Financial advisors may want to skip technology stocks for their investor clients' portfolios in 2012 because they may have already passed their earnings prime, according to mutual fund manager Jerry Jordan.

Jordan, manager of the Jordan Opportunity Fund (JORDX), has not totally given up on technology. He still owns companies such as Apple, Qualcomm and SanDisk, for example. Overall, however, he sees little opportunity in the sector, even though it outperformed industrials, financials and materials in 2011. While tech stocks are still on a growth curve in Asia and Africa, they are close to mature markets in the U.S. and Europe, he said.

The information-technology sector of the S&P 500 stalled in 2011 as several tech heavyweights floundered. Hewlett-Packard fell 37 percent over the past year, Oracle dropped 17 percent and Microsoft dipped 4 percent. High fliers like Akamai Technologies and Salesforce.com have lost 31 percent and 25 percent, respectively, over the past 12 months.

"I think you'd have a hard time finding a lot of companies in tech that can grow earnings 25 or 30 percent that aren't trading at those earnings already," Jordan said in an interview last week.

Technology companies, said Jordan, are not "leaving a lot on the table" as they used to do. "They'll be commoditized, cleaned open, whatever. It will eventually affect them, and they'll have issues; definitely not this year, but probably in 2013.''

"For instance in the flat panel TV market, we went from selling 30 million units a years to 300 million and people literally made less money on a ten-fold increase in volume," he said. "Revenue went up, but profits didn't-they all had too much capacity.''

Financial advisors would best serve their clients by asking themselves where things stand in the life cycle of recently successful asset classes, Jordan said.

"If I were looking at your portfolio right now, one thing I know I would be doing is re-weighing aggressively out of the tech stocks,'' he said. "[Technology stocks] have just been too good for too long. At some point, all these industries over do it, so that's always a risk.''

Chicago-based Morningstar Research rated Jordan Funds in the top ten percent of its category for the last three months. Morningstar raised Jordan Fund's star rating from three to four stars on Jan. 4.

Jordan recommended financial advisors look to biotech stocks or "some interesting, aggressive growth technology mutual funds where you'll get the real bang for your buck.''

While these stocks may be reasonably good investments, Jordan concedes that the volatile market and economy may make them a hard sell to clients. "If you can convince your customer to do anything right now, you're a heck of a financial advisor salesman.''

"I still think that valuation matters," Jordan said. "The dilemma is, as we know, that you can have these periods where valuation doesn't matter for a year, but then it does.''

"We still invest [in technology], but we are at a penetration level where the profitability tends to peak,'' he said. "You might be at 25 or 30 percent penetration of smart phones in the U.S., but generally to get to 60 to 70 percent, you need lower prices.''

While Jordan maintains tech stocks are either at or close to peak, four of Jordan Opportunity Fund's top ten equity investments as of Sept. 30, 2011, were tech stocks: Qualcomm, Apple, Google and SanDisk.

Jordan said he's still high on Qualcomm because of its digital patent ownership and SanDisk because it has cornered the flash memory market.

"Apple still is hot, too, because of its high valuation,'' Jordan said. "Because they've got the iPad 3 coming out, the iPhone 5 coming out and the iPhone 4."

One tech stock likely to benefit from the introduction of the next generation of smartphones and tablets is Qualcomm, which makes chipsets that go into those types of devices, Jordan said.

"The smartphone/tablet space is a massive, global phenomenon," Jordan said. "As the emerging market world shifts from 2G to 3G smartphones, demand will explode. People will be doing more and more of their lives through a smartphone. You're going to have to have a more powerful smartphone."

Jordan still owns Apple, whose shares he thinks are still extremely cheap on a valuation basis, even after stripping out the company's massive cash holdings.

"In terms of sales, it's enormous," Jordan said of Apple. "The profitability part is where it gets dicey. At 11 times earnings, there is a lot of margin compression priced in for Apple. I still think the runway is big. There is a law of diminishing returns. We're probably still an iteration or two away from that. If Apple runs to 15 or 18 times earnings, I'd be a seller. But I don't think I have a lot of risk in Apple."

Jordan owns SanDisk because phones and tablets are using flash memory. "Flash memory is just going to get bigger and bigger,'' he said. "Then the question really is, OK, is the flash memory area going to [generate] too much capacity? At the moment, I think they're still OK.''

-Jim McConville