also recommitted to expanding his company’s footprint well beyond search.

“Companies tend to get comfortable doing what they have always done with a few minor tweaks,” Page said in a conference call with analysts. “It’s only natural to want to work on the things you know. But incremental improvement is guaranteed to be obsolete over time.”

Apple Inc. (AAPL)Tellingly, the comments came just a day after Google announced plans to expand its gigabit fiber optic network to Provo, Utah. Expect more such moves in the coming quarters. All signs suggest that Google will grow into a service provider that uses software, algorithms, infrastructure, and devices to bring us data, apps, and entertainment on-demand, instantly, wherever we may be.

What’s the Big Idea this week?
Overall, this marks my portfolio’s fifth consecutive loss to Mr. Market. A sharp decline in Apple stock, combined with pullbacks in shares of Rackspace Hosting, Inc. (NYSE:RAX) and, inc. (NYSE:CRM), set me back another 205 basis points in our three-year tussle to see who can do better for investors. All four indexes also fell.

This time, the Russell 2000 led the laggards with a 3.22% plunge, followed by the Nasdaq’s 2.69% drop, the Dow’s 2.14% decline, and the S&P 500’s 2.11% dip, 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 $416.26** $390.53 (6.2%)
Google $650.09 $799.87 23%
Rackspace Hosting $41.65 $45.05 8.2%
Riverbed Technology $25.95 $14.21 (45.2%)
Salesforce $25.26** $40.88 61.8%
S&P 500 SPDR $124.39** $155.48 24.99%

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

Notable newsmakers
Among the other tech stocks making news last week:

Yahoo! Inc. (NASDAQ:YHOO) kicked off tech earnings week by reporting better-than-expected results, though revenue fell 7% year over year. Display ad revenue, long a source of strength for the business, fell 11%. The good news? Yahoo! says there are now 300 million active mobile users of its apps, a 50% improvement from December.

Microsoft Corporation (NASDAQ:MSFT) lifted the Dow on an earnings beat, overcoming disappointing results from the index’s top blue chip, International Business Machines Corp. (NYSE:IBM). Revenue grew 18%, in line with expectations, while similar profit gains tracked ahead of estimates. Mr. Softy’s $0.72  a share of fiscal Q3 earnings beat the consensus by $0.04.

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