We recently compiled a list of the 20 High Growth Mega Cap Stocks You Can Buy And Hold For Next 5 Years. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against the other high growth mega cap stocks.
Exactly 5 years ago, the world struggled to deal with a black swan event: the COVID-19 pandemic. There was so much uncertainty that people didn’t even know if they’d be alive in the next few weeks, let alone figure out where the market was heading. Anyone who invested in the S&P 5 years ago would have gained 83%. If you had bought at the exact bottom, you’d have gained twice that amount.
What the above proves is that the present isn’t necessarily an indicator of what the future holds. All companies that had their workflows disrupted have recovered, some more than others. Some companies have strengthened their supply chains. Others have improved their work-from-home capabilities. Industries like airlines and restaurants have modified their business models to cater to the new dynamics.
These companies have been able to deal with the changing dynamics because of their financial strength and innovation. A company’s past performance and its finances give a good idea of whether it will be able to survive bad times. That’s why when we look at the best mega-cap stocks to hold for the next 5 years, we look at how well they have grown in the last 5 years.
To come up with our list of top 20 mega-cap stocks to hold for the next 5 years, we considered stocks with a market cap of at least $200 billion and a 5-year sales growth rate of at least 10%.
A close-up of a complex network of integrated circuits used in logic semiconductors.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a manufacturer, tester, packager, and supplier of ICs and other semiconductor devices. It offers various wafer fabrication processes and customers, manufactures masks, engineering support services, and other products and services. The company has grown its revenue by 22.25% over the last 5 year.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a leader in semiconductor manufacturing. If there is demand for semiconductor chips, TSM will benefit. Intel’s manufacturing debacle also shows that TSM has a moat and running a foundry isn’t everyone’s cup of tea. With such a strong moat, the stock would be part of any long-term portfolio.
Some investors worry about geo-political tensions weighing down on the stock. These fears are justified. However, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is increasing its presence in the US and has the US government’s support in doing so. In fact, it is one of the favorites to acquire Intel’s manufacturing segment, something that will help it diversify its manufacturing footprint outside Taiwan and hence out of the reach of any Chinese influence.
The stock trades at a forward PE of just under 20. The valuation is low compared to peers with a significantly smaller moat. If investors can keep the political concerns aside, this has the potential to be one of the best investments for the next 5 years.
Overall TSM ranks 5th on our list of the high growth mega cap stocks you can buy and hold for the next 5 years. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as 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 was originally published at Insider Monkey.
