Fortune's Top 8 High Tech Picks: Have They Weathered The Correction?

|
Includes: AAPL, APKT, BIDU, CRUS, EBIX, MELI, PCLN, RVBD
by: BubbleBustInvesting

In a previous piece published in the beginning of the market correction, we took a close look at Fortune magazine’s top 8 high tech companies, assessing their potential for continuing growth that can deliver investors higher returns. Now, we take another look at the same companies to see how they fared during the recent correction, and determine whether we should maintain or change our earlier recommendations.

Let’s take a look at each of them:

Baidu (BIDU)—China’s largest search engine portal—the Google (GOOG) of China. It trades at reasonable PE and hefty profit margins, compared to E-Commerce China Dangdang Inc (DANG) and Youku (YOKU). The problem, however, is that Baidu operates in a semi-Communist market environment in which the government changes the rules of the game frequently, especially for the politically sensitive sector of social media.

Baidu has fared well during the correction, preserving its market value, due to a better than expected earnings report--that’s why we do change our recommendation from avoid to buy.

2. Cirrus Logic (CRUS)—A semiconductor company that rides the smartphone and tablet trend, which is still in its early stages. The company stock has risen in value thanks to better earnings results, and strong inside buying. We do maintain our buy recommendation.

3. Priceline.com (PCLN). After some early difficulties, the company has become the booking site of preference for international travelers. But given its rapid stock price increase and the closing in of competition from Expedia (EXPE)--The company has lost part of its value; and dissapointed analysts in today's earnings report. We do maintain our avoid recommendation.

4. Mercade Libre (MELI)—The beneficiary of e-commerce in Latin America. With a strong partnership with eBay, a growing Latin American economy, and a reasonable (for the sector) P/E, MELI is a buy. The company’s stock has climbed sharply higher, especially after a robust earnings report. We do maintain our buy recommendation.

5. Ebix (EBIX)—A beneficiary of the outsourcing trend, the company thrives by helping insurance companies cut transaction costs. Outsourcing, however, has come under criticism on several fronts that may hurt Ebix’s business. I would maintain my sell recommendation on the stock.

6. Apple (AAPL)—The undisputed leader in modern wireless mobile devices, Apple needs no introduction. The question, however, is whether things get better for Apple after the departure of its founder and legendary leader Steve Jobs. Hard to say—that’s why I will stay with my previous recommendation: Avoid the stock until I get better visibility on leadership transition.

7. Acme Packet (APKT)—A leading manufacturer of session border controllers and other devices that deliver voice and video over the Internet, the company rides the multimedia trend, as companies rush to replace old legacy technologies with IP solutions. The problem, however, is that after a big run up in the stock, insiders are cashing out. That’s why I'd avoid the stock--The stock has been taken a big hit after a very disappointing earnings report. We do maintain our sell recommendation.

8. Riverbed Technologies (RVBD)—A leading wide-area network (WAN) provider, the company has benefited from soaring demand for faster Internet. This area, however, is highly competitive. Today’s winners can be tomorrow’s losers, as the case of Cisco Systems (CSCO) and Alcatel-Lucent (ALU) has confirmed. I would avoid the stock—

The stock is a winner, however, due to a robust earnings report. We change our recommendation to buy.

Company

Price 9/11/11

Price 11/5/11

Recommendation

BIDU

$147

141.21

Avoid/Buy

CRUS

$15.73

16.72

Buy

PCLN

$525

496

Avoid

MELI

$68

84.62

Buy

EBIX

$17

15.75

Sell

AAPL

$400

396.84

Avoid

APKT

$51

37.82

Avoid/sell

RVBD

$24

28.12

Avoid/buy

SPY

122.10

124.50

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.