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If you invested much in wireless stocks amid the hubbub early this year, around last fall you probably felt like a giant hand had reached down from the sky and administered a sharp slap upside your head.

That's around the time when some of the leading stocks started their biggest slide, following high-profile revisions of third-quarter earnings and growth estimates from leading handset manufacturers like


Stocks like





(QCOM) - Get QUALCOMM Incorporated Report

are trading far from their 52-week highs.

No big surprise, then, that it's easier to find themes in what money managers don't like than what they do. They're leery of the majority of handset makers, given disappointments from the likes of

Motorola and



. They're cautious on chipmakers, with a few exceptions, because of problems with inventory buildup earlier in the year. And while there's selective interest in some equipment makers, the beleaguered service providers don't even merit a mention.

But beneath the bloody wreckage, one overriding theme emerges: Though many large-cap stocks have gotten walloped this year, institutional investors still seem to perceive relative safety in market leaders.

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Several money managers interviewed for this story name


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, the leader among handset manufacturers, as a top holding. It's been gaining market share this year at the expense of Motorola and Ericsson, and its recently-released growth forecast

bolstered confidence in the outlook for handset sales.

"The Street's going to give them credit for doing what they said they would," says Christopher McHugh, lead portfolio manager for the

Turner Wireless & Communications Fund

, which has been adding to its position in Nokia. "They have excellent management that's been able to execute." The company's infrastructure business also looks good, with a just-announced deal to sell equipment to

AT&T Wireless



Another popular holding is Qualcomm, which was the uber stock of 1999 with a 2619% return. It's the top holding in the Investec Wireless World fund and also a favored wireless stock at ABN Amro. Recently, Qualcomm's had a couple of disappointing quarters, based on downward revisions in the number of handset shipments. That hurt both chip sales and royalties, since Qualcomm has patents on one of several protocols used in wireless transmission.

On the upside, the patents diversify the company's revenue. The company collects royalties on handsets and infrastructure equipment that use CDMA, or code division multiple access, a growing technology that will be used in the next generation of wireless systems. Also, Qualcomm's chips have a broad following among wireless handset and infrastructure companies. "So that's an additional source of revenue. And you're not betting on any particular manufacturer of handsets," says Jim Baudendistel, a technology analyst at ABN Amro.

Money managers are more divided on the prospects of semiconductors, since many of the companies that buy the chips are dealing with inventory pile-ups. ABN Amro and Investec are both steering clear of chipmakers for the moment. Investec Wireless World fund manager Adrian Brass explains, "If you look at Ericsson and Motorola, they're sitting on extremely high levels of inventory on the balance sheet at the moment. In other areas, on the wireline-equipment side of things, companies like


(CSCO) - Get Cisco Systems Inc. Report







are sitting on very high levels of inventory. Nokia's the only handset manufacturer that seems to be sitting on a lean book."

A contrarian view comes from

Firsthand Capital Management

. Senior analyst Rex Dwyer says that as inventory problems settle down, he expects to see good forward-looking statements from the component companies toward the end of the fourth quarter. He anticipates a corresponding rise in the stocks of components companies. "You need to be investing now, even though the news the component companies will report for the fourth quarter won't be that good," he says. "They will hopefully have forward guidance that looks good."

A favorite supplier of his is

TriQuint Semiconductor


, which designs a popular phone from Nokia (also a Firsthand holding). Turner Funds' McHugh also likes Triqint; it's been able to diversify its business into the optics area, helping it grow into the downturn, he says.

Another popular play is on wireless gadgets themselves. Several money managers like Palm, despite a sky-high trailing P/E of 473. "In the short term, there's a valuation issue," acknowledges analyst Baudendistel. "Earnings are pretty nominal, since they're spending so much money on building the infrastructure." But he likes the company long term for the same reasons he likes Qualcomm: its intellectual property assets. Palm licenses its proprietary operating system to companies like Handspring, Nokia and Sony.

In the mid-cap realm, Investec's Adrian Brass likes

Research In Motion


, which makes Blackberry pagers that receive and send email. The company's expected to see revenue grow a phenomenal 110% by next year, dropping off to 80% the year after that. But Brass thinks RIM could beat even those lofty expectations as corporations pick up on the pagers in a big way. He concedes the stock's on the pricey side, selling at the top end of the price-to-sales range (50.22 trailing sales). "But if what we expect bears itself out, then obviously price to sales comes down a lot," he says.

Finally, Dwyer, the analyst at Firsthand Funds, likes two relatively tiny equipment makers that "aren't hugely followed. They haven't hit the map." Those companies are

DMC Stratex


and the even smaller

Ceragon Networks

(CRNT) - Get Ceragon Networks Ltd. Report


Both companies sell digital microwave radios that allow for wireless Internet access. As it stands, Dwyer says, more than 90% of the buildings in the U.S. don't have fiber optic cable running into them. It could take decades for all that fiber to be laid, but in the meantime DMC Stratex and Ceragon offer data transmission as fast as 155 megabits per second. "They're allowing metro fiber companies to put more customers on their networks," Dwyer says. He describes the customers of DMC Stratex, including



XO Communications

, as well financed, unlike many smaller CLECs.

Dwyer also likes DMC Stratex's management and operations personnel teams. Revenue has grown at a clip of more than 35%, earnings at more than 100%. Ceragon Networks is "like a small version of DMC Stratex," with similar products and good growth margins. He expects it to be profitable in a few quarters. Ceragon, which only went public last August, has a tiny market cap of less than $300 million.

But most fund managers investing in wireless at this point are focused on much bigger, relatively older companies with a reputation for consistent execution. While they're generally still bullish on the long-term prospects of the area, the sector's helter-skelter performance this year has severely tested their patience for unproven quantities.