The most diverse way to invest directly in Taiwan is to invest in the Taiwan ETF (EWT). This Exchange Traded Fund invests in Taiwanese companies that many people in the US have difficulty purchasing through a US brokerage.
Alternatively, an investor in the United States can purchase stock in certain individual Taiwanese companies through American Depository Receipts (ADR). Many of the Taiwanese ADRs are Semiconductor Companies. Exemptions include Chunghwa Telecom (CHT), a Telecom Company, and AU Optronics (AUO). AU Optronics engages in the "design, development, manufacture, assembly, and marketing of thin film transistor liquid crystal display (TFT-LCD) panels and other flat panel displays."
By the Numbers
Data taken from Yahoo Finance on Wednesday, July 18, 2007:
|Symbol||Stock Name||Market Cap||MyPEG||Fwd PE||5 yr growth||Yield|
|ASX||Advanced Semi Engineering||6.42 B||0.24||10.31||38.17%||0%|
|SIMO||Silicon Motion Tech||817 M||0.38||15.63||35.00%||0%|
|TSM||Taiwan Semiconductor||58.66 B||0.46||14.56||24.93%||3.1%|
|HIMX||Himax Technologies||1.03 B||0.50||9.91||17.50%||0%|
|AUO||AU Optronics||12.88 B||0.53||11.42||20.00%||0.4%|
|UMC||United MicroElectronics||12.56 B||0.65||18.58||20.00%||0%|
|SPIL||Siliconware Precision Industries||6.29 B||0.68||12.71||17.50%||0%|
|MXIC||Macronix International||14.72 B||N/A||N/A||N/A||0%|
|CHT||Chunghwa Telecom||18.46 B||N/A||N/A||N/A||5.4%|
In order to understand the chart, we have to understand the different elements.
MyPEG is my own variation of the PEG Ratio. A MyPEG of less than one means the stock is cheap relative to its growth. A MyPEG of greater than two means the stock is very expensive relative to its growth. More info on MyPEG in this link. MyPEG incorporates the yield and cash per share.
Forward PE is the Price divided by Forward estimated earnings. When choosing between a stock that has a PE of 15 and a growth rate of 15% vs. a stock that has a PE of 30 and a growth rate of 30% (both have a PEG ratio of 1), I'll prefer the former. The reason is that high PE's are often priced to perfection. Any miss and high PE stocks can get hit very hard. Stocks with Lower PEs have less expectations and have a greater margin of safety. Another reason is that I have more confidence in the forward PE than the 5 yr. estimated growth rate. So the results are better by preferring the lower PE stock given an equivalent PEG or MyPEG because the 5 year growth rate is given less importance. Lastly, stocks can't maintain 30% plus growth for long periods of time, so growers from 15-30% might be preferred.
5 Yr Growth
5 Yr Growth is an estimate by the analysts. As I discussed earlier, the higher the better, though some people such as the legendary Peter Lynch have suggested that buying fast stocks, but not too fast, might be a good idea (from Peter Lynch's One Up On Wall Street : How To Use What You Already Know To Make Money In The Market).
The higher yield, the better. If you have a high yield, high growth, and low PE, that's a good combination.
Here's a WallStrip Video Blog on Semiconductors featuring SPIL and ASX:
WallStrip Semiconductor Video.