Second-Half Tech Success Will Be a Matter of Choice

Tech stocks overall enjoyed a positive second quarter, but investors endured another wild ride. And it isn't over yet, as a slew of quarterly financial reports in the coming weeks will provide plenty of fodder for buy-or-bail decisions.

Traditionally, tech investors benefit during the second half of the year as consumers increase electronic-related purchases for back-to-school and holiday shopping seasons, and businesses tend to flush their budgets.

However, the potential carryover has been clouded this year because of a flurry of rabid buying in May. Investors snapped up tech stocks that month, as they literally banked on strong results for the second half. Solid first-quarter reports and several key midquarter updates all fueled the increased interest in tech stocks.

The Nasdaq Composite Index fell only five sessions during May, rising nearly 8% in that month alone. During June, the tech barometer moved sideways as investors consolidated their gains and awaited better indicators of second-quarter results and third-quarter expectations.

But despite the recent surge, the Nasdaq was still down 5% for the year at June 30. "People are in a wait-and-see mentality," says Jason Cooper, portfolio manager of the (FMSPX Quote)1st Source Monogram Special Equity Fund, which runs $40 million in assets.

With earnings season nearly here, the waiting should be over.

"I would hope to continue to see [corporate spending] picking up and gaining strength, but it looks like it's going the other way," Cooper says, citing early concerns about second-half PC demand failing to exceed seasonal patterns.

Cooper says he's more inclined to take an underweight stance toward tech stocks, but he's comfortable maintaining semiconductor exposure through some non-PC plays, like International Rectifier(IRF Quote), a maker of power regulation chips used in automobiles and appliances.

Similarly, others see the tech sector gyrations as a call to become more selective in stock picking.