Fubon OTC's Tzeng uses valuations to beat rivals

The average price-to-earnings ratio of TAIEX stocks, now about 13 times earnings forecasts, according to Bloomberg data, is "the cheapest in more than a decade," Tzeng said. The average is down from 41 in 2003, 58 in 2002, and 18 in 2001.

Tzeng was head of research at Fubon before becoming a fund manager seven years ago. As well as the OTC Fund, which he has managed for five years, he also oversees the Fubon Aggressive Growth Fund, which had assets of NT$1.59 billion as of May 31, Bloomberg data show.

The OTC Fund, set up in March 1997, traded today at NT$4.33 a share, a 14 percent discount to its net asset value.

While smaller-company stocks involve more risk, "the returns can be outstanding," Tzeng said.

Tzeng said he's considering buying more shares of Powerchip and seeking to profit from rising global demand for mobile phones, flat-panel displays and laptop computers.

Taiwan Green Point Enterprises Co (台灣綠點), which makes molds, casings and other plastic parts for mobile phones, is another company that Tzeng is analyzing. The shares are up 34 percent this year, after rising 69 percent last year.

Tzeng said another habit he has kept from his days as an analyst is to get as much time as possible with executives whose stocks he's buying.

"I continue to do company visits almost every day," he said.