One of our readers, Mack Raymond, is on a treasure hunt. He’s looking for a technology stock that can wow ’em, and he thinks he’s found one. In an email, he writes, “Hey Dan, jot my name down and remember it because I think you’re going to want to interview me after my fabulous call.I’m sure tech stocks are ready to roar again and I predict they will do it in this quarter and lead the market. I also think I’ve discovered a treasure in a tech company called Digital River. Please give me your read on my tech premise and this stock.”

For starters, Mack, Standard & Poor’s also favors the technology sector and notes that it traditionally outperforms the market in the final quarter of the year.Why? I asked, but it doesn’t know. Will the techs, as you suggest, roar this quarter? S&P is not willing to predict that, but it does feel tech will outperform again this year.

The S&P strategist I talked to was unfamiliar with Digital River, but I checked around, and what I find suggests you may be on the right track.

You might call Digital River, which is trading at $35.60, another example of peewee power on Wall Street, a company whose earnings are expected to more than double this year after nearly doubling in 2004. That’s how one might legitimately view this provider of online commerce solutions that has delivered at least 30% sales growth in each of the past four years.

The stock, interestingly enough, is one of the darlings of a relatively little-known monthly investment newsletter, Upside, a product of Horizon Publishing of Hammond, Ind. Horizon also publishes Dow Theory Forecasts, a well-known weekly newsletter. Upside, a bull on Digital River, rates it as “a best buy.”

That recommendation in itself suggests this tech company merits a respectful hearing. The reason: Since its May 1999 inception, Upside’s best buy list, according to Horizon, has gained 310.5%, excluding dividends and transaction costs. Over the same period, the Russell 2000 index gained 50.3%, while the S&P 500 fell 6.6%.

“Growth is flowing at Digital River,” the editor of Upside, Richard Moroney, says in explaining the reason for the newsletter’s enthusiasm. And with software increasingly delivered over the Internet, the company’s growth should remain strong, he says. Digital River’s software clients distribute its products online through the company’s network of more than 50,000 affiliated online retailers.

Mr. Moroney reckons the company – which posted sales last year of $154 million and whose base of 40,000 customers includes Motorola, H&R Block, Staples, and Symantec – should turn in a per-share profit gain this year of 60% to 70% and another 15% to 25% increase next year. Consensus estimates on Wall Street call for the company to earn $2.01 a share this year, up from $0.96 last year, and then rack up $2.39 in 2006.

Digital River ended its June quarter with $322 million (about $7.85 a share) in cash and investments and also repurchased $3.2 million worth of its shares in the quarter.The newsletter rates the stock as reasonably valued at roughly 16 times year-ahead operating earnings, and sees a prospective 20% gain over the next 12 months. An even heftier increase, about 45%, is seen by another Digital River bull, First Albany, which recently raised its 12-month target on the stock to $48.

A word of caution, though: The company’s shares are not exactly a state secret, having already climbed about 50% from their 52-week low of $22.43.

Some other best buys that Upside believes merit investor attention:

Barret Business Services ($23.15), a provider of human resources services.

Extendicare ($16.80), an operator of 177 assisted living facilities.

Pilgrim’s Pride ($30.94), the country’s second-largest chicken producer.

Steiner Leisure ($30.94), a global provider of spa services, including aboard Carnival and Royal Caribbean, the world’s two largest cruise lines.

dandordan@aol.com