2 Tech Stocks...Via Portugal?

02/20/2012 7:15 am EST

Focus: STOCKS

Timothy Lutts

Publisher, Cabot Heritage Corporation

It may not be the most direct route to finding stocks, but a recent trip to Portugal gave me some perspective on a pair of online businesses that have been in the headlines recently, writes Timothy Lutts of Cabot Wealth Advisory.

Many months ago, while casting about for a destination for a late January vacation with my wife-a respite from the usual mid-winter cold and snow of New England-I decided on Madeira and the Azores. They 're Portuguese islands located in the Atlantic Ocean, 600 miles and 900 miles respectively from the capital city, Lisbon.

We had stopped briefly in Ponta Delgada, the biggest city in the Azores, five years ago on the way to Porto, Portugal, and loved our brief glimpse of the city, as well as the four days in Porto that followed. So this time, the plan was to spend three days in Madeira, and then a whole week on Sao Miguel, the main island of the Azores.

It was wonderful...but it was different. And it's not for everybody.

Madeira is a volcanic island, 35 miles long and 14 miles wide at its extremes, but it's seen no volcanic activity for 6,000 years. What it has seen is holiday-makers, primarily from England, who overrun the island in the summer.

The benefit of visiting in January, when temperatures averaged about 60 degrees Fahrenheit, was the absence of any crowds. We didn't meet any Americans on the whole trip. Furthermore, prices were more reasonable than in most of Europe. We stayed in the capital of Funchal, rented a car, and got a view of most parts of the island in our few days there.

One highlight was a visit to the Igreja do Colegio (Church of the College) in Funchal. Churches, to us, are like art museums, except entry is free...and sometimes they're closed. Luckily, Igreja do Colegio was open when we wandered by, and its plain exterior belied the magnificence of the splendors inside.

Originally, I was going to follow that story with a recommendation for TripAdvisor (TRIP), in part because on our vacation, two different proprietors asked that we rate their establishments, and write about them, on TripAdvisor. The company was spun off from Expedia (EXPE) last year, and since coming public in early December, it had been acting well.

But on February 8, the company reported fourth-quarter results and Wall Street was disappointed. The next day, the stock sold off heavily. Thus the short-term prospects for investors in TRIP are not so bright.

Now, this doesn't mean that the business that is TripAdvisor won't succeed in the long run (the company and the stock are not the same thing), but it does mean that growth-oriented investors should look elsewhere, to stocks where investors' perception is improving.

Which brings me to LinkedIn (LNKD), known as Facebook for businesspeople. The company has been public since last May, and it's still trading below its opening-day peak price of $123. But the stock recently spiked higher on huge volume after the company's fourth-quarter results beat analysts' estimates handily, and for that reason alone, I prefer LNKD to TRIP.

As businesses, both companies are attractive to me, and I hope that both do well. But I know that my opinion of these businesses is worth almost nothing.

Contrarily, I know that the opinion of the aggregate of investors who care about these stocks (who have positions in them) is everything. And thus I know it's wiser to listen to the stocks than myself.

So if you want to play it simple, you can buy LNKD right here, and hold as long as the current uptrend, which dates back to the start of the year, remains intact.

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