In this article we will analyze whether Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) a good stock to buy now? TSM has experienced an increase in activity from the world’s largest hedge funds lately. Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) was in 67 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 63. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TSM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Andreas Halvorsen of Viking Global
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s take a gander at the new hedge fund action regarding Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM).
Hedge fund activity in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM)
At third quarter’s end, a total of 67 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the second quarter of 2020. On the other hand, there were a total of 57 hedge funds with a bullish position in TSM a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), which was worth $2230.2 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $856.1 million worth of shares. AQR Capital Management, Viking Global, and Driehaus Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Keywise Capital Management allocated the biggest weight to Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), around 13.25% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, earmarking 7.06 percent of its 13F equity portfolio to TSM.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Viking Global, managed by Andreas Halvorsen, established the most outsized position in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). Viking Global had $498.3 million invested in the company at the end of the quarter. Rajiv Jain’s GQG Partners also made a $209.9 million investment in the stock during the quarter. The other funds with brand new TSM positions are Alex Sacerdote’s Whale Rock Capital Management, Daniel S. Och’s OZ Management, and Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) but similarly valued. These stocks are Berkshire Hathaway Inc. (NYSE:BRK-B), Tesla Inc. (NASDAQ:TSLA), Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), Mastercard Incorporated (NYSE:MA), and NVIDIA Corporation (NASDAQ:NVDA). All of these stocks’ market caps are similar to TSM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BRK-B | 109 | 19555477 | 2 |
| TSLA | 67 | 8176828 | 4 |
| WMT | 69 | 5492521 | 9 |
| JNJ | 82 | 4882436 | -12 |
| PG | 75 | 10091350 | 2 |
| MA | 133 | 15645517 | -14 |
| NVDA | 82 | 7672045 | -10 |
| Average | 88.1 | 10216596 | -2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 88.1 hedge funds with bullish positions and the average amount invested in these stocks was $10217 million. That figure was $7972 million in TSM’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Tesla Inc. (NASDAQ:TSLA) is the least popular one with only 67 bullish hedge fund positions. Compared to these stocks Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is even less popular than TSLA. Our overall hedge fund sentiment score for TSM is 40. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on TSM as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on TSM as the stock returned 21.8% since Q3 (through November 27th) and outperformed the market by an even larger margin.
Follow Taiwan Semiconductor Mfg Co Ltd (NYSE:TSM)
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Disclosure: None. This article was originally published at Insider Monkey.
