Tech strategist cites Adobe, Akamai

Information technology stocks have lagged this year, in part due to the stock options scandal. The widening investigation into alleged manipulation, or backdating, of executive stock options has hit hardest in Silicon Valley, where stock options have been widely used to recruit and compensate employees.

But the economically sensitive sector could be poised for better performance, said Kevin Landis, co-founder and chief investment officer at Firsthand Capital, a Silicon Valley firm specializing in technology investments. The company takes its name from its technology professionals, who bring "firsthand" experience to the industries in which they invest, said Landis, a former engineer.

Landis manages the Firsthand e-Commerce Fund (TEFQX), up 10% year to date and up 7.6% on an annualized basis over five years.

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CNBC video: The outlook for tech stocks

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"Our fund likes to look at 'behind the scenes' stocks," Landis told CNBC's "Closing Bell. Mid-cap and small companies have better growth prospects than big-cap names, Landis said.

Among the stocks he likes are storage products maker SanDisk (SNDK, news, msgs), semiconductor equipment maker ASML Holdings (ASML, news, msgs), software provider Adobe Systems (ADBE, news, msgs) and Internet applications provider Akamai Technologies (AKAM, news, msgs).

Adobe Systems

The Silicon Valley company provides software used by graphic designers, Web developers, bloggers and others to create and share documents and digital content.

Products include Acrobat, Photoshop, Illustrator, PageMaker, Dreamweaver, Flash and Premiere.

The company last year acquired Macromedia, a developer of software used to create and consume digital content. The deal essentially doubled Adobe's customer base and brought Flash and Dreamweaver into the Adobe family, strengthening its presence in Internet publishing.

Adobe has two major product cycles coming that could serve as catalysts for the stock. Its Acrobat 8 is expected next month, while its Creative Suite 3 is due in May. Adobe generates about 25% of the company's revenue, while Creative Suite accounts for 60%.

According to Zacks, the average brokerage recommendation for Adobe Systems is moderate buy.

Adobe Systems on Oct. 17 was rated 10 out of 10 on StockScouter.

Akamai Technologies

The Cambridge, Mass., company has software used to stream video and multimedia content on the Web, with some 19,000 servers in 71 countries that analyze and manage Web traffic, and transmit content from the server geographically closest to the user requesting the data. Its EdgePlatform technology allows companies and government agencies to deliver Web content and applications, such as ads, video and other high-bandwidth content.

Its Akamai Media Delivery service is designed to help corporate and government clients bypass traditional server and bandwidth limitations to better handle peak traffic conditions and large file sizes.

Canaccord Adams analyst Mark Kelleher downgraded the stock to "hold" from "buy" today, saying the stock is overvalued. "While we believe the results and forward guidance will demonstrate continued strong growth, we also believe the recent appreciation in stock price has fully incorporated the company's dominant market position," Kelleher said in a note to clients.

Piper Jaffray also cited valuation concerns Sept. 19 in downgrading the stock to "market perform" from "outperform." "We believe shares at current levels are pricing in solid upside," the investment firm said.

According to Zacks, the average brokerage recommendation for Akamai Technologies is moderate buy.

Akamai Technologies on Oct. 17 was rated 8 out of 10 on StockScouter.