Tech stocks: Back in style

    If this rally has legs, Robert Turner of Turner Investment Partners says it's time to pick the right growth stocks that will lead the charge.

    By Katie Benner

    When markets waver, growth investing is a high-risk, high-volatility proposition. But when they roar back to life, the momentum is rocket fuel for stocks that out-earn their peers.

    For those who believe the current rally is the beginning of a true bull market, growth investing looks attractive again, says Robert Turner, chairman and chief investment officer at Turner Investment Partners.

    Turner's Core Growth fund (TCGFX) is up 31% year-to-date, vs. the S&P 500's 21% gain over the same period; and the performance is a dramatic turnaround from last year's nearly 49% drop, according to Morningstar.

    Turner stopped by Fortune to discuss which stocks will lead the rally and which companies can bounce back from the recession.

    Do you think this is a true rally, and if so, what sectors will benefit the most?

    Even though stock gains may settle down a bit from here, given the bounce we've had, I think we're in a new bull market. It's in large part due to the monetary and fiscal stimulus programs that are playing out worldwide.

    Tech stocks will lead the charge this time. The sector has more cash, less debt, and fewer pension issues than any other. It's a growth cyclical group, so it benefits as we come out of a recession and companies spend again. And in general tech companies grow faster than global GDP.

    There are also two big waves building in the sector that should create earnings opportunities for some companies. One is wireless convergence -- whereby individuals have access to voice, data, and video on a wireless device -- is going to continue. Penetration levels of netbooks and handsets are very modest throughout the world. The other is cloud computing, which allows corporations to access hardware and software on demand. Companies will be willing to invest in these capabilities because they enhance profitability and efficiency.

    Which companies do you think will benefit from these trends?

    In wireless convergence, Apple (AAPL, Fortune 500) is at the forefront for devices. The company could do an iPhone deal with Verizon next year and they've announced a handset deal in China with China Unicom.

    In chips, Intel will most certainly do well. Another semiconductor company to watch is Broadcom (BRCM, Fortune 500). It spends about 20% of its revenue on R&D and its chips should get designed into new products because it has great relationships with equipment manufacturers. Broadcom chips can now be found in handsets from Research in Motion and Palm, as well as in products that have Bluetooth devices.

    In routers, F5 Networks (FFIV) is an interesting name. All the big server farms for companies like Google and Amazon use F5 systems.

    Cloud computing immediately brings to mind big names like IBM (IBM, Fortune 500), Google (GOOG, Fortune 500), Amazon (AMZN, Fortune 500), and Microsoft (MSFT, Fortune 500). But we also really like Salesforce.com (CRM). It was the first company to have on-demand software for sales applications, and big groups like Merrill Lynch and Dell have adopted its products because they're very good.

    Given the recent consumer spending uptick, is retail a buy?

    When picking stocks in the most battered sectors, be careful that the companies are truly strong and not just lifted by the rally.

    Some retail names will continue to struggle because of unemployment, and we would still be cautious here. We think that Best Buy (BBY, Fortune 500) will be a survivor because Circuit City isn't around, and people will still buy electronics. We think that Urban Outfitters (URBN) has built a strong brand and is well managed. It, too, is a survivor.

    Are there any other battered sectors you would invest in now?

    We're looking closely at financial services. There are only a handful of big banks now, and asset managers are consolidating, too. The large commercial bank that stands out is JP Morgan (JPM, Fortune 500) because they stand to benefit from share gains in commercial and investment banking.