We recently published a list of 10 Best Very Cheap Stocks to Buy According to Billionaires In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against other best very cheap stocks to buy according to billionaires.
Coming off 2 years of healthy broader market performance (~26% total return in 2023, ~25% in 2024), the US Bank Wealth Management believes that the S&P 500 valuations kicked off 2025 at elevated levels. In 2025, stocks continue to face a volatile environment, and in mid-March, the S&P 500 index witnessed a correction (a fall of 10% or more). Despite this, the index’s expected P/E ratio remains marginally above the historic 5-year and 10-year average, says the firm. As per Rob Haworth, senior investment strategy director, U.S. Bank Asset Management, it’s critical that, in 2025, earnings growth remains on track.
Corporate Earnings Projections in 2025
US Bank Wealth Management believes that current market projections hint at the 11.5% S&P 500 earnings growth in 2025 versus the prior year. This number is subject to change. However, Terry Sandven, chief equity strategist for U.S. Bank Asset Management, mentioned that when considering the potential impact of tariffs and other issues, it is difficult to expect that 2025 earnings would meet the current projections. Haworth says that the impact of tariffs on company profits is expected to be mixed. Companies that are more dependent on importing goods manufactured overseas can witness more challenges.
In comparison, the smaller companies, which are not as dependent on foreign trade, are expected to be better placed to mitigate the impact of the trade environment. Because they are not selling in the foreign markets and are not relying on foreign goods, smaller companies can have more pricing power, opines Haworth. This can equate to a healthier earnings picture.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Technology Sector Remains Well-Placed
JPMorgan believes that uncertainty related to the trade and other factors of the US administration’s policy agenda continue to lead to a wait and see attitude from businesses and households. Given that household and corporate balance sheets remain relatively healthy, this attitude is expected to be consistent with a slowness in the broader US activity rather than a recession. Coming to the technology sector, in most part, the balance sheets are in healthy shape, with valuations based on forward earnings sitting at a decent place, says JP Morgan. As per the investment firm, these valuations still demonstrate anticipations for very strong 20%+ earnings growth from the US technology sector in 2025.
Our Methodology
To list the 10 Best Very Cheap Stocks to Buy According to Billionaires, we used a stock screener and Insider Monkey’s exclusive database of billionaire stock holdings to shortlist the companies that trade at a forward P/E of less than ~20.0x. For the stocks with the same number of billionaire holdings, we have used the number of hedge fund investors as a secondary metric to rank the stocks, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up of a complex network of integrated circuits used in logic semiconductors.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Forward P/E as of March 28: ~18.7x
Number of Billionaire Investors: 30
Number of Hedge Fund Holders: 186
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is engaged in manufacturing, packaging, testing, and selling integrated circuits and other semiconductor devices. Bernstein analysts remain optimistic about the company, considering its strong positioning in the semiconductor industry, mainly in the data-center AI sector, which is expected to be a significant growth driver through 2025. As per Bernstein, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is well-placed to benefit from the expanding demand for high-bandwidth memory (HBM), which can tighten the capacity for mainstream memory production. Bernstein analysts continue to forecast a positive shift around the middle of the year, stemming from healthy AI and HBM demand.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s dominant position in the broader semiconductor industry is mainly because of its technological leadership. It continues to be at the forefront of developing and implementing advanced manufacturing processes, enabling it to maintain a competitive edge. Its focus on R&D allowed it to stay ahead of the curve when it came to process technology. This advantage remains important in attracting and retaining high-profile customers in the broader tech industry, which includes well-established smartphone manufacturers and AI chip designers.
Nightview Capital, an investment management company that concentrates exclusively on publicly traded equity strategies, published the Q4 2024 investor letter. Here is what the fund said:
“Semiconductors are the unsung heroes of the modern economy, powering everything from AI and 5G to electric vehicles and renewable energy systems. Without them, innovation stalls. The semiconductor industry has entered a supercycle, driven by unprecedented demand across industries that rely on advanced computing. And while this notoriously boom and bust industry has seen cycles before we believe this cycle remains in relative infancy.
These advancements aren’t incremental. As AI systems scale, the need for cutting-edge semiconductors will only accelerate. We believe the companies at the forefront of this revolution are foundational to the next wave of global progress.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM): Core Opportunity: TSMC, the world’s largest dedicated chip foundry, holds an impressive 67% share of the global foundry market. Its dominance is even more pronounced at the cutting edge of semiconductor technology, where it plays a critical and unparalleled role. Their lead has only been strengthened recently and they have begun to take advantage of their pricing power.
Competitive Advantage: Revenue Growth: TSMC posted 34% YoY revenue growth in November 2024 to $8.55 billion, with robust demand across AI, high-performance computing, and 5G technologies.…” (Click here to read the full text)
Overall, TSM ranks 2nd on our list of best very cheap stocks to buy according to billionaires. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued 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.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
