Seth Klarman Dividend Stocks In Focus: ChipMOS Technologies

Value and income investors should get to know Seth Klarman.

Seth Klarman is the Chief Executive Officer and Portfolio Manager of the Baupost Group, an investment management firm with an $8 billion equity portfolio.

He invests similarly to Warren Buffett, with a focus on value investing principles.

Among Seth Klarman’s top five high-yield dividend stock holdings is ChipMOS Technologies, Inc. (IMOS).

Since the stock is not in the S&P 500, ChipMOS is not a member of the Dividend Aristocrats, a group of stocks with 25+ straight years of dividend increases.

At the end of last year, Baupost was the company’s biggest institutional shareholder, with a nearly 8% stake in the company. This investment was worth $49.5 million as of December 31, 2016.

This article will provide an overview of ChipMOS’s business model, and why it is one of Seth Klarman’s biggest stock holdings.

Business Overview

ChipMOS is an international semiconductor company, based in Taiwan. It is a small-cap stock, with a market capitalization of approximately $742 million.

It provides back-end testing and assembly services for chips and processors used in a variety of applications, including memory, as well as LCD and OLED displays.

The company has a diversified group of customers. It services a wide variety of end markets, including consumer electronics, personal computers, and communications equipment.

Its product breakdown is as follows:

(Click on image to enlarge)

IMOS Breakdown

Source: 4Q Earnings Presentation, page 9

ChipMOS operates in four core segments, which are:

  • Testing (27% of revenue)
  • Assembly (32% of revenue)
  • LCD Driver (24% of revenue)
  • Bumping (17% of revenue)

2016 was a difficult year for ChipMOS, due to a decline in demand from certain core end markets.

Revenue declined 2.4% for the year, while earnings-per-share declined 30%.

The good news is that the company’s performance improved substantially toward the end of the year.

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