Call him the

E.F. Hutton

of tech stocks: When

George Gilder

talks, people listen. But the recent action in Gilder's stock picks has some long-term tech investors asking if that's all for the good.

Gilder, a

Reagan

-era economist turned tech guru, sells a monthly newsletter picking companies whose technologies could transform the information economy.

Gilder Technology Review

publisher Richard Vigilante says the report considers only technology, without regard to valuations or market conditions, via a long-term perspective.

Nonetheless, in what's now known as the Gilder effect, the shares of companies featured in the newsletter are observed to jump as much as 70% the day the report is released. The most recent example is

Avanex

(AVNX)

, a maker of photonic processors that pack streams of data traffic onto a single fiber-optic path. Avanex shares have nearly doubled since Gilder, on Monday, pronounced its

PowerMux

"the single most promising new product in the industry."

The Gilder effect illustrates the power of so-called momentum trading, in which traders buy a stock simply because it's going up. And just as Gilder's word has tended to drive his anointed stocks sharply higher for a day or two, the recent slide in tech stocks has seen these issues come crashing back to earth. That has some investors wondering if the report's main contribution is to contribute to the market's volatility.

Too Popular?

Gilder's notoriety and the mileage companies gain from his stamp of approval afford him access to the developers at the core of a technology. Traditionally, subscribers forked over $300 a year for

Gilder Technology Review

to gain a type of due diligence research to guide their investments. But that specialized insight may have become just another resource for tech-stock momentum investors searching for a stock ticker that promises another big run-up.

Gilder's newsletter has some 60,000 subscribers and is also distributed to an undetermined number of

Merrill Lynch

brokers. Through the anarchy that is the Internet, it's also leaked out in part or whole to a much wider readership via message boards.

"Because of his success he's become too popular, and that has made it difficult," says Sonny Astani, president of

Lambert Smith Hampton

, a private investment firm that holds several Gilder picks. "I'd say better than half of the people that follow him are daytraders, and they have sort of ruined it for the others."

The publisher agrees, though he emphasizes Gilder's long-term tech view. "It has become harder for our own people to get in at a decent price," Vigilante concedes. "But we think most of our readers are mature enough to recognize that the market will determine when is a good time to get into a stock."

Dismissing the notion that the report is merely a tout sheet, Vigilante adds that some readers have resisted a change to a posting time that might dull the report's effect on mentioned stocks. "This is really a response to our subscribers," he explains. He said Gilder doesn't own any of the stocks in this story.

For example,

Terayon

(TERN)

shares gained 70% in the

aftermath of a glowing mention in February's installment of the Gilder letter. But after hitting a high of 277 on March 9, the stock has slid steadily amid

Nasdaq's

selloff, dropping some 70% to 79 7/8. Similarly,

Xcelera.com

(XLA)

popped 46% on the day its

Mirror Image

Internet caching system was mentioned by Gilder. But since it hit a high of 225 late last month, its value has fallen by two-thirds, to 75.

The Longer View

All the same, Gilder's devotees are hard to shake.

"I buy hook, line and sinker Gilder's ascendant technology philosophy," says John Rhoads, president of

Rhoads Grunden Lucca Capital Management

, a Dallas-based private investment firm. Rhoads manages a technology fund of 14 Gilder stocks and though it is down 12% for the year, he says he has not sold any of his Gilder positions. "From a money standpoint, I just want to be where the technology is going."

The Gilder theory holds that some companies are better positioned on technology's evolutionary pathway and ultimately it's how well a company executes on that advantage that determines its success.

Rhoads says he doesn't act on a stock the day the Gilder report is released and figures anyone who is short-sighted enough to do so is apt to shoot themselves in the foot chasing the stock.

Still, some Gilder report readers are starting to voice their pain and doubt. Amid the Avanex runup, one poster named "thegoat" wrote on a Gildertech message board: "Does everyone still believe in our hero ... I think we are toast!!!"

As originally published, this story contained an error. Please see

Corrections and Clarifications.