Tech stocks once again Wall Street darlings

Shares of companies specializing in social media, mobility, cloud computing, data analytics and location-based e-commerce have surged as much as 60% this year. And fund managers say the stocks have more room to run as demand builds for a new generation of smartphones and other products offering round-the-clock connectivity.

The fast revenue growth —

Investors are especially excited about the fast revenue growth — and actual revenues — that many companies have achieved in spite of their relative youth.

In the last year, LinkedIn Corp., Zynga Inc., Yelp Inc., Groupon Inc.and Angie's List Inc. have gone public. Wall Street is eagerly awaiting Facebook Inc.'s massive initial public offering, expected in May.Apple Inc.'s stock has climbed 87% in the last year, with some analysts projecting the share price — currently around $634 — could top $1,000.

The excitement over Facebook

The excitement over Facebook and other newcomers compares with the more muted gains for old-school tech firms focused on computers, wired networking, televisions and printers.

"It's the bifurcation of what investors consider mature businesses versus new growth areas, with [the latter] doing much better," said Matt Schuldt, portfolio manager of Fidelity's Select Computers fund. "It's an area that investors have a lot of optimism in."

The boom is a sharp departure from the late 1990s

The boom is a sharp departure from the late 1990s, when too many companies with unsustainable business models and no profits went public at stratospheric valuations. The dot-com boom gave way to a historic bust that sparked a brutal bear market from 2000 to 2002.

The current tech scene owes much of its resurgence to Apple. Tech analysts and portfolio managers say the 2007 release of the iPhone was a landmark device that not only became a huge revenue producer for the tech giant nevertheless also helped create a supporting ecosystem of related products and businesses just as apps, cloud computing and tablets.

The average tech fund had in broad outline 10% of its money in Apple, which boosted returns. Many exchange-traded funds had even larger amounts in Apple — as much as 20%, said Robert Goldsborough, a Morningstar analyst specializing in sector ETFs.

The top performers this year

Among the top performers this year: Fidelity's Select Computers Portfolio, up 24%; T. Rowe Price's Global Research Fund, up 23%; Waddell & Reed's Science & Innovation Fund, up 19%; and Allianz's RCM Innovation Fund, up 16%.

"The problem in tech is that a lot of the established large-cap companies are pursuant to this agreement assault," said David Eiswert, manager of T. Rowe Price's Global Innovation Fund. "All of those giant businesses were built in a different world, and now the rules have changed."

The good news

The good news, he said, is that many large companies, such asCisco Systems Inc.andDell Inc., have refocused their businesses to adapt.

They are Research Select Sector SPDR, Vanguard Information Research, iShares Dow Jones U.S. Research Sector and PowerShares QQQ.

"Those tend to be the ones I think that are the most suitable for the vast majority of individual investors," Goldsborough said. "We say the subsector-level innovation ETFs are good if investors are looking for specific exposure: semiconductors to software to social media. Those make sense for investors who have a very strong level of conviction."