Managers of eight of the top 25 U.S. technology mutual funds, according to Bloomberg Rankings, told Businessweek.com their top stock ideas. The fund ranking is as of Oct. 5, 2010, and takes into consideration one-year, three-year, and five-year total returns, as well as three-year and five-year Sharpe ratios.
View the full list of funds here.
First Solar, Inc.
Recommended by: Kevin Landis, co-manager of the Firsthand Technology Opportunities Fund (TEFQX), ranked No. 1 by Bloomberg Rankings
Likes it because: The company has lucrative businesses, including fiber optics, LCDs, and alternative energy. Landis also sees the potential for growth in Corning's (GLW) "Gorilla Glass," a thin, highly durable sheet of glass used in high-end displays for notebook PCs, TVs, and mobile phones. Landis wrote in an e-mail that he sees "great potential as the markets for smartphones and tablet PCs continue to grow."
The stock's year-to-date performance through Oct. 15: -2.7 percent
Recommended by: Walter Price, co-manager of the Wells Fargo Advantaged Specialized Technology Fund (WFTZX), ranked No. 5 by Bloomberg Rankings
Likes it because: First Solar's (FSLR) competitive advantage is improving as the cost of thin film for solar panels continues to fall by 5 percent to 10 percent per year, outpacing cost reduction for polysilicon, which other solar panel manufacturers depend on, amid quality and supply constraint issues in China. Concerns about reduced demand in parts of Europe have been pushed out to 2012, says Price, and financing for solar systems has rebounded strongly from depressed levels in 2008 and the first half of 2009.
The stock's year-to-date performance through Oct. 15: +6.8 percent
Recommended by: Robert Stimpson, manager of the Black Oak Emerging Technology Fund (BOGSX), ranked No. 10 by Bloomberg Rankings
Likes it because: The stock, trading at about 15 times projected earnings for 2011, is being undervalued on uncertainty about possible delays in utilities rolling out big infrastructure projects thanks to states' fiscal woes. Stimpson is confident utilities will be compensated through public rate cases for expenditures on smart meters, while federal stimulus money earmarked for electric grid modernization and automation should help revive infrastructure spending. Itron's (ITRI) 2007 acquisition of Actaris, which designs and makes electricity, gas, water, and heat meters, gives the company access to growth in markets outside North America.
The stock's year-to-date performance through Oct. 15: -7.9 percent
Check Point Software Technologies
Recommended by: Richard Parower, co-manager of the Columbia Seligman Global Technology Fund (SHGTX), ranked No. 11 by Bloomberg Rankings
Likes it because: Check Point (CHKP) continues to take market share in hardware security from Juniper and Cisco with its firewall design. By integrating new functions such as intrusion prevention and URL filtering, the company is prompting customers to upgrade their computer security systems. Check Point's security appliances enable a client company to monitor hundreds of data points at one time with one or two employees. Parower says Check Point can grow its revenue 10 percent to 15 percent per year, and can grow faster by serving customers that continue to invest in more secure connections to the Internet. Check Point has ample cash for small acquisitions and continues to buy back a couple of hundred million dollars' worth of stock every year, says Parower.
The stock's year-to-date performance through Oct. 15: +15.9 percent
Check Point Software
Recommended by: David Eiswert, manager of the T. Rowe Price Global Technology Fund (PRGTX), ranked No. 12 by Bloomberg Rankings
Likes it because: Demand for Informatica's (INFA) data extraction tools will increase as Fortune 1000 companies recognize they can use the ability to take data from one format and process and analyze it in different formats in day-to-day production, not only for special projects. If these tools were to be widely used in production, the market for them would expand multifold, says Eiswert. Although the stock isn't cheap, it isn't trading at the premium it could be if more Wall Street strategists understood its prospects, he says.
The stock's year-to-date performance through Oct. 15: +43.3 percent
Recommended by: Jeffrey Donlon, co-manager of the Manning & Napier Technology Series Fund (EXTCX), ranked No. 16 by Bloomberg Rankings
Likes it because: Demand is growing for Internet Protocol-based communication networks such as those that Cisco (CSCO) designs as customers increasingly demand access to voice, video, and data over a single network. Cisco continues to sell IP routers and switchers and other equipment for traditional communications systems, sales of which Donlon expects to keep growing at 10 percent to 15 percent per year. Cisco also sells equipment for next-generation data networks such as those geared to virtualized infrastructure and data storage.
The stock's year-to-date performance through Oct. 15: -2.4 percent
Recommended by: Jean Rosenbaum, co-manager of the BlackRock Science & Technology Opportunities Portfolio (BGSAX), ranked No. 18 by Bloomberg Rankings
Likes it because: Apple (AAPL) continues to innovate and create new markets. Sales of iPhones are expected to dramatically increase once Verizon Wireless starts selling it in early 2011, breaking AT&T's exclusive grip on U.S. sales of the device. Rosenbaum says Apple is riding the wave driving more content to the Internet, and can win customers more willing to pay for an iPad than for a high-end notebook PC. Notebooks showed that people want mobile computing, and the tablet takes that to the next level in a more elegant form, says Rosenbaum.
The stock's year-to-date performance through Oct. 15: +49.4 percent
Recommended by: Mark Oelschlager, co-manager of the Red Oak Technology Select Fund (ROGSX), ranked No. 25 by Bloomberg Rankings
Likes it because: Accenture (ACN) is trading at only nine times trailing 12 months' free cash flow per share, even though the company has been able to increase its free cash flow by 15 percent each year since 2002. Accenture has tripled its dividend over the last five fiscal years and bought back $10.7 billion worth of stock, notes Oelschlager. The company has been more stable than most outfits in the tech industry thanks to diversified business lines, customers, and geographic exposure, and may be undervalued because it's not as exciting a story as those that most tech investors look for, he says.
The stock's year-to-date performance through Oct. 15: +9.1 percent