We recently compiled a list of the 10 Best High Volume Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against the other high volume stocks.
On September 18, the Federal Reserve implemented its first interest rate cut since the onset of the COVID-19 pandemic, reducing benchmark rates by half a percentage point to counter a potential labor market slowdown. This adjustment brings the federal funds rate to 4.75% to 5%. Aside from the emergency rate cuts during the pandemic, the last time the Federal Open Market Committee (FOMC) made a half-point reduction was during the 2008 global financial crisis. Following the decision, Fed Chairman Jerome Powell made the following remarks:
“We’re trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with this inflation. That’s what we’re trying to do, and I think you could take today’s action as a sign of our strong commitment to achieve that goal.”
The post-meeting statement emphasized that the Federal Reserve has grown more confident in inflation moving sustainably toward the 2% target. It believes the risks to achieving its employment and inflation goals are now roughly balanced. Wall Street expects that the ensuing rate cuts will enable well-established, financially stable companies to boost spending and investments, potentially driving up their stock prices through the remainder of 2024 and into early 2025. Similarly, Wells Fargo analysts suggest that the global economy stands to benefit as many major central banks have already announced or are expected to announce rate cuts. However, not everyone is optimistic. Billionaire investor Ray Dalio highlighted that the U.S. economy continues to grapple with an “enormous amount of debt.” During an interview, he pointed out that the Federal Reserve faces the challenge of maintaining interest rates high enough to benefit creditors, while not raising them so much that they become burdensome for debtors. Dalio described this as a difficult “balancing act”.
On another front, the Conference Board’s consumer confidence index dropped to 98.7 in September, down from 105.6 in August, marking the largest one-month decline since August 2021. This was below the Dow Jones forecast of 104 and significantly lower than the pre-pandemic level of 132.6 recorded in February 2020. All five components of the index saw declines, with the most significant drop occurring among those aged 35-54 and earning less than $50,000. The last time the index fell this sharply was when inflation was starting its rise to a 40-year high. Commenting on the sentiment shift, Dana Peterson, chief economist at The Conference Board, noted:
“Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further. Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income.”
Within a complex economic landscape marked by mixed signals across sectors, investor sentiment remains cautiously optimistic, with market participants closely watching economic indicators and Fed policies to identify future trends. With this in mind, we present a list of the 10 Best High Volume Stocks To Buy According to Hedge Funds.
Our Methodology
We used stock screeners to identify stocks that met specific criteria as of September 23. Our selection criteria was focused on stocks with notable market activity, including a 3-month average trading volume exceeding 5 million shares. We also considered companies with a quarterly revenue growth rate of over 15%. Additionally, we highlighted the number of hedge funds invested in each stock, as of Q2 2024.
At Insider Monkey, we are obsessed with 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 275% since May 2014, beating its benchmark by 150 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)
Avg Volume: 16.74 million
Quarterly Revenue Growth: 33.01%
Number of Hedge Fund Holders: 156
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a Taiwan-based semiconductor firm that provides integrated circuits and other semiconductor devices to major tech companies, including Apple and NVIDIA.
In the second quarter of 2024, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) reported a 13.6% sequential increase in revenue, driven by rising demand for its advanced nanometer technologies. The company anticipates a 50% compound annual growth rate (CAGR) in revenue from AI chips by 2027 and projects overall revenue growth of 20% for the year ending 2024.
Bernstein has maintained an Outperform rating on TSM, noting that the stock remains attractively valued, particularly as the company is positioned to perform well during a recession. Analysts from Bernstein expect the company’s revenue to grow by 26% and earnings per share by 29% this year, with continued momentum into 2025 and beyond. This growth is fueled by strong demand from data center AI and high-end smartphones utilizing TSMC’s advanced N3 and N4/5 nodes.
As of the end of Q2 2024, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was held by 156 hedge funds, with total stakes valued at $21.28 billion. Fisher Asset Management was the largest shareholder, holding a position worth $4.94 billion as of June 30.
Ave Maria World Equity Fund stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q2 2024 investor letter:
“Top contributors to performance included SharkNinja, Inc. and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). Taiwan Semiconductor Manufacturing Company Limited is the global leader in semiconductor foundry services, with a dominant market share position in advanced semiconductors. The company has significant pricing power and stands to benefit from secular “megatrends” (5G, high performance computing, AI, rising silicon content per device, etc.) due to its technological leadership.”
Overall TSM ranks 2nd on our list of the best high volume stocks to buy according to hedge funds. While we acknowledge the potential of TSM as an investment, we believe that certain AI stocks hold promise for delivering high returns and doing so within a shorter timeframe. 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.