Tech stocks jump to the front of market's charge

Economists may argue whether there's a recession raging or not, but tech investors aren't wasting any time betting on a recovery.

Stocks Wednesday extended their more than 2-month-old recovery. Beneath the surface, though, tech stocks that were pummeled during the market's correction are pulling ahead in what's been an even more impressive rally since March.

The tech-heavy Nasdaq composite index is up 15% from its bottom this year in March, following Wednesday's 2-point gain to 2497. And the Nasdaq 100 index, which measures the 100 largest non-financial stocks, has rocketed 19% in the same time, trouncing the 11% gain of the Standard & Poor's 500.

This tech-stock rally is a signal some brave investors are starting to bet on a brewing tech comeback, says Jordan Kimmel, portfolio manager at Magnet Investment Group. "The market is looking ahead six to nine months," he says.

There are several factors behind tech stocks' sudden strength, including:

•Relief from last year's beating. The Nasdaq 100 fell nearly 26% from its high last October to the March low, much worse than the broader market's 18% decline. So tech stocks stand to bounce back more, says J.P. Scandalios, tech portfolio manager for Franklin Templeton.

•Growth is back in style. Investors hoping the economy is mending want to own companies likely to have turbocharged revenue and earnings, Kimmel says. The Russell 3000 growth index, which measures the performance of faster-growing companies, is up 10% since March 10, edging out value stocks by a percentage point.

•Exposure to global demand. While steel and other commodities get attention for benefitting from global demand, tech is also a winner, says Doug Sandler of Riverfront Investment Group. Tech stocks in the S&P 500 are up 14% since March 10, just behind the 16% gains by materials and energy stocks.

•Compelling values. Prices on some tech stocks are low enough to tempt some bargain hunters. Scott Barbee, portfolio manager at the Aegis Value fund, is finding deals on tech stocks, including in the semiconductor manufacturing industry. "A serious number of (tech companies) are hitting our screens" as potential investments, he says. "We are buying some."

Investors, though, are torn over whether the tech bounce can last, especially headed into the traditionally weak summer period. "We could see tech summer doldrums," Scandalios says.

But Jeff Markunas, portfolio manager for RidgeWorth Investments, thinks tech stocks are just getting started. "We like tech and continue to stay with it," he says.

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