The Next AOL: Five Candidates

Technology portfolio managers take a stab at picking the next 100-bagger.
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I know, hindsight is just about the clearest sight your rearview investment mirror has to offer.

Yep, if only you had bought it when it wasn't, well,

America Online

(AOL)

. Or at least AOL as we know it now. Back when it was a little risky small-cap, say, seven years ago, when on a pre-split-adjusted basis, a share cost about 3 cents. Not bad, considering the stock is selling for near $150 now. Yeah, every investor's dream.

The Next AOL: Join the discussion on our

message boards.

For Jim Callinan, it was a reality. The manager of

(RSEGX) - Get Report

RS Emerging Growth, who can boast a triple-digit return this year, discovered AOL way back then. So, what's the question you'd most like to ask someone like that? That's right: What's the next AOL?

So I asked him -- and some of the other best-performing tech managers out there. What do they, who have racked up some impressive records in the business, think now?

Granted, all these guys have money in the stocks they're talking about. (For some publications, that's a problem. But my take is, if they didn't have a position in one of their picks, what does that say? After all, money talks loudest on Wall Street.)

And granted, this is not an easy ask. "Boy, is that a tough question," says Garrett Van Wagoner, while pausing and mentally rifling through the portfolio of

(VWEGX)

Van Wagoner Emerging Growth, which has delivered a sizzling 284% return in the past year. "You need a business model that can expand, a market opportunity that's just enormous and growing, and the ability to transform."

Exactly. So now you know what we're talking about. Here are their picks:

EchoStar

(DISH) - Get Report

. Callinan is more than high on this Colorado-based provider of direct-broadcast satellite-programming services and products. "If I had to say one company that I'm most excited about, it's EchoStar, given the potential for satellite to supplement rural cable. One point in the sky to millions of homes. It's an incredibly efficient technology as opposed to the highly fragmented telecommunications sector. Earning about $42 a month per subscriber -- could be earning about $60 a month in two years. This is the most exciting company I've seen since I first saw AOL."

Phone.com

(PHCM)

. In a prescient call, Van Wagoner lightened up on Internet stocks back before they spiked this spring. But he rates this dot-com a clear buy, despite a price tag in the upper 200s. (He got into the company as a private placement.) "Think of them as the

Netscape

and the

Microsoft

(MSFT) - Get Report

browser for handheld devices. So as the world goes wireless and gets wireless data, you need their software. They're pretty much the industry standard. These guys are going to be huge, huge."

Tanning Technology

(TANN)

. Mike McCarthy, co-manager of

(FRSGX) - Get Report

Franklin Small Cap Growth, is making a big bet on this Denver consulting firm that helps companies set up and streamline their online transaction processing. "They specialize on the back end -- you're going to see more spending on that side. A lot of people this year set up their Web site but have to make sure they have the capacity to handle all the transactions that come through."

RF Micro Devices

(RFMD)

.

(TPAGX)

TransAmerica Aggressive Growth's Chris Bonavico is taking a huge stake in wireless. And one of his favorite picks is RFMD, which designs and develops radio-frequency circuits for wireless applications. "Here's an opportunity for a company to really explode its market cap. They have content that no one else can provide, and a two- to three-year lead over the competition in a very difficult space, and I think that's worth a lot."

Packeteer

(PKTR)

. Kevin Landis of

(TIFQX)

Firsthand Technology Innovators calls this the next "wow." Packeteer is well-poised to capitalize on e-tailers and others anxious to prioritize their Internet traffic. "It says, 'OK, you're a customer trying to do business on our site; you get the highest priority. You, you're just an Internet hit on

espn.com

; you can wait.' That's pretty cool. I think of those as markets opened by

Cisco

(CSCO) - Get Report

. Imagine these little companies coming along in Cisco's wake and saying, 'Here's the new reality of things, and how do we anticipate what people need now that they've got all this networking gear?'"

Of course, all these stocks should come with warning labels (along with the funds that buy them). Volatility likely goes hand-in-hand with their returns, as it did with AOL, especially in the early days. And anyone who dreams of picking a 10-bagger from the scores of small-cap, cheap stocks out there had better have a very strong stomach and a keen eye for numbers. But it can be very worthwhile to at least check the road ahead as often as you watch your investment rearview mirror.

Brenda Buttner's column, Under the Hood, appears Thursdays. At time of publication, Buttner held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or funds. While she cannot provide investment advice or recommendations, Buttner appreciates your feedback at

TSCBrenda@aol.com.