Feature: Top technology fund manager hunts `untold stories'

George Hsieh (謝文雄), manager of the world's top technology fund, skipped a November briefing by MediaTek Inc (聯發科技), Taiwan's 10th-largest company, to attend one by semiconductor designer Global Unichip Corp (創意電子) before its share sale.

Global Unichip, now among Hsieh's top five holdings, has more than quadrupled since trading began on Nov. 3. Hsinchu-based MediaTek, 14 times larger by market value, is up 8.2 percent. More than 92 percent of Hsieh's Hi-Tech Fund is in companies whose weighting in the TAIEX index is less than 1 percent.

"Smaller companies are more profitable on a per-share basis, which is key to returns for investors," Hsieh, 33, said in an interview in his office at Capital Securities Investment Trust Co (群益證券) in Taipei.

"Well-known companies are more likely to have been thoroughly researched, leaving fewer untold stories to explore and reap big profits from," he said.

Concentrating on smaller companies helped NT$6.6 billion (US$200 million) Hi-Tech Fund return 48 percent in the past year, more than the 23 percent for the TAIEX index, the fund's and nation's benchmark.

The fund, which invests only in Taiwan's stocks, ranks first among 113 with at least US$100 million under management that focus on the technology industry and are tracked by Bloomberg.

The year Hsieh began managing Hi-Tech, in 2005, it returned 58 percent, giving investors a return six times greater than the TAIEX and almost 10 times more than the Morgan Stanley Capital International's World Information Technology Index.

Hsieh has concentrated on Taiwanese suppliers of electronic parts and chip designers set to benefit as Sony Corp and Nintendo Co buy components for video-game players introduced in the past three months.

PixArt Imaging Inc (原相科技) and Genesys Logic Inc (創惟科技) were among Hsieh's top holdings last year, company filings indicated. Neither firm is listed on the TAIEX.

Hsinchu-based PixArt, which makes chips that allow movements of Nintendo's Wii wireless video-game console controller to be replicated on screen, has a market value of NT$42.6 billion. It's included in the over-the-counter GRETAI Securities Market Index of the nation's smaller companies.

Genesys, the sole supplier of chips used in regulating so-called USB connectors and card readers in Sony's PlayStation 3, has a market cap of NT$6.9 billion.

Shares of PixArt have almost tripled since they started trading in May, while Hsintien-based Genesys has more than doubled in the past year. The Hi-Tech Fund sold some of its stake in both companies, according to company filings in December.

Hsieh eschewed Hsinchu-based Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the nation's most valuable company, whose shares lagged behind the 19 percent gain in the TAIEX last year with a gain of 11 percent. TSMC represents more than 9 percent of the TAIEX.

Acer Inc, the nation's biggest computer maker, located in Taipei, slipped 16 percent last year. Hsieh doesn't own either of the stocks.

TSMC, which researcher IC Insights says controls more than half of the world's market for making customized chips, had an 18 percent drop in fourth-quarter profit because of an excess in inventory. Acer's third-quarter profit dropped 6.1 percent from a year earlier.

Hsieh sold Compal Communication Inc (華寶通訊) shares, which made up 5.5 percent of the fund at the end of September, last quarter on concerns cost-cutting at mobile-phone maker Motorola Inc might hurt profitability at suppliers. Compal, Taiwan's biggest maker of cellphones, manufactures handsets for Motorola. Shares fell 28 percent in the fourth quarter.