NEW YORK (TheStreet) -- Technology stocks have been rebounding. So far this year, technology funds have returned 12.4%, outpacing the S&P 500 by 5 percentage points, according to Morningstar.

Has the sector gotten expensive? No, say some fund managers. "Technology is just about as cheap as it has ever been," says Ian Warmerdam, portfolio manager of

Henderson Global Technology



Portfolio managers say that for much of the past two decades, technology stocks sold for price-to-earnings ratios of more than 15, a premium to the S&P 500. But now managers say that the forward P/E is 12, about the same as that for the S&P.

To grab bargains, you might consider buying a technology fund. But beware of the aggressive managers who surge in bull markets and crash in downturns. For better long-term results, consider steady funds that excel in downturns.

Solid choices include

Firsthand Technology Opportunities

(TEFQX) - Get Report


Henderson Global Technology


Red Oak Technology

(ROGSX) - Get Report


Fund portfolio managers say that technology share prices have stagnated in recent years because of concerns that debt problems could depress demand for software and electronics. Investors fear that economic problems could cause technology stocks to crater as they did in 2000.

But the outlook for technology is very different now than it was a decade ago, says James Swanson, chief investment strategist of

MFS Investment Management

, a fund company.

A decade ago, many technology stocks were expensive highfliers with volatile share prices and shaky earnings.

Now many companies have big cash stakes and little or no debt. Profit margins for the industry are about three times as great as they were a decade ago. As a result of the solid fundamentals, technology stocks are much less volatile than they once were.

"If there is a market downturn, people expect technology to do worse than most other industries," says Swanson. "But I think the opposite is true, and technology will go down less."

Swanson says that technology earnings have been growing, and that the picture is likely to remain healthy.

Sales are booming in China and other emerging markets where demand for mobile phones and tablet computers is expanding rapidly.

In addition, sales in the U.S. should also climb, Swanson figures. After the technology bubble burst, companies postponed buying new software and computers. Now the average age of installed software is 5.5 years, the oldest on record.

In recent months, more companies have begun replacing outdated equipment, spending an increasing percentage of their sales on technology.

To hold a bargain-hunting fund, consider Red Oak Technology, which returned 7.3% annually during the past five years, outdoing 91% of competitors.

Portfolio manager Mark Oelschlager steers away from high-priced growth stars and focuses on unloved issues.

"We look for companies that have the ability to grow in the future, but we don't want to pay a lot for that growth," he says.

One holding is defense contractor

Northrop Grumman

(NOC) - Get Report

, which sells for a P/E of 7. The stock has languished because investors worry about cuts in the defense budget.

But Oelschlager says that the cuts are likely to have a limited impact on Northrup, and the company's substantial civilian aerospace operation should grow.

"The stock will do very well if the company can show single-digit growth," he says.

Oelschlager also likes

Applied Materials

(AMAT) - Get Report

, a maker of equipment for semiconductor manufacturers. The stock sells for a P/E of 8. Oelschlager says that the company is a leader that should show improving sales as the economy recovers.

Firsthand Technology Opportunities aims to buy unloved stocks that will benefit from long-term trends.

Portfolio manager Kevin Landis holds a mix of low-priced blue-chips and smaller companies that have not yet won the attention of investors.

The fund has returned 7.2% annually during the past five years, outdoing 90% of competitors.

Landis says that he is avoiding such stocks as


(DELL) - Get Report



(MSFT) - Get Report

because they depend too heavily on personal computers at a time when the industry is moving toward tablets and mobile devices.

Instead, he likes


(GOOG) - Get Report

because of the growth in online advertising. The stock recently sank after the company failed to meet sales expectations.

But Landis says that Google's search business should continue growing rapidly as more companies begin emphasizing online ads. "Most of the world's advertising has not moved online yet," he says.

Henderson Global Technology holds a broad portfolio that includes stocks of all sizes as well as foreign and domestic issues. During the past five years, the fund returned 7.0% annually, outdoing 88% of peers.

Portfolio manager Ian Warmerdam looks for stocks that are positioned to benefit from industry growth trends, including the expansion of e-commerce and electronic payments.

One holding is


(BIDU) - Get Report

, the dominant search business in China.

Warmerdam says that the Chinese company has the potential to grow as rapidly as Internet use increases in China. "Baidu is the Google of China, but Baidu has a higher market share in China than Google has in the U.S.," he says.

Warmerdam also likes


, the online travel service. The company is expanding in Europe where online booking is still in its early stages of development.

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.