(MONEY Magazine) – Robert Gensler remembers technology's darkest days well. The 46-year-old manager of T. Rowe Price Global Technology took over the reins of the fund from Chip Morris in early 2002. By then the Nasdaq had lost more than half of its value from its 2000 peak. For Gensler, who also manages $711 million T. Rowe Price Media & Telecommunications, the timing was perfect.

Gensler says he favors companies with strong franchises, durable earnings and long product cycles. But he's also less willing to pay sky-high prices than most tech managers, and that gave him an advantage right out of the box. In 2002 the fund lost 30%, which hurt--but not nearly as badly as the 43% dive the average technology fund took. Now that the sector is raging again and some of the most speculative stocks are back in vogue, Gensler is facing tougher competition. Still, as of Jan. 31, Global Tech was well into the black over Gensler's tenure vs. a loss for the tech group. MONEY's Adrienne Carter and Tara Kalwarski asked him what's next.

Q. Despite a gain of 56% over the past year, the Global Technology fund is still in the bottom half of its category. Can you explain the underperformance?

A. The last year was a momentum market. By momentum I mean investors saying "things are getting better," saying "get me in"--with no valuation discipline and with no respect for what's a good company over the long term. Telecom-equipment stocks like Alcatel, JDS Uniphase, Lucent and Tellabs started going up because it was so bad that it had to get better. Every time you get a positive momentum signal, such as an earnings surprise, people just keep plowing in.

Q. If you know that's what people will do, why don't you try to ride the momentum yourself?

A. While you may be able to get a lot of short-term outperformance in the momentum game, I think it's a very risky style in the long term. You can use momentum on the bottom, but try and wait until the last minute, near the top, and you can get clocked. Those investors who piled in can't all cash out at the top price. It's like a lot of fat pigs trying to get out of a porthole.

Q. Is the market through the momentum phase yet?

A. I think many of these tech stocks are getting tired. They're up 3% one day and down 3% the next day. For example, Applied Materials reported great numbers--great orders--in the middle of February. The next day Applied Materials was up, but since then it's been down. These stocks are in the seventh inning of a nine-inning game.

What's left to buy

Q. So are there still any deals to be found in technology?

A. I still think there are companies that have compelling valuations relative to their long-term growth. But they tend to be the ones that are less cyclical in nature. It's so boring. Oddly enough, in technology, it's the megacaps. Despite its Linux worries, I like Microsoft (MSFT). If you account for its cash, it's trading at 16 times earnings. This company can grow profits in the low teens, but it's trading at a market discount. I think it's a better company than its valuation indicates.

Q. Personal-computer maker Dell (DELL) is also a top holding in Global Tech. Can such a big company really keep up the growth from here?

A. Dell is everybody's enemy because as technologies commoditize and standardize, Dell wins. It's the Wal-Mart of tech. Dell's core business, personal computers, is growing modestly, but the company is still taking share. It's also expanding to adjacent markets like printers and servers. Over time its profit margins are going up. It's growing profits at 20% a year.

Q. What about Dell's price?

A. Dell is trading at less than 20 times 2005 earnings if you account for its cash. Dell at a P/E below 20 is absurd.

Q. Are you as picky about valuations when you invest in the telecom sector?

A. The funny thing about telecommunications services is that almost the entire world trades between 11 and 15 times earnings. The valuations are so tight it's bizarre. There are a lot of industries where the valuation dispersion is tight, and you want to own the ones with better growth rates. Vodafone Group (VOD) is trading at 13 times its expected future earnings. SBC and BellSouth are trading at 15 times earnings. Which one has a better prospect, the global wireless leader or the fixed-line guys who are fighting against wireless and cable? I think it's pretty obvious. I own Vodafone and no SBC or BellSouth.

Q. Has Cingular's planned acquisition of AT&T Wireless changed your outlook for the wireless industry?

A. The U.S. industry is going to consolidate, and it's going to be a good thing for the providers because there will be less competition. But all you have to do is get off a plane in another country to see what highly consolidated looks like. Go to France. Go to Italy. Go to Australia. The structure of the wireless industry is just better outside the United States.

That's why I like América Móvil (AMX). It has a 77% share of Mexico. It's No. 2 in Brazil and recently bought assets in Argentina. This is a company whose free cash flow is going to grow at 20% a year for many years to come. Yet it's trading at just 11 times earnings, far cheaper than U.S. wireless providers.

Q. After the big moves in these sectors over the past year, would you invest your own personal money in technology and telecom right now?

A. I have 100% of my 401(k) money and my kid's college money in the T. Rowe Price Media & Telecommunications fund.