Fisher Investments is a Woodside, CA-based investment advisory firm founded by billionaire Kenneth Fisher. Fisher Investments manages $ 33 billion worth of equity assets primarily adhering to a value-oriented approach, managing U.S., international and global portfolios. The firm employs an active approach, applying proprietary capital markets technology developed through finance theory, history, and momentum. Fisher Investments uses a combination of top-down macroeconomic research and bottom-up, fundamental stock selection process. For the domestic portfolio, the firm typically applies bottom-up, fundamental and quantitative analyses.
A four-factor valuation model that uses P/E, P/B, PSR and dividend yield is used to determine whether a stock is undervalued. Debt and liquidity screens are also employed. For the global and international investments, Fisher Investments generally utilizes a top-down process that places emphasis on the determinants of portfolio returns. The firm looks into portfolio drivers based on economic and political factors, as well as sentiment to identify relevant themes.
The following is a list of Fisher Investments' top buys in the December quarter, as released in its most recent 13F filing with SEC.
Shares Held as on 09/30/2011
Shares Held as on 12/31/2011
Change in shares
Stillwater Mining Co.
McDermott International Inc.
Taiwan Semiconductor Manufacturing Co. Ltd.
Key Energy Services Inc.
I recommend going long on Stillwater Mining Co., Taiwan Semiconductor and Baidu, among the above stocks.
Stillwater Mining Company is engaged in the development, extraction, processing, refining and marketing of palladium, platinum and associated platinum group metals from a geological formation in south central Montana, known as the J-M Reef, and from the recycling of spent catalytic converters. I am bullish on platinum and palladium pricing going forward, which makes Stillwater a good buy. The bull thesis for platinum and palladium prices rests on the fact that ongoing power constraints, capital constraints, low return investments, and a significant increase in safety inspections are hampering production of these metals in South Africa. South Africa is home to ~38% of global palladium supplies and ~76% of global platinum supplies. Clearly, the tightening supply will cause an uptick in Platinum and Palladium prices. Stillwater has no exposure to South Africa, which means it will be in a good position to capture both volume as well as pricing upside in these metals.
Taiwan Semiconductor Manufacturing Company Limited engages in the computer-aided designing, manufacturing, packaging, testing, and selling integrated circuits and other semiconductor devices; and manufacturing masks. It offers a range of wafer fabrication processes, including processes to manufacture complementary metal oxide silicon logic, mixed-signal, radio frequency, embedded memory, BiCMOS mixed-signal, and other semiconductors.
Taiwan Semiconductor is one of my favorite picks among global semiconductor companies. Last month, it reported better than expected Q4 results and provided strong guidance. Going forward, I expect a strong 28 nm ramp up due to improving mobile device demand. This will improve average fixed cost and lead to better contribution margins. Revenues from 28 nm are expected to account for more than 10% by 1H 2012.
With a growth rate higher than industry average and 28nm leadership, I believe Taiwan Semiconductor warrants a trading premium over its peers.
Baidu, Inc. is the market leader in the Chinese Internet search market, with an 80% market share. The business has high barriers to entry and even Google (NASDAQ:GOOG) wasn't able to meaningfully challenge Baidu's dominance in the past. Going forward, I believe Baidu can continue to post 50% plus growth for the next several years. China's total online advertising spend to GDP ratio is still five to eight years behind the U.S.
There is a secular tailwind for the leading search company - Baidu - which will be the likely beneficiary as the normalization occurs. According to consensus estimates, Baidu is expected to post EPS of $4.55 in the current year and $6.47 in the next year. It is trading at 21x forward P/E, which is reasonable given its 50% growth rate.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.