This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

4 Resilient Tech Stocks for a Tough Economy

BOSTON ( TheStreet) -- High-flying technology stocks such as Priceline.com (PCLN - Get Report) and OpenTable (OPEN) are dismissed by many analysts as expensive and overhyped.

Ian Warmerdam, manager of the Henderson Global Technology Fund (HFGAX), says they're attractive investments because industries like e-commerce, data storage and network equipment are thriving in an economy that's barely growing.

Warmerdam says companies' large capital budgets are supporting spending on technology even as Americans, whose purchases of consumer goods make up the bulk of the economy, get tight-fisted.

Henderson Global Investors has about $120 billion in assets and 17 offices worldwide. Based in Edinburgh, Scotland, Warmerdam manages the successful $305 million Henderson Global Technology Fund.

The tech-centric fund, started a decade ago less than two weeks before the 9/11 terrorist attacks, has thrived amid the tech bubble's unwinding, two severe recessions and major new trends in technology. It's the only tech fund to have outperformed both the MSCI All-Country World IT Index and the Morningstar specialty-technology category every calendar year since inception, with an average excess return of 6.1% over its benchmark.

Not every investor is as excited about the tech sector as Warmerdam is. Technology was the best-performing sector of the S&P 500 last week as the broad market index pieced together a five-day winning streak. For the year, though, information-technology stocks are down 1%, trailing defensive sectors like utilities (up 7% in 2011) and consumer staples (up 4.7%).

Warmerdam says sentiment toward the technology sector continues to be hurt by the wealth that was lost in the Internet bubble in 2000.

"Frankly, the sector is completely different now, particularly in terms of valuation," Warmerdam says, noting that price-to-earnings ratios have fallen from an average of 50 times forward earnings in 2000 to the current market average of 11 or 12 times, in line with the broader market. "There are much more attractive valuations on an absolute basis."

The fact that the broad tech sector now trading in line with the market indicates an attractive opportunity, Warmerdam says, even with macro headlines like European debt concerns and weakening economic data spooking investors.

In addition, the 2008 stock-market crash showed that tech stocks are resilient.

"There is a lot more recurring revenue from companies, and tech companies are managed much more conservatively than in the past," he says. "What speaks to the conservatism is that tech is the only sector of the S&P 500 with positive net cash on the balance sheets."

Warmerdam offers four stocks in his fund's portfolio that some investors may be wrongly dismissing. TheStreet details those picks on the following pages.

1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
OPEN $102.95 -0.02%
AAPL $127.60 0.00%
BIDU $211.86 0.00%
GOOG $535.38 0.00%
PCLN $1,191.42 0.00%

Markets

DOW 18,034.93 +208.63 1.17%
S&P 500 2,100.40 +19.22 0.92%
NASDAQ 4,994.6020 +62.7870 1.27%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs