Hsieh's strategy has risks, said Belinda Yu (
Smaller companies are less able to provide consistent profit growth and their stocks are more vulnerable, she said.
"Smaller stocks are jumpy, which is a double-edged sword that works really well during a bull trend," Yu said.
Jih Sun Securities Investment Trust manages 15 funds with US$1.3 billion in assets, including shares of TSMC and Hon Hai Precision Industry Co (
The electronics industry accounts for more than half the weighting of Taiwan's stock market, more than anywhere else in Asia and more than in the NASDAQ Composite Index.
"There is hardly ever an electronic gadget that isn't made or at least supplied by Taiwan," said Hsieh, who calls Nintendo's Wii, which allows players to swing the wireless controller like a golf club or tennis racket, a "cool gadget."
The over-the-counter GRETAI Securities Market Electronics Index of the nation's smaller electronics makers climbed 21 percent last year, outperforming a 14 percent advance in a TAIEX index that tracks the performance of the nation's biggest technology companies like TSMC.
Hsieh in the fourth quarter began buying smaller companies that are part-owned by some of the nation's biggest.
He bought shares of a maker of connectors used in computers and mobile phones, Pan-International Industrial Co (廣宇科技), and a manufacturer of wireless network equipment, Cybertan Technology Inc (建漢科技), company filings in December showed.
Hon Hai, which makes music players for Apple Computer Inc and consoles for Sony and Nintendo, has stakes in the two companies.
Pan-International and Cybertan, which have a combined weighting of less than 0.3 percent in the TAIEX, each gained more than 50 percent last year. The Hi-Tech Fund doesn't hold Hon Hai shares.
Hsieh spends half his time touring the nation's science parks and meeting executives, chip designers, and industry analysts. He says personal contact is essential when looking for smaller companies.
"The fund management community is very competitive, so I have to stay close to the industry and act quickly before others stumble upon the treasures," said Hsieh, who has a master's degree in international trade from National Chengchi University in Taipei, and was previously an analyst at Capital Securities.
Hsieh said he decided to invest in Hsinchu-based Global Unichip after he learned at the briefing that the company is 46 percent-owned by TSMC and has access to the bigger chipmaker's production facilities.
"The trick is to find the stock and get in early," Hsieh said.
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