A little more than a year ago, I picked a group of cloud computing stocks that represented various corners of the space and put them into a fictional market basket. I invested about $1,000 of fictional dollars in each, because I wanted to see how this then-emerging segment would fare over time.
The companies in my fictional portfolio:
• Google, the search and online application giant;
• Rackspace Hosting, the company that provides data center infrastructure to people and businesses seeking hosted IT;
• Terremark Worldwide, another big data center hosting outfit;
• Qwest Communications, which provides platform technology that connects businesses to cloud hosts;
• Equinix, a data center hosting company that provides "carrier neutral" data centers and Internet exchanges – another cloud backbone company;
• And Salesforce.com, which provides cloud-based CRM and other business application solutions.
This fictional portfolio was formed on Nov. 27, 2009. Since then, as a group, this cloud portfolio has grown more than 76 percent. Terremark has grown the most, at 130 percent over that time. Equinix is the only loser, having declined by 7.7 percent.
As a group, this cloud portfolio’s 76 percent return has dwarfed Nasdaq’s 27-percent growth, Dow Jones’ 13-percent growth, and the S&P 500’s 16.7-percent growth over that same span.
This growth indicates the stock market continues to place big bets on companies like Google and Terremark and Salesforce.com to outgrow the rest of the market (cloud companies like Salesforce.com were among the best-performing technology stocks of 2010). Some cloud companies – in my market basket and others – are growing like gangbusters and attracting new rounds of funding; others are having difficulty and are lugging around massive debt. Eventually, investors will sort them all out.
But for now, the money is still pumping.