Fund Climbs Rankings With Bet on Samsung’s Small-Cap SuppliersBy
Chip-related names drive Shinhan BNPP Fund past rivals
China tension hurts appeal of cosmetics: Shinhan BNPP
Jung Sung Han joined Shinhan BNP Paribas in 2014 and took over an underperforming fund that was mostly invested in large caps. A switch in focus to small-cap suppliers of Samsung Electronics Co. helped it become one of the best funds of 2016 in its peer group.
The Shinhan BNPP Value Equity Investment Trust fund beat 80 percent of its peers with an 11 percent return over the past year. Jung’s top picks include LOT Vacuum Co., a maker of dry vacuum pumps that more than tripled in two years, Tera Semicon Co., a maker of heat treatment equipment that gained 65 percent in three years, and Soulbrain, which surged 50 percent in 2016.
"The current cycle in the semiconductor industry seems to be the best time I have ever experienced," Jung said in an interview on Jan. 5. "There seems to be no cap for growth in sector stock prices."
Samsung Electronics last week posted its biggest operating profit in three years, helped by a surge in memory chip prices and growth in displays using organic light-emit diodes (OLEDs). Chinese demand pushed contract prices for DRAM chips to $1.97 in December from $1.41 in October, according to data compiled by Bloomberg from Inspectrum Tech Inc.
Jung believes it will take at least three years for Chinese rivals to catch up with Samsung’s chip business. In addition to the hurdles posed by the large upfront investment and technology levels, Jung notes Samsung’s advantage in the form of its chain of dedicated, locally based suppliers.
"The semiconductor industry is different from shipbuilding or displays -- you can’t follow quickly only with capital and M&A," Jung said.
Jung is bearish on Korean cosmetics and biotechnology stocks. He sold his last shares in LG Household & Health Care Ltd. in April 2016 and has no plan to revisit the stock amid tension between China and South Korea over U.S. deployment of the Thaad anti-missile system.
"Chinese tourists are increasingly visiting Europe or Japan rather than South Korea recently, leading to a decrease in duty-free stores’ sales in Korea," Jung said.
Jung says about half of his portfolio is still in large caps such as Posco and bank stocks, which he added in late 2014 mainly for short-term trading purposes. IT is effectively the only industry he is bullish on for long-term investment.
"Between 2011 and 2015, Korean markets were in a good cycle for consumer stocks, including cosmetics," Jung said. "Now, the markets are in a good cycle for semiconductors and related components. The stocks in my portfolio have not reached my target prices yet."