Silicon Valley is its own world ("the Valley"), with its own language (geek speak) and its own commerce (ludicrous options grants). That's why many people I know would rather try to eat a gallon of soup with a fork than invest in tech stocks.

But forsaking all tech stocks can be a recipe for subpar returns. Consider Cisco Systems. This tech pioneer, which specializes in the once-esoteric business of networking equipment, delivered mind-blowing returns for early investors. You could have become one of the winners had you done some homework.

Yes, you could have
What homework? Trade magazines such as Network World were a great source of information when tech investments were taking off. Had you been a reader of that particular publication in 1994, you would have learned that Cisco products were helping build the digital communications backbone of the Canadian government. In 1996, you would have learned that Ryder was depending on a Cisco-powered network to keep its trucks in top working condition. And, in 1997, you would have learned that Cisco employees loved their jobs so much that they were happily working 60 or more hours per week.

At the same time, had you checked Cisco's annual reports, you would have seen outrageous sales growth:


Total Sales

% YoY Growth


$1.3 bil



$2.2 bil



$4.4 bil



$6.5 bil


Source: Capital IQ, a division of Standard & Poor's.

Investors who seized the momentum in 1994 have seen their original positions increase more than nine times in value. But those who waited till January 1997 are sitting on a 280% gain today, which is more than double the market's return over the same period.

What about today?
It's tempting to say that the dot-com bubble was a unique time of massive growth and that those days are gone, never to return. But I think that's crazy. Plenty of great tech stocks are available today, and some even look like Cisco did in 1995.

How to find them? Try the same trade magazines that worked back in the day. What you're looking for are technologies that corporate chief information officers (CIOs) are willing to spend big money on. A quick search of "spending priorities" at trade magazine CIO Insight brought forth this article, which says that analytics -- that is, software that uses historical data to find patterns and predict outcomes -- will be a priority this year.

Screening for opportunities in this industry isn't too difficult. Here's a list of candidates ranked by three-year revenue growth:


3-Year CAGR

Business Objects (NASDAQ:BOBJ)












Source: Capital IQ, a division of Standard & Poor's.

Could any of these help you make millions from thousands? Oracle, in which I've held a personal stake for more than three years, has made CEO Larry Ellison a billionaire. And SPSS has been a heavyweight in analytics and data mining for years.

But, of these five, it's Actuate that interests me most. Capitalized at just $375 million, with $69 million in the bank and no debt, the firm is a likely acquisition target by ... Well, honestly, everybody.

Why? Actuate's technology fills a need. Though classically known as a vendor of reporting tools, Actuate entered the analytics business in 2003 and today offers a complete suite of tools for gathering and analyzing business data.

And that's big business. Known as business intelligence, or BI, this market takes in roughly $50 billion a year in revenue and is growing at a double-digit pace.

Make millions in tech
Learning about the technology industry isn't easy, but the rewards of study can be huge. That's why we devote significant time and energy searching for stocks like Actuate at Rule Breakers. We think hunting for the next big technological breakthroughs will lead to the highest possible returns.

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This article was originally published on July 15, 2006. It has been updated.

Fool contributor Tim Beyers, ranked 3,348 out of more than 29,500 in CAPS, only breaks the rules in his portfolio. Wimp. Tim owned shares of Oracle at the time of publication. Tim's portfolio holdings can be found at his Fool profile. His thoughts on growth stocks, Foolishness, and investing in general may be found in his blog. The Motley Fool's disclosure policy is a rebel with a cause.