Hedge Funds Like These 5 Taiwan ADRs

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).

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#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.

#3. Silicon Motion Technology Corp. (ADR) (NASDAQ:SIMO)

 – Investors with long positions (as of March 31): 21

 – Aggregate value of investors’ holdings (as of March 31): $126.84 Million

Silicon Motion Technology Corp. (ADR) (NASDAQ:SIMO) lost some appeal among the money managers followed by our team during the March quarter, as the number of managers invested in the company fell to 21 from 24 quarter-over-quarter. At the same time, the dollar value of those managers’ equity investments in Silicon Motion dropped by 4% to $126.84 million, even though the company’s ADSs gained an impressive 24% during the first quarter. Roughly 9% of the company’s outstanding shares were being held by the 21 hedge funds long the stock. The fabless semiconductor company has seen its market value jump by 45% since the beginning of the year. Silicon Motion Technology’s net sales for 2015 were $361.30 million, up from $289.32 million in 2014 and $225.31 million in 2013. Silicon Motion shares are changing hands at around 14.3-times expected earnings, but the company may deserve an even higher valuation given its bottom-line growth of 12.2% in 2013, 15.3% in 2014 and 16.7% in 2015. Ken Griffin’s Citadel Advisors owns 278,071 ADSs of Silicon Motion Technology Corp. (ADR) (NASDAQ:SIMO) as of March 31.

#2. Himax Technologies Inc. (ADR) (NASDAQ:HIMX)

 – Investors with long positions (as of March 31): 27

 – Aggregate value of investors’ holdings (as of March 31): $161.86 Million

Himax Technologies Inc. (ADR) (NASDAQ:HIMX) was a hedge fund darling in the first quarter of the year, given that the number of funds in our system with equity investments in the company spiked to 27 from 17 during the quarter. Similarly, the overall value of the aggregate holdings among those investors jumped to $161.86 million from $111.69 million quarter-over-quarter. The 27 asset managers invested in Himax stockpiled nearly 14% of the company’s outstanding shares. The ADSs of the fables semiconductor solutions provider focused on display imaging processing technologies are up by 21% in 2016. Himax Technologies is enthusiastic about its future prospects in the Augmented Reality and Virtual Reality segments, as the company is uniquely positioned as the provider of choice for microdisplay and related optics to enable AR. David Halper’s Price Street Capital Management acquired a new stake of 1.62 million ADSs of Himax Technologies Inc. (ADR) (NASDAQ:HIMX) during the March quarter.

#1. Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM)

 – Investors with long positions (as of March 31): 3o

 – Aggregate value of investors’ holdings (as of March 31): $2.05 Billion

Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) also received more love from the hedge funds monitored by our team during the January-to-March period, with the number of funds invested in the company increasing to 30 from 24 quarter-over-quarter. What’s more, the aggregate value of those funds’ positions in TSMC rose by a little less than 15% to $2.05 billion, thanks to the 15% price appreciation of the company’s ADSs during the quarter. The leading provider of integrated circuits and other semiconductor devices has seen its shares advance by that same 15% mark since the start of 2016, with shares flat in the second quarter. Although Apple Inc. (NASDAQ:AAPL) had A9 processors for its phones built by both Samsung and TSMC, several sources claim that the iPhone maker will have its A10 processors for the iPhone 7 build solely by TSMC. Even though iPhone unit sales likely won’t grow as they did over the past few years, the Taiwan-based chipmaker will most likely get a strong boost from its Apple-related business thanks to the new arrangement. Howard Marks’ Oaktree Capital Management has 4.46 million ADSs of Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) among its holdings as of the end of March.

Disclosure: None