Fortune's Top 8 High Tech Picks: Are They Still Buys?

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Includes: AAPL, APKT, BIDU, CRUS, EBIX, MELI, PCLN, RVBD, SPY
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 rally 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 (NASDAQ:GOOG) of China." It trades at reasonable PE and has hefty profit margins compared to E-Commerce China Dangdang Inc (NYSE:DANG) and Youku (NYSE: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 are changing 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 are maintaining 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 last robust earnings report, we are changing our recommendation from avoid to buy.

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. However, after the big run up, we are changing our recommendation from buy to avoid.

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. After a leadership setback, Apple is regaining momentum. That's why I will change my recommendation from avoid to buy.

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. It has been taking a big hit after a very disappointing earnings report. We do believe, however, that sale is overdone, so we are changing our sell recommendation to accumulate.

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 (NASDAQ:CSCO) and Alcatel-Lucent (ALU) have confirmed. I would still avoid the stock.

Company

Price 9/11/11

Price 2/29/2012

Recommendation

BIDU

$147

137.21

Avoid/Buy

CRUS

$15.73

23.62

Buy

PCLN

$525

496

Avoid/buy

MELI

$68

97.92

Buy/avoid

EBIX

$17

23.52

Sell

AAPL

$400

$640

Avoid/accumulate

APKT

$51

30.82

Sell/Accumulate

RVBD

$24

28.42

Avoid

SPY

122.10

136.50

Click to enlarge

Disclosure: I am long (NASDAQ:AAPL).