TIP SHEET

Tempted to dabble in the U.S. technology sector, but unable to shake the memory of the tech wreck at the beginning of the decade? Take heart, says Brian Belski, U.S. sector strategist at Merrill Lynch & Co. Inc. Fundamentals in the sector have improved greatly over the last five years, he pointed out in a report yesterday.

Moreover, the sector has done a great job building cash, diminishing debt, cleaning up balance sheets and reducing capacity where needed. And now profit growth has stabilized as well, unlike the earlier period when profits were highly volatile. Furthermore, the majority of the tech companies that have rolled out their second-quarter results so far have exceeded consensus estimates, he said.

Mr. Belski also sought to assuage fears that third- and fourth-quarter growth estimates for the sector will be revised lower, as they have been so often before. This time around, the bulk of the downward revisions has already occurred, especially for the third quarter, he said, and the conservative guidance is not matching actual results.