Now Is the Time to Buy Tech

What do executives at Adobe, Cisco (NASDAQ:CSCO), and Google have in common? They all think it's time to be buying tech stocks.

"If you step back and look at it, it's a favorable time." That's what Didier Moretti, vice president of emerging technologies and business incubation at Cisco, said at the recent VentureWire Technology Showcase in Silicon Valley.

You call that good timing?
Moretti has some cred on this topic; Cisco buys growth better than most. But Cisco isn't the only one shopping. Outgoing Symantec CEO John Thompson recently told analysts that his firm was shopping for bargains, too.

Even Apple (NASDAQ:AAPL) CEO Steve Jobs, a deal-avoider if ever there was one, thinks it's time to be looking. "This downturn may also present some extraordinary opportunities for companies that have the cash to take advantage of them, like Apple does," Jobs told analysts during a conference call to report fourth-quarter results.

He's right. Tech stocks are about as cheap and well-positioned as I've ever seen. Apple, Google, and Microsoft, together, are blessed with more than $50 billion in net cash. Why ask the Feds for a bailout, General Motors? Apple has all the cash you need, right now, in the bank.

Not that Jobs would buy; I doubt he'd be interested. My October visit to the Valley with the Motley Fool Rule Breakers team revealed that the movers and shakers are still feeling the sting of the dot-com bust, eight years later. They've become tight-fisted as a result.

That's how Benchmark Capital's Bill Gurley described to us the environment in which he's investing -- but even he's bullish on stocks. "I'd rather be a buyer than a seller," Gurley said during our interview. "I'm a net buyer of public stocks."

Five stocks to buy now
So both deep-pocketed firms and proven investors think now is the time to buy tech. What might they buy? I asked our Motley Fool CAPS stock screener to find a few cheap candidates using the following criteria:

• Four or five stars from the CAPS community.
• Between $250 million and $2 billion in market value.
• 30% or better revenue growth over each of the past three years.
• Trading no more than 50% off their 12-month low.

Of the 30 growers that CAPS found, five strike me as attractive buys:

The PEG ratio compares the current price-to-earnings multiple versus expected growth. A result below 1.0 is an excellent sign; it suggests that growth isn't fully priced into the stock.

Here, I see several stocks priced as if analysts are grossly overestimating growth. Take Korea's Gmarket. With a PEG of 0.69, it's trading as if analysts are off by more than 30% -- as if earnings are likely to improve by less than 15% annually over the next five years.

Perhaps that's the case. But I think my Foolish colleague, Rick Munarriz, had it right when he recommended the stock to Rule Breakers subscribers in the February issue:

Gmarket wasn't a force when eBay dipped into the South Korean market, but it's the undisputed leader today, handling an amazing 20% of all e-commerce in the country. It got there by offering more than just no-fault handshakes.

Exactly. And, as with so many other well-positioned tech businesses, growth has followed. Most of them have since gone cheap, thanks to Mr. Market's madness.

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Fool contributor Tim Beyers had stock and options positions in Apple and Google at the time of publication. Apple and eBay are Stock Advisor selections. Microsoft is an Inside Value pick. IPG Photonics, Gmarket, and Google are Rule Breakers recommendations. Atheros Communications is a Hidden Gems pick. The Fool owns shares of IPG Photonics. The Motley Fool's disclosure policy is tech-tastic.