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Waking up to the markets could make some feel as if the sky is falling and the world around them is plummeting into a deep abyss with no promise of return. Although the immediate future looks glum, there is no need to mope around, chum. Even bear markets such as this one present investors with opportunities. I feel that everyone is so wound up in the present that they fail to look forward beyond this crisis. I will admit the current situation is quite grave, but it is time to wipe away those tears and work to put that excess cash into the market, specifically within a few solid tech plays

Why do I need more cash?

Markets that erode portfolio value generally require investors to overweight themselves to make up for losses once the markets rally. For example, if one has $100,000 invested in the market, and the market falls 10%, the investor now has $90,000. Let’s say conditions improve and the market rises by 10%, the portfolio is now only worth $99,000, still short of breaking even. This unfortunate mathematical detail requires investors to overweight themselves as the markets turn to make up for losses and profit. Hence the importance of saving some extra cash to harness the performance of mid-cap companies during a bull run. Below are five picks that I believe could benefit investors when trying to accomplish this objective.

Cerner (NASDAQ:CERN)

A leading health care information services provider, Cerner is poised to capitalize on the electronic trend in health care management. Cerner’s integrated systems allow health care professionals to pull patient data electronically at fast and secure speeds. The company has also found ways to integrate medical devices into their information solutions so doctors can monitor the wellbeing of a patient from their computer. The firm also offers various other consulting and technology services to help ensure that customers harness the power of information technology in the everyday workings of a health care facility.

Although there may be concerns around IT spending, hospitals will continue to do well in a downturn since consumers cannot shy away from addressing their health needs. Cerner’s management is also top notch, continuing to support any developments in health care information system. The digital craze has yet to take over hospitals, but with a steady stream of cash, these entities can afford to begin (or finish) projects that convert patient records to an electronic copy. This offers great flexibility and security with regard to records, an area where human error can be prevented and information is sent securely to appropriate parties. Cerner is a great pick going forward and I look forward to seeing its growth.

  • P/E (ttm): 18.60x
  • Forward P/E: 13.82x
  • PEG: 0.75x
  • EV/EBITDA: 6.64x
  • LT EPS Growth Rate: 21.26%

Comtech Telecom (NASDAQ:CMTL)

CMTL engages in the design, development and sales of communications equipment in the U.S. and abroad. Operating in three segments, Telecommunications Transmission, Mobile Data Communications and RF Microwave Amplifiers, CMTL posted revenues over $531 million in fiscal 2008. CMTL’s offerings include wireless transmission solutions where terrestrial equipment is not feasible as well as VoIP equipment for both government and commercial use through the telecommunications transmission segment. The mobile data communications arm services the government with its integrated offerings for mobile satellite based communications.

Lastly, the RF unit provides customers with radio frequency chips that can be used for various tasks including inventory tracking and remote communications. I believe that CMTL’s offerings are extensive and high growth products while being the leaders in satellite and microwave related communications. CMTL excites me as infrastructure needs to be revamped and as technology continues to help businesses become more efficient. RF IDs will continue to penetrate supply chains where they can provide visibility both upstream and downstream, helping companies set themselves apart from the competition. Paired with their other offerings, CMTL should be able to capitalize on these trends, especially with defense related contracts. On a simple valuation basis, CMTL is attractive and a solid telecom pick for any rebound in the markets.

  • P/E (ttm): 16.29x
  • Forward P/E: 12.47x
  • PEG: 0.63x
  • EV/EBITDA: 7.09x
  • LT EPS Growth Rate: 23.00%

FactSet Research Systems (NYSE:FDS)

FactSet is the leading provider of financial data to customers worldwide. FactSet provides industry analysis, fundamentals, analytics and real time market data for portfolio managers, research analysts, sales forces and risk professionals in addition to several other financial professionals. IT companies with such heavy exposure to the finance industry might concern you but the company reported an increase of 9.4% in net due to a growing customer base. FactSet’s cost effective, real time, cutting-edge offerings allow the company to grow its user base as companies seek inexpensive information during this cycle of cost cuts. I like FactSet’s offerings and I think the fundamentals show promise when the market turns.

  • P/E (ttm): 14.99x
  • Forward P/E: 11.88x
  • PEG: 0.77x
  • EV/EBITDA: 7.58x
  • LT EPS Growth Rate: 17.67%

Sohu.com (NASDAQ:SOHU)

The Chinese mega retailer, Sohu.com, is used by the majority of the Chinese consumers with sufficient purchasing power and businesses. The entity offers online branding, advertising, online gaming and wireless services. The site also offers news and content on various topics ranging from finance to horoscopes and astrology. It appears to me that the site is striving to be a Yahoo! (NASDAQ:YHOO) on steroids, attempting to curtail any Google-esque (NASDAQ:GOOG) competitors.

I am concerned about the lack of transparency, a commonality amongst Chinese corporations, however this idea should pan out as the global economy shifts back in line. Sohu provides sufficient exposure to the BRIC economies which I expect to grow somewhat versus a recession in the U.S. and Eurozone. It is important to keep an eye on the potential for explosive growth from these emerging markets despite any sentiment that the four could be entering possible recessionary periods. Sohu’s fundamentals look promising, reminding me of a young Yahoo! and Google hybrid with potential to be an online superstar.

  • P/E (ttm): 14.28x
  • Forward P/E: 9.42x
  • PEG: 0.22x
  • EV/EBITDA: 9.34x
  • LT EPS Growth Rate: 51.17%

Ansys (NASDAQ:ANSS)

Operating in a niche market, Ansys provides stable growth to investors looking to spice up their portfolio. Ansys provides engineering software for its clients who operate in a wide spectrum of industries ranging from architecture to biotechnology. The company is best known for its CAD software that is an industry standard tool for structural modeling.

The recent purchase of Ansoft expands an already strong offering that models anything from structural weaknesses to fluid dynamics with electronic design automatic software that is utilized heavily in magnetic and electricity applications to develop better high performance electronic products. The imminent overhaul of American infrastructure by President-elect Obama and the eventual build-out by the developing world should help Ansys experience a boom in sales. Their industry standard, cutting edge software suite is an essential to design top notch transportation systems, utility lines and buildings. Ansys is a great long term mid-cap play, providing unique exposure that most IT companies do not bring investors.

  • P/E (ttm): 21.35x
  • Forward P/E: 14.84x
  • PEG: 0.99x
  • EV/EBITDA: 12.51x
  • LT EPS Growth Rate:15%

Bear markets such as the one we are experiencing offer investors opportunities. In order to be successful as an investor, it is important to harness the potential of the upside. I am not saying the market will rebound anytime soon, but I expect to see stabilization within the next six months as valuations become more and more attractive, causing investors to start pushing capital back into the markets. Remember: buy low, sell high, and do not fear the bear but instead make use of the opportunity it has provided us and get ready for the eventual rebound by the bulls.

- Santosh Sankar

Disclosure: The mutual fund the author is asssociated with is long CERN and GOOG.

Source: 5 Bear Market Tech Opportunities