These funds are worth a look even if the year's rally continues to fizzle. By Elizabeth Leary, Contributing Editor November 12, 2007 Investors who just two weeks ago were ravenous for hot technology stocks may have lost their appetites the week of November 5, during which the group tumbled nearly 9%. But prospects remain strong for this ever-fickle sector, in part because it derives a growing proportion of revenues overseas, and those sales are getting a lift from the rapidly declining U.S. dollar. For investors with steely-enough nerves to withstand the inevitable ups, downs and unexpected turns of the sector, here are our favorite tech funds: Classic approach. The seasoned managers of Allianz RCM Technology are no strangers to the whims of the sector. Walter Price, Jr. and Huachen Chen have run this fund for almost 12 years. They and the two analysts who support the fund take a hands-on approach: They meet with company managements and study competitors of firms in which they might invest. "Our goal is to identify the high growth sectors of tech, find leading companies and buy them at reasonable valuations," Price says. Advertisement That approach has generated 17.0% annualized returns since the fund's inception in 1995 through November 9, beating the tech segment of Standard and Poor's 500-stock index by seven percentage points per year on average. But the fund surrendered 81% during the 2000-02 bear market, evidence that it's not for the faint of heart. Price says that some naiveté may have fueled tech's rally of the last couple of months. "I think maybe expectations were that tech would skate through a slowdown without its own slowdown, and I don't think that's a reasonable expectation," he says. But he adds that the recent dip will prove to be a buying opportunity -- provided the U.S. skirts a recession and solid growth persists outside America. The fund's D shares (symbol DGTNX) are available without a sales charge through discount brokers and charge 1.66% in annual fees. Advertisement Relative edge. Charlie Chai thinks in relative terms. The manager of Fidelity Select Technology builds his fund around its benchmark, the MSCI Investable Market Information Technology index. After generating ideas, he looks for companies with the most robust earnings and revenue acceleration. He then ranks them according to how strong his convictions are for each company. He'll hold a position 2.5 to 5 percentage points greater than a stock's weighting in the benchmark for those firms he ranks highly. For example, if he's pound-the-table bullish about a company that represents 2% of the index, he could invest from 4.5% to 7% of his fund's assets in the stock. He'll make smaller bets on companies about which he feels less certain. Chai says mobile Internet applications and the acceleration in Internet traffic will be the key drivers of growth in the tech sector over the next few years. Long-term performance isn't hugely relevant because Chai has been running the fund only since early 2007. So far this year, Select Technology (FSPTX) has gained 21%, beating more than 80% of the funds in its category. During the 2000-02 bear market, the fund plummeted 84%. Annual expenses are 0.95%. Advertisement Opportunistic and daring. Chris McHugh, manager of Turner New Enterprise, has only about half of his funds assets in what are commonly classified as tech stocks, according to Morningstar. Most of the rest are in financial exchanges, such as NYMEX Holdings and Chicago Mercantile Exchange, and drug and biotech stocks, such as Alexion Pharmaceuticals and Gilead Sciences. But all of his holdings, McHugh says, use technology to gain a competitive edge in their sectors. McHugh employs hands-on fundamental analysis and computerized rankings to home in on companies with improving revenues and earnings. He'll ditch a company at the first whiff of an earnings disappointment because "if you see one cockroach, you've probably got 20." A high turnover rate -- as much as 750% in past years -- and a relatively concentrated portfolio of about 40 names means New Enterprise is a high-octane choice in a volatile category. But the fund has been on a tear this year -- currently number two in its category, with a 29% return. Long-term performance, at 27% annualized over the past five years, isn't shabby either. The fund wasn't around for the entire 2000-02 bear market, although chances are high that, like the two funds mentioned above, it would have crumbled. The fund (TBTBX) charges 1.61% in annual expenses.