Diamond Hill Capital’s Top 10 Stock Picks

5. Texas Instruments Incorporated (NASDAQ:TXN)

Value of Diamond Hill Capital’s 13F Position (9/30/2024): $642 million

Number of Hedge Fund Shareholders (9/30/2024): 60

Shares of Texas Instruments Incorporated (NASDAQ:TXN) have gained 12.9% since the end of March, which coincided with a 15.4% rise in hedge fund ownership of the semiconductor manufacturer during the middle two quarters of 2024. The stock was one of Diamond Hill’s top contributors in Q2 and the fund left its stake largely untouched during Q3, ending the quarter with just over 3.11 million shares.

Texas Instruments Incorporated (NASDAQ:TXN) is a global leader in the analog chip space, which powers the mechanical heart of many automated machine processes, most notably in the industrial and automotive sectors. Recent volatility in those segments drove the company’s overall revenue down by 8% to $4.15 billion in Q3, while profitability sagged by double digits across several metrics.

The company is confident that its current investments centered around boosting 300mm wafer production will pay off in the future, as evidenced by the recent awarding of up to $1.6 billion in funding through the U.S. CHIPS and Science Act. Wells Fargo has a $215 price target and ‘Equal Weight’ rating on TXN shares, citing a lack of visibility into when demand for the company’s chips will reaccelerate.

The Diamond Hill Select Strategy likes Texas Instruments Incorporated (NASDAQ:TXN)’s long-term outlook, as revealed in its Q2 2024 investor letter:

“Among our top individual contributors in Q2 were Amazon, Texas Instruments Incorporated (NASDAQ:TXN) and Mr. Cooper Group. Shares of semiconductor manufacturing company Texas Instruments rose in Q2 as demand in several of the company’s end markets show signs of recovering. Given the company’s long-term prospects, competitive positioning and scale advantages, we believe the outlook for the company from here is strong.”