TheStreet.com Ratings: Five Undiscovered Tech Gems

With earnings season well under way, results have been predominantly beating the estimates. Heading into this week, 151 companies from the S&P 500 had reported, with 74% exceeding estimates, while the results beat expectations by an aggregate of 5%, according to Thomson First Call.

Large-cap technology firms, however, have had decidedly mixed results so far. For every Google (GOOG Quote) or IBM (IBM Quote) with blockbuster results, there's been a Yahoo! (YHOO Quote) or Motorola (MOT Quote) with disappointing quarters and/or guidance.

Still, technology remains alluring to many investors, and many market-watchers believe now is a good time to selectively add to your tech holdings.

For the purposes of this exercise, let's assume that's the case. But let's also assume that, rather than chasing the biggest names, greater price-return potential exists in mid-caps and ADRs.

The accompanying table reveals the TheStreet.com Ratings' top 10 buys in the technology sector, ranked by rating.

To make this list, the stock has to score in the top 10th percentile in cash flow, total return to shareholders, capital efficiency, low price volatility and solvency -- the five core factors in our stock-ratings model.

The minimum market cap considered was $2 billion, which filtered out the smaller, more volatile investments. The minimum rating acceptable was A-, the rating our stock model assigns to Apple Computer (AAPL Quote).

In addition to Apple, the top 10 list includes other well-recognized names such as Hewlett-Packard (HPQ Quote), Oracle (ORCL Quote), Harris (HRS Quote) and Infosys Technologies (INFY Quote).

But, again, the idea is to dig beyond the obvious, popular names for fresh ideas in the technology sector. So let's look more in depth at the other five "undiscovered gems" on our list.

Our stock model's top pick is Amphenol (APH Quote). This A-rated $5.6 billion market-cap stock is up 49% year to date. Amphenol reported earnings last Thursday, beat estimates and was rewarded with a new 52-week stock-price high. The company makes electronic and fiber-optic connectors and is also benefiting from global demand for its wireless handsets.

The recent acquisition of Teradyne Connection Systems also functions as a growth driver. Our model likes Amphenol's high profitability and cash-flow generating ability, which more than offset the debt burden taken on to fund the TCS acquisition. Earnings guidance numbers continue to climb for this favorite.

Top 10 Tech Stocks Our model likes some well-known names and some less-familiar faces
Ticker	Company name	Rating
APH	Amphenol	A
CAJ	Canon	A
FDS	Factset Research Systems	A
TRMB	Trimble Navigation	A
MTD	Mettler-Toledo	A
HPQ	Hewlett-Packard	A
ORCL	Oracle	A
HRS	Harris	A
INFY	Infosys Technologies	A
AAPL	Apple Computer	A-
Source: TheStreet.com Ratings

Next on this list is a $72.4 billion ADR, Canon (CAJ Quote). Rating: A. This Japanese maker of consumer and business technology is up 30% year to date with global growth flourishing in all sectors: cameras, business machines and optical products. Our stock model likes CAJ's low debt-to-equity, efficient use of capital and its past growth. In a flight-to-quality scenario, this global bellwether could experience further upside appreciation as managers seek stocks with a balanced book of international businesses and solid total return potential.