In late May, Taiwan inaugurated pro-independence President Tsai Ing-wen, who has a duty to inject new dynamism into the tepid domestic economy, as well as manage its delicate relations with China. Taiwan is among the few countries running a trade surplus with the world’s second-largest economy, so China’s recent troubles have put immense pressure on the economy of small neighbor. Taiwan’s economy contracted by 0.8% in the first quarter of 2016, worse than the 0.5% decline registered in the fourth quarter. The country’s manufacturing purchasing managers index, which measures the activity at Taiwan’s factories, fell back into contraction territory in April and dropped to a seven-month low of 48.5 in May. Moreover, business and consumer confidence has deteriorated lately, but the newly-inaugurated President plans to implement market-friendly reforms and support new industries such as biotechnology to revive growth. With this in mind, Insider Monkey compiled a list of five Taiwanese companies trading on U.S stock exchanges that are favored by the hedge funds tracked by our team.
At Insider Monkey, we track around 765 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
#5. Siliconware Precision Industries (ADR) (NASDAQ:SPIL)
– Investors with long positions (as of March 31): 11
– Aggregate value of investors’ holdings (as of March 31): $43.24 Million
The hedge fund sentiment towards Siliconware Precision Industries (ADR) (NASDAQ:SPIL) increased during the first three months of 2016, as the number of funds in our database with long positions in the company climbed to 11 from eight quarter-over-quarter. Meanwhile, the overall value of those positions nearly doubled, increasing by 98% to $43.24 million. The 11 hedge fund vehicles invested in the provider of semiconductor packaging and testing services amassed almost 11% of its outstanding common stock. Earlier this week, Siliconware Precision Industries sealed a deal to merge with fellow chip packager Advanced Semiconductor Engineering (ADR) (NYSE:ASX). The agreement stipulates that the two parties will establish a new holding company that will buy both companies, with ASX shareholders receiving shares of the new company and SPIL stockholders receiving cash. Jim Simons’ Renaissance Technologies reported ownership of 1.43 million ADSs of Siliconware Precision Industries (ADR) (NASDAQ:SPIL) in the latest round of 13Fs. Each ADS of the company represents five common shares.
#4. Advanced Semiconductor Engineering (ADR) (NYSE:ASX)
– Investors with long positions (as of March 31): 12
– Aggregate value of investors’ holdings (as of March 31): $158.05 Million
There were 12 asset managers tracked by Insider Monkey with stakes in Advanced Semiconductor Engineering (ADR) (NYSE:ASX) at the end of the March quarter, up from ten registered at the end of 2015. Correspondingly, the aggregate value of those stakes increased to $158.05 million from $111.99 million quarter-over-quarter. While the aforementioned deal between the two Taiwan-based companies is being called a merger or a “mutually beneficial platform”, the deal is a common takeover, with the larger Advanced Semiconductor Engineering controlling the new holding company. Meanwhile, Siliconware shareholders will receive $1.69 per each unit of common stock or $8.45 per ADS. The $1.69 offer is priced at 17.1-times estimated annual earnings, the highest multiple in the past two years, so Siliconware shareholders should not be overly disappointed with the agreement. Ken Fisher’s Fisher Asset Management had 26.49 million ADSs of Advanced Semiconductor Engineering (ADR) (NYSE:ASX) in its portfolio at the end of the first quarter.
We’ll check out the three most popular Taiwan-based stocks among top hedge funds on the next page.