The high-tech sector has consistently lagged the general stock markets since 2003, and there’s little reason to believe the pattern will be broken this year.

The technology-heavy Nasdaq composite index has slipped by 26.6% year-to-date, to 1947.39 on Oct. 3. For the same period, the S&P/TSX composite index, which includes resources and bank stocks under heavy pressure, has fallen by almost 22% to 10803.35.

With global economic growth expected to continue to slow into next year, many technology stock analysts have been scaling back revenue estimates, especially for sectors such as telecommunications, in which major carriers have been reducing capital expenditures.

Nevertheless, the high-tech sector offers some attractive investments, especially now that a bear market has brought some high fliers down to earth. Investment Executive screened more than 100 tech stocks early in October and found a handful that should do well over the next year, regardless of the economy’s performance.

Some, like Google Inc. of Mountain View, Calif., are well positioned in growth markets such as Internet advertising or smartphones. Others, such as Thermo Fisher Scientific Inc. of Waltham, Mass., are achieving significant savings as a result of earlier mergers or, as in the case of Adobe Systems Inc. of San Jose, Calif., possess great software titles.

Coincidentally, most of these firms have substantial cash balances. This should allow them to weather any storm, as well as provide the wherewithal for acquisitions should opportunities arise.

Among tech firms covered by at least 20 analysts, the top pick is Google, which provides Web searching and online advertising services; the firm had cash reserves of more than US$14 billion at the end of June. The consensus view supplied by Thomson Reuters Corp. suggests that Google’s revenue will jump by 23.6% to US$27.5 billion in 2009 from US$22.25 billion in 2008. At the same time, earnings are expected to rise by 20.5% to US$23.53 a share next year compared with an estimated US$19.52 per share in 2008.

Mark May, an analyst with Needham & Co. LLC of New York, considers Google a core tech holding and rated it a “buy” in a research report published on Oct. 1. He cites several factors for this, including the firm’s rising share of the U.S. market for Internet searches — 59% in August — and its ability to tweak its search algorithms to generate new sources of online revenue.

“While the global economy is undoubtedly going to take a toll on Google’s numbers,” May’s report notes, “Google and the search-engine marketing space in general has held up relatively well compared with other marketing channels.”

May has a share price target of US$690 on Google, based on a multiple of 24 times his US$24.84 a share estimate for 2010 earnings, plus his per-share projection for the company’s cash.

Meanwhile, two tech firms that a strong majority of analysts recommend — Apple Inc. of Cupertino, Calif., and Research in Motion Ltd. of Waterloo, Ont. — are chasing the same hot niche: smartphones. And little wonder why, as Oppenheimer & Co. Inc. of New York projects in its Oct. 5 industry survey that the number of smartphones sold globally will increase by 31.8% a year from 2007 to 2011 despite the slowing economy. That’s down considerably from its August estimate of 44% annual growth over the same period, but it offers plenty of opportunities for the best-positioned firms.

According to Oppenheimer analyst Ittai Kidron, RIM — the maker of almost 20 versions of the BlackBerry device — held a leading 39% share of the U.S. market in September; it also held a 19% share of the European market, good for third spot behind Nokia Corp. of Finland and HTC Corp. of Taiwan.

“Given its strong upcoming product pipeline,” Kidron notes, “we don’t see RIM giving up its formidable position anytime soon.”

RIM’s share price has tumbled dramatically since it touched a high of $150.30 on June 19; it closed at $66.03 on Oct. 3. A big contributor in the decline was a Sept. 25 earnings report that called for slightly lower earnings in future quarters as the company hires new staff and increases its research and development spending to prepare for higher growth down the road.

Barry Richards, an analyst with Toronto-based Paradigm Capital Inc., thinks this makes RIM an excellent long-term investment. Richards estimates in his Sept. 30 report that RIM’s revenue will jump by 52.6% to US$17.35 billion in fiscal 2010, ending Feb. 28 of that year, from US$11.37 billion in fiscal 2009.

@page_break@“RIM has the potential to grow to more than 100 million subscribers from about 19 million this year over the next three to five years,” Richards’ report notes, “which requires the investment spending we are now seeing.”

A key factor in RIM’s recent growth has been its ability to break out of its corporate stronghold and persuade regular consumers to use BlackBerrys. In RIM’s most recent quarter, 42% of its subscribers were non-business. This trend naturally pits it against Apple, which makes the highly popular iPhone. Charlie Wolf, an analyst with Needham & Co., believes that Apple will soon make inroads into RIM’s consumer share of the smartphone market. He points out in his Sept. 26 report that the iPhone will be sold in 70 countries by yearend and now runs on much faster 3G (third generation) mobile networks, eliminating a pair of obstacles to previous growth.

Wolf concedes RIM will remain the dominant player among corporate buyers, but projects that RIM’s sales in fiscal 2010 will reach only US$14.9 billion, some US$2.5 billion short of Richards’ estimate. That said, Wolf’s estimate still represents a respectable 36.1% growth compared with Wolf’s US$10.94-billion revenue estimate for fiscal 2009. He calls for earnings of US$4.65 per share in 2010 — up by 32.8% from fiscal 2009.

Not surprising, given Wolf’s assessment of RIM, he rates Apple a strong “buy.” He reckons in his Sept. 10 report that Apple’s revenue will jump by 30.6% to US$42.2 billion in fiscal 2009 (ending Sept. 29) from US$32.32 billion in fiscal 2008. Wolf projects Apple’s earnings will hit US$5.95 a share in fiscal 2009, up 15.5% from his estimate of US$5.15 for fiscal 2008.

Apple is much more diversified than RIM, with large units that sell Mac computers, iPods and other consumer products. The personal computer group, which accounts for 45% of the firm’s sales, is expected to grow by 35% year-over-year in fiscal 2009 compared with a relatively modest 7.2% growth for the iPod division, which accounts for 29% of revenue. Apple’s fastest-growing unit by far is its iPhone division. Wolf estimates iPhone sales will reach US$5.1 billion in fiscal 2009, up by 219% from his estimate of US$1.6 billion for fiscal 2008.

Another pick by analysts also plays off the wireless technology theme. Qualcomm Inc. of San Diego, which develops wireless chips and licenses wireless technology, is rated a “buy” by 85% of the 27 analysts surveyed by Bloomberg LP A major factor for this rating was the settlement it reached this past summer with Nokia, which had refused to pay Qualcomm royalties related to certain 3G patents for the previous year. The two firms signed a 15-year deal covering wireless handset and infrastructure technology.

Qualcomm’s revenue is now expected to jump by 16% to US$12.3 billion in fiscal 2009 (ending Sept. 30) compared with US$10.6 billion in fiscal 2008, according to Thomson Reuters’ survey of analysts. IE