LinkedIn Debut

LinkedIn in Mountain View, California, the first major U.S. social-media company to go public, surged 109 percent on its May 19 debut and traded as high as 31 times annual sales. The rally was a day before Harvard University Professor Lawrence Summers, the former U.S. Treasury secretary, said there's concern technology stocks are in a bubble.

Groupon Inc., the largest provider of online coupons, filed with the U.S. Securities and Exchange Commission on June 2 to raise $750 million. The Chicago-based company discussed an IPO with underwriters in March that would have valued it at as much as $25 billion, or 9.7 times sales, people familiar with the matter said at the time.

The S&P 500 Information Technology Index trades for 2.4 times sales, data compiled by Bloomberg show. That compares with the average of 2.6 since 1992.

"I'm actually looking at this area, particularly with the selloff, to see if there might be some stocks that we can add," said John Carey, a Boston-based money manager at Pioneer Investments, which oversees about $250 billion including Microsoft. "It's out of favor. And yet technology is still a growing part of the world economy."

Biggs Favorite

Hedge-fund managers have added computer stocks since Traxis Partners LP's Barton Biggs said they were among his favorite investments at the start of 2010. Paulson & Co., the New York- based firm run by billionaire John Paulson, disclosed a $1 billion stake in Hewlett-Packard in a May 16 filing. David Einhorn's Greenlight Capital Inc. told clients in April that it bought shares of Sunnyvale, California-based Yahoo! Inc.

Hewlett-Packard fell nine straight days through May 23, the longest streak since at least 1980, as the biggest personal- computer maker cut its full-year sales forecast. Yahoo dropped 6.5 percent in May as speculation grew it may benefit less from part ownership of China's largest e-commerce provider amid tension with Alibaba Group Holding Ltd.

Greenlight also added 1.39 million shares of Microsoft last quarter, according to a filing with the SEC. The biggest software maker has slumped 14 percent this year after lagging behind the S&P 500 in four out of the previous five quarters. It trades at 9.7 times reported earnings, down from its peak multiple of 81 in 1999. The 34 percent discount to the S&P 500 is the widest since at least 1992, Bloomberg data show.

Microsoft Discount

Low valuations may not be enough to drive above-average gains. Since Oct. 9, 2002, the end of the bear market that followed the collapse of technology shares in 2000, Microsoft's price-earnings ratio has averaged 18.6, compared with 23.9 for technology stocks in the S&P 500. Over the period, Microsoft has returned 53 percent including dividends, versus 131 percent for the industry, data compiled by Bloomberg show.