Fidelity fund that beat 98% of peers bets on Samsung over Apple

A top-performing global technology fund manager has raised bets on Samsung Electronics Co, making the stock the number one holding in his portfolio, ahead of Apple Inc or Alphabet Inc.Hyunho Sohn, portfolio manager at FIL Investment Management whose Fidelity Global Technology fund runs about $4.8bn of assets, said he has been adding positions in the world’s largest memory-chip maker since late 2018. He interpreted the sharp plunge in Samsung’s share price toward the end of that year as an opportunity, and he believes in the long-term growth of the tech giant.“If you ask me why I bought the stock, while the chip cycle was experiencing a downturn, I’d say I have faith in its fundamentals from a long-term perspective,” Sohn said in a telephone interview from London. “Samsung is a typical example of my strategy, which is buying an undervalued stock that the market participants hate temporarily.”His fund, which holds about 60 global technology stocks, has beaten 98% of its peers with an annualised return of about 20% over the past five years, according to Bloomberg-compiled data. The fund’s top five holdings also include Alphabet, Apple, Intel Corp, and Microsoft Corporation.The potential growth in demand for memory chips is apparent in the growing needs of cloud storage and service providers alongside the artificial intelligence industry that needs data storage, he said, adding he is also watching the development of 5G networks, which may drive demand for memory chips. Compared with global tech stocks, valuations of Samsung are “still attractive,” he added.Although Samsung’s forward price-to-earnings ratio of 12.6 times is not cheap compared with its historical average, it still lags Micron Technology Inc’s 14.7 times and Taiwan Semiconductor Manufacturing Company’s 18.6. On forward price-to-book terms, Samsung is trading at 1.2 times, lower than almost all of its peers.Shares of Samsung have risen about 30% this year as overseas investors bought net 4.3tn won ($3.6bn) of shares, the most sought-after stock on Korea’s KOSPI benchmark this year.To be sure, it’s not all rosy for the memory chip sector. Micron, the third-largest player in the industry, released disappointing sales forecasts last month. And Samsung’s third-quarter preliminary earnings guidance announced earlier this month is less than half of its operating profits a year earlier. Chip prices have also been mixed. Contract prices for 32-gigabyte DRAM server modules fell 13.8% in the third quarter from the previous three-month period, while those for 128-gigabit MLC NAND flash memory chips rose12.3%, according to inSpectrum Tech Inc.