7. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 156
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is one of the largest chip makers in the world. It accounts for more than 60% of foundry spending in the world justifying its huge market capitalization of more than $873 billion. The company develops chips that are powerful and power efficient, with applications in market-critical areas such as AI, data centers, and smartphones.
The competitive edge of the company lies in its huge scale boosted by one of the most advanced chip-making processes and its ability to generate record revenues. The robust revenue generation capability allows the company to continue its R&D investment and keep its strategic edge up and running. Over the past 10 years Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has grown its top line by 14% and its bottom line by 17%.
During the past month, the company achieved a new monthly record revenue of $8 billion, marking a 45% increase year-over-year. Quarterly, the FQ2 was also a success. Net revenue of the company grew 32.8% year-over-year to reach $20.82 billion, ahead of its guidance of $20.4 billion. More than two-thirds of the company’s revenue grew on the back of its advanced chip manufacturing processes.
In addition to the revenue, the gross margin was also above quarterly guidance and was recorded to be 53.2%. Looking ahead the company expects its gross margin to expand between 53.5% to 55.5% indicating strong pricing power and growing demand.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has increased its capital expenditure lower-end forecast from $28 billion to $30 billion for the year. However, management has ensured that higher CapEx has always correlated with higher growth opportunities for the upcoming years.
TSM is an attractive investment opportunity for growth investors. It is trading at a slight premium of 10% to its sector, however, its earnings are expected to grow by 34% during the year to reach $1.94. Moreover, the stock was held by 156 hedge funds in Q2 2024, with total stakes worth $21.27 billion. Fisher Asset Management is the top shareholder of the company with position worth $4.93 billion.
Cooper Investors Global Equities Fund stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q2 2024 investor letter:
“Unsurprisingly the portfolio’s best performers in the very short term reflect this pattern, having narrowed to those most obviously exposed to the AI story – Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and Alphabet. While the portfolio has owned semiconductor companies for years it remains diversified and is underweight the group from an active risk perspective, dragging on relative performance in the last six months. The portfolio is currently positioned to take advantage of the Value Latency we see in smaller sized companies, and the performance of the quarter has been more aligned with those factors.
While this positioning is painful in the short-term, we see considerable embedded value in our portfolio. We also see considerable risks and uncertainties existing in the AI theme that are not reflected in the Value Latency on offer in many stocks that have surged.
Returning to the AI story, today the portfolio has around 10% of capital invested across TSMC and Alphabet. We think TSMC has a tremendous opportunity to extract more value from the profit pool currently being enjoyed by its downstream customers.”
