Baron Funds, an investment management firm, released its “Baron Durable Advantage Fund” first quarter 2023 investor letter, a copy of which can be downloaded here. The Baron Durable Advantage Fund gained 16.0% during the first quarter, compared favorably to its S&P 500 benchmark which earned a 7.5% return for the same period. Spare some time to check the fund’s top 5 holdings to know more about their top bets for 2023.
In its Q1 2023 investor letter, Baron Durable Advantage Fund mentioned Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and explained its insights for the company. Founded in 1987, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a Hsinchu, Taiwan-based semiconductor company with a $559.6 billion market capitalization. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) delivered a 44.77% return since the beginning of the year, while its 12-month returns are up by 23.68%. The stock closed at $107.06 per share on June 12, 2023.
Here is what Baron Durable Advantage Fund has to say about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q1 2023 investor letter:
“We have admired Taiwan Semiconductor Manufacturing Company Limited (TSMC) for years and believe that short-term, industry-wide cyclical pressure has provided an attractive entry point for long-term investors.
Morris Chang founded TSMC in 1987 as the world’s first dedicated semiconductor foundry. Until then, semiconductor chips were always designed and manufactured by the same company. TSMC introduced a groundbreaking new business model in which TSMC acted purely as a contract manufacturer. This business model proved to be highly successful. TSMC maintained a single-minded focus on improving its manufacturing process technology and enabled the emergence of innovative fabless companies, including NVIDIA, Apple, and Qualcomm, who became its key customers. While many other foundry competitors emerged over the years, TSMC has outcompeted them with superior execution, operating efficiency, high-quality customer service, and the benefits of economies of scale. Today, TSMC controls approximately 60% of the total semiconductor foundry market and has a near-monopoly in manufacturing the world’s most advanced chips. TSMC enjoys high barriers to entry given the ever-increasing cost and technological complexity of semiconductor manufacturing, while customer relationships are becoming increasingly sticky.
We believe TSMC will sustain strong double-digit earnings growth for years to come, with continued market share gains driven by its superior technology, reliability, and customer service. We expect TSMC to continue to benefit from the virtuous cycle of its scale advantage – higher profits leading to higher R&D and capex investments, allowing for further technological differentiation, resulting in more profits. We expect TSMC will remain a key enabler of future technological innovation, including AI and High Performance Computing, and a major beneficiary of the increasing pervasiveness of chips, including in electric vehicles and IoT.”
Photo by Jonas Svidras Unsplash
Our calculations show that Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) ranks 19th on our list of the 30 Most Popular Stocks Among Hedge Funds. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was in 102 hedge fund portfolios at the end of the first quarter of 2023, compared to 86 funds in the previous quarter. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) delivered a 20.78% return in the past 3 months.
On April this year, we also shared another hedge fund’s views on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters Q1 2023 page.
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Disclosure: None. This article is originally published at Insider Monkey.
