We recently compiled a list of the Top 10 Stocks to Buy According to Lone Pine Capital. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against the other stocks.
Lone Pine Capital, established in 1997 by Stephen Mandel, is a leading hedge fund and investment advisory firm based in Greenwich, Connecticut. The firm also operates offices in major financial hubs, including London, New York City, and San Francisco. Over the years, Lone Pine Capital has built a strong reputation in the investment world, focusing on long-term growth strategies. The firm’s disciplined approach to stock selection and asset management has enabled it to maintain a significant presence in the hedge fund industry.
Stephen Mandel, the founder of the firm, has had an extensive career in finance even before launching Lone Pine Capital. He previously worked as a managing director at Tiger Management, gaining valuable experience in investment strategy. A graduate of Dartmouth College with a degree in government, Mandel later earned an MBA from Harvard University. His expertise and leadership led to his ranking in the highest-earning categories among Forbes’ top hedge fund managers multiple times between 2012 and 2018. Although Mandel stepped away from active investment management in 2019, he continues to serve as a managing director at the firm. As of Q4 2024, Lone Pine Capital managed nearly $13.5 billion in 13F securities spread across 30 companies, with its top 10 holdings accounting for 55.89% of its portfolio.
Lone Pine Capital’s investment philosophy is rooted in identifying transformative changes that can unlock or accelerate value. By leveraging institutional knowledge and deep expertise across sectors and global markets, the firm continuously reassesses its investment theses and uncovers new opportunities. It strategically times market entry by recognizing key turning points in economic and industry cycles, allowing it to capitalize on shifts before they become widely apparent. The firm also prioritizes long-term value creation, typically holding investments for two to three years, though it has held stocks of certain companies for decades. This disciplined approach aligns investment timelines with investor expectations, optimizing returns. Additionally, Lone Pine Capital remains highly responsive to innovation in various forms—whether through technological advancements, business model evolution, or leadership changes—adapting its strategies based on emerging data and shifting market dynamics.
Moreover, the hedge fund’s investment strategies are designed to achieve long-term capital appreciation through a disciplined and research-driven approach. For its long-only strategy, the firm focuses on high-conviction investments in companies with strong growth potential, maintaining a diversified portfolio primarily across North America and Europe while limiting exposure to emerging markets. Its long/short equity strategy follows a similar approach, combining concentrated long positions with a diversified selection of short investments to navigate market fluctuations effectively. Net exposure varies based on market conditions and available opportunities, ensuring flexibility in positioning. In private investments, the firm applies its extensive research capabilities to identify promising companies in sectors such as software, financial technology, healthcare, and consumer markets. By targeting capital-efficient businesses with significant public market potential, Lone Pine Capital seeks to maximize returns through selective, high-impact investments.
Our Methodology
The stocks discussed below were picked from Lone Pine Capital’s Q4 2024 13F filings. They are compiled in the ascending order of the hedge fund’s stake in them as of December 31, 2024. To assist readers with more context, we have included the hedge fund sentiment regarding each stock using data from 1008 hedge funds tracked by Insider Monkey in the fourth quarter of 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)
Number of Hedge Fund Holders as of Q4: 186
Lone Pine Capital’s Equity Stake: $742.65 Million
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a leading multinational semiconductor company based in Taiwan, specializing in contract manufacturing and design. The company generates revenue through the sale of semiconductor wafers, foundry services, and customized solutions, catering to a diverse range of clients. TSMC also operates internationally through subsidiaries such as WaferTech in the United States and TSMC China Company Limited, reinforcing its global presence and expanding its market reach.
Several analysts have recently weighed in on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). Barclays increased its price target from $240.00 to $255.00, maintaining an “Overweight” rating in a report issued on January 17th. The stock currently holds a consensus rating of “Moderate Buy” with an average price target of $220.00.
TSM has a price-to-earnings (P/E) ratio of 27.66, a price/earnings-to-growth ratio of 0.66, and a beta of 1.06, indicating moderate volatility. Financially stable, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) maintains a debt-to-equity ratio of 0.24, a quick ratio of 2.30, and a current ratio of 2.57. Over the past year, TSMC’s share price has fluctuated between a low of $125.78 and a high of $226.40, reflecting strong investor interest and growth potential.
The company’s dominant position in the semiconductor industry, combined with its global expansion through key subsidiaries, ensures a steady revenue stream and long-term growth potential. Additionally, strong analyst ratings, a solid financial foundation, and increasing price targets highlight its resilience and attractiveness as a top investment choice in the tech sector.
Baron Emerging Markets Fund stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q4 2024 investor letter:
“Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) contributed in the fourth quarter due to a cyclical recovery in semiconductors and significant incremental demand for AI chips. We retain conviction that TSMC’s technological leadership, pricing power, and exposure to secular growth markets, including AI/high-performance computing, automotive, 5G, and internet of things, will allow the company to sustain strong double-digit earnings growth over the next several years.”
Overall TSM ranks 4th on our list of the stocks to buy according to Lone Pine Capital. While we acknowledge the potential for 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 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.