'We believe that the recent relative strength of tech stocks is the start of a longer term trend,  not merely a flash in the pan," says Jim Oberweis and Dave Covas.

In The Oberweis Report, they explain, "Our confidence stems from the emergence of the next Killer Apps, which drive technology cycles because they change how we live our lives." Here, they make a case for technology and offer a trio of small cap favorites.

'During the 1980’s and early 1990’s, the personal computer was the Killer App. During the late 1990’s, it was the Internet. During this decade – zilch.

' Until now.  The next Killer Apps – video-on-demand and ubiquitous high-speed wireless connectivity – are coming. 

'During the next 10 years, video-ondemand will change how we watch TV and see movies.  Soon enough, you will be able to watch what you want, when you want. Say adios to the traditional TV networks, and maybe even to your cable TV provider.

And 'smart phones' cruising high-speed wireless networks will morph from boring and blasé cell phones into robust, multi-functional devices. Apple’s iPhone, after all, is really a mini-computer that just happens to have phone capabilities.

'Frankly, the product’s name doesn’t do it justice. Just as Apple’s unique graphical user interface in the original Macintosh accelerated the proliferation of computers, their revolutionary iPhone marks the start of the real smart phone revolution.

'So assuming a more favorable technology backdrop, how should investors evaluate potential technology investments?  There are winners and losers in every tech cycle, and the technology business can be tricky and fast-moving. Some basic tips: 

• • Try to identify technology stocks levered to Killer Apps and avoid slow-growth parts of the technology industry. Target companies tied to smart phones and video-on-demand. Avoid stocks that depend on the PC market, which is now a mature, slow-growth industry. 
• • Look at a company’s revenue growth rates. Are sales growing rapidly and accelerating?  Do consumers thirst for more of what the company makes? 
• • Target proprietary products and avoid companies that make commodity-type products. If you lack a degree in computer science or electrical engineering, a good way to do this is to examine a company’s gross profit margin on their income statement. High gross margins north of 40% signal that a company makes something relatively unique – at least for now. 

'Low gross margins imply that products are 'me-too' and that the primary method of competition is based on price.