We recently compiled a list of Billionaire Prem Watsa’s 10 Stock Picks With Highest Potential. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against Prem Watsa’s other stock picks.
Momentum and technology stocks have dominated the markets over the past decade. They have been the catalyst behind valuations in the overall equity markets getting out of hand. Not anymore. A full-blown correction is in play, going by major US indices pulling back by up to 10% from all-time highs. The pullback has mostly been felt in the tech space, where most counters have been trading at premium valuations for years.
The correction being experienced comes on the backdrop of billionaire investor Prem Watsa insisting that value investing has been overshadowed over the past decade. The renowned investor and CEO of Fairfax Financial Holdings insists on patience and discipline in value investing as one of the ways of generating long-term returns.
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“In the last 10 years since that 2008, 2009 crash—call it the great financial crash—value investing basically, I think, one, maybe two years we’ve had that value-oriented stocks have done well compared to momentum.”
The dominance of technology stocks led by the “magnificent seven” stocks has tested the resolve of value-focused investors in recent years. The stocks have posted double-digit percentage gains over the past two years, resulting in premium valuations at the back of the artificial intelligence-driven rally. However, the stocks have come under pressure in 2025 amid a string of headwinds, among them the growing concerns about the impact of the US trade war.
Growing concerns that the US Federal Reserve will not cut interest rates as inflation ticks high on the pitfalls of the US trade war and tariffs have also sent tech stocks tumbling the most. With the stocks pulling back, billionaire Watsa insists that now may be the best time to look for value investments, trading at highly discounted valuations with significant upside potential.
For Watsa, the Canadian “Warren Buffett”, focus should always be on value investing, focusing on strong businesses at fair prices.
“We just think value investing—where you’re buying something, a dollar for 50 cents, is the expression—good companies run by good, honest, hardworking presidents, CEOs. And you’re buying them at fair prices. We think over time that should work.”
Watsa has built a reputation for identifying and focusing on undervalued opportunities. He has also cemented his place as one of the most respected figures in global finance with a reputation for navigating crises, such as the one in play amid the US trade war. Fairfax Financial Holdings, the holding company that Watsa founded in 1985, has carved a name over its disciplined underwriting and value-oriented investment strategy. It also focuses on delivering above-average returns over time. With a portfolio value of about $1.5 billion, the holding company portfolio is highly diversified across basic materials technology financials and consumer cyclical sectors.
Our Methodology
We combed Fairfax Financial Holdings Limited SEC Q4 2024 13F filings to identify Billionaire Prem Watsa’s 10 stock picks with highest potential. We then settled on stocks with more than 30% upside potential based on analysts ratings and analyzed why the stocks stand out as solid value investments well poised to generate significant value. Finally, we ranked the stocks in ascending order based on the value of the stock’s upside potential after highlighting hedge fund sentiment on the stocks.
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)
Number of Hedge Fund Holders: 186
Fairfax Financial Holdings’ Stake: $27.99 Million
Analysts’ Upside Potential as of April 21: 49.08%
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a semiconductor foundry that offers advanced manufacturing processes and a comprehensive portfolio of technologies. Consequently, it manufactures chips for other companies, including Apple, Intel, Qualcomm, and Nvidia. It is one of billionaire Prem Watsa’s top stock picks in the tech sector, offering exposure to the burgeoning artificial intelligence landscape. While the stock is down by about 24% year to date amid the broader stock market rout, the average consensus price target indicates the stock could rally by about 49%.
On April 17, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) delivered better-than-expected first-quarter 2025 results, affirming it benefits from the artificial intelligence boom. Revenue in the quarter was up 41.6% year-over-year to NT$839.25 billion as diluted earnings per share increased 60.4% to $2.12, with net income increasing 60.3% to NT$361.56 billion. Taiwan Semiconductor expects its full-year revenue to grow close to mid-20% amid the continued AI development.
Needham reiterated a Strong Buy on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) with a $225 price target buoyed by the company’s strong fundamentals despite demand and tariff concerns. Management reiterated strong business in the second quarter, attributed to strong demands for the industry-leading 3nm and 5nm technologies. Additionally, Taiwan Semiconductor has refuted claims that it’s negotiating a potential tie-up with ailing chipmaker Intel.
Overall TSM ranks 5th on our list of Prem Watsa’s stock picks with highest potential. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. 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 this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
