We recently published a list of 12 Best Stocks to Invest in for the Next 3 Months. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against other best stocks to invest in for the next 3 months.
On November 13, Morgan Stanley published an analysis highlighting potential risks to the “Trump trade,” which refers to market optimism following Donald Trump’s decisive victory in the 2024 U.S. presidential election.
The investors poured into small-cap stocks, financials, and cryptocurrencies, expecting lower taxes and deregulation. However, bond markets signaled caution, with 10-year Treasury yields rising sharply. Concerns about unfunded tax cuts and swelling U.S. debt weighed on sentiment in fixed-income markets, and the stronger U.S. dollar put pressure on emerging market currencies.
Despite the current market momentum, the bank’s Global Investment Committee advises investors to approach these trends cautiously as 2025 approaches. They cite three primary risks to the sustainability of this rally.
First, equity valuations are highly stretched. The report points out that higher interest rates are increasing borrowing costs and could weigh on corporate profitability. Inflation-adjusted 10-year Treasury yields have risen to about 2%, historically associated with lower stock price-to-earnings ratios. Currently, this multiple sits at 23x, far above historical norms.
Second, corporate earnings targets for 2025 are ambitious and may be difficult to achieve. Forecasts project profit growth of 15%, which seems overly optimistic given current single-digit earnings growth and weak productivity improvements. While some sectors, such as traditional energy and financials, might benefit from regulatory clarity under Trump’s leadership, headwinds such as rising borrowing costs and the stronger dollar could challenge multinational corporations. Moreover, potential tariffs might increase production costs, putting additional pressure on manufacturers.
Finally, policy timing poses significant risks. The Trump administration’s policy sequencing will be critical. While measures such as deregulation and tax cuts could stimulate growth, inflationary policies such as tariffs or immigration restrictions could offset these benefits. Such actions may raise consumer prices, slow labor-force growth, and disrupt key industries, including agribusiness and services.
Given these risks, the bank advises investors to consider taking profits in high-performing stocks and offsetting tax liabilities by selling underperforming securities. They see potential opportunities in large-cap value, mid-cap growth, and emerging markets, where currency volatility has created attractive entry points.
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Oaktree Capital’s Howard Marks on Investing Amid Chaos
In an interview with Bloomberg on November 20, Howard Marks, Co-Chair of Oaktree Capital Management, shared his insights on navigating the uncertainties of the global market and investment strategies amidst geopolitical and economic turmoil.
Marks emphasized the inherent unpredictability of markets, cautioning against overreacting to short-term events such as geopolitical tensions, shifts in U.S. policy, or macroeconomic changes. Instead, he advocated for a disciplined, bottom-up approach to investing that focuses on intrinsic value and the fundamental performance of individual companies.
Marks addressed the high valuations in U.S. equity markets, noting that while prices might be elevated relative to historical norms, he does not view them as prohibitively overpriced but rather highly priced.
On geopolitical developments, including former President Trump’s rhetoric and potential policy impacts, Marks stressed the difficulty of predicting how events might unfold or how markets might respond. He highlighted the importance of maintaining a long-term perspective rather than attempting to time markets based on speculation. He pointed to historical instances where predictions of major global events could have led to costly investment mistakes.
The financial landscape is currently being shaped by shifting policies, evolving market trends, and global uncertainties. Investors should proceed with caution, focus on long-term strategies, and adopt disciplined decision-making to navigate potential risks. With that in context, let’s take a look at the 12 best stocks to invest in for the next 3 months.
A close-up of a digital circuit board with chips illuminated by LED lights.
Our Methodology
To compile our list of the 12 best stocks to invest in for the next 3 months, we used Insider Monkey’s Hedge Fund database to rank the 12 stocks that are the most popular among elite money managers, as of Q3 2024. The list is sorted in ascending order of their hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
No. of Hedge Funds: 158
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest dedicated semiconductor foundry, producing chips for leading technology companies such as Apple, NVIDIA, and Qualcomm. The company plays a pivotal role in the global electronics manufacturing industry, and its advanced manufacturing processes and technological leadership have set it apart in the semiconductor industry.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is poised to dominate the semiconductor space with its cutting-edge 2nm chip technology, advanced node leadership, and strategic global expansion. The company’s dominance in advanced node technologies (3nm, 5nm, and 7nm) drives its leadership in the AI and high-performance computing (HPC) chip space. This dominance creates a significant entry barrier for competitors, as Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) leadership in advanced node technology ensures it has a near-monopoly on high-demand chips.
Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) upcoming 2nm (N2) chips will introduce the gate-all-around (GAA) transistor structure, a significant technological leap that will drive better power efficiency and performance compared to the current FinFET architecture. This innovation is essential as demand for high-performance chips continues to rise, especially in areas such as AI, HPC, and next-generation consumer electronics. The N2 node will offer 10% to 15% performance gains at the same power and complexity, while also cutting power consumption by 25% to 30% compared to N3E. The shift to N2 will enable a 15% improvement in transistor density, allowing chip designers to pack more computing power into smaller spaces.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is building several new fabrication plants which will increase its production capacity and solidify its position as the world’s leading semiconductor foundry. The company’s $11 billion investment in a new semiconductor fabrication plant in Dresden, Germany, represents a significant strategic shift toward regional diversification.
Overall, TSM ranks 8th on our list of best stocks to invest in for the next 3 months. While we acknowledge the potential of TSM to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TSM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
