Walter Price, portfolio manager at Allianz RCM Technology Fund, told CNBC’s “Squawk on the Street” that the technology sector looks strong.
“I think you have the beginning of some nice product cycles on the corporate side,” Price said Friday. “You have very strong growth outside the U.S., and most of these companies have a lot of their business outside the U.S. I think you have corporate spending running way under depreciation and cash flows. So, companies have the ability to spend, and you’re starting to see pockets where spending is picking up.”
He said valuations in the technology sector aren’t high considering strong and accelerating growth rates.
“I think the problems with Microsoft and Google are more on the cost side than the revenue side,” Price said. “The revenue side was quite good. Cost growth is easier to fix than revenue growth.”
But Roger Kay, founder and president of Endpoint Technologies, urged caution.
He said corporate replacement cycles are lengthening and some companies are reluctant to jump into Vista, Microsoft’s new operating system.
“I would still be a little bit cautious although I think you can still pick some winners,” Kay said. “Look at the multiples. Some of them are in the teens and some are in the 50s and 60s. A conservative value-oriented investor would pick the lower multiples.”