We recently compiled a list of the 20 Most Profitable Stocks of the Last 20 Years. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against the other profitable stocks.
The stock market has a long history of generating wealth for investors. While past performance doesn’t guarantee future results, studying successful companies can provide valuable insights. By understanding the factors that drive these companies’ growth, we can potentially make better investment decisions in the future. It’s important to remember that investing involves risk, and conducting thorough research is crucial before making any investment decisions.
Investors frequently overlook revenue in favor of profitability when evaluating stocks. Profit is what’s left over after all costs are paid. Revenue is the total amount of goods and services sold. Because it is essential to determine if a business is a growth stock or a value one, profitability is important. To learn more about growth stocks, see 12 Best Growth Stocks to Buy and Hold in 2024. You can also discover some undervalued value stocks by reading 11 Oversold Value Stocks To Buy Now.
The U.S. stock market has seen several major events since 2000, including the dot-com boom and fall, the 2008 financial crisis, a tech boom with trillion-dollar values, and the 2020 pandemic crisis. The S&P’s broader market index produced double-digit yearly returns thirteen times between 2003 and 2023. This strong performance can be largely attributed to the phenomenal returns generated by technology stocks, which significantly boosted the overall return of the large-cap market.
According to a recent estimate, the aggregate market value of the top seven S&P 500 corporations is almost double that of the Japanese market. The head of topical research and global economics, Jim Reid, cautions that this is the most concentrated the US market has ever been.
As interest in growth stocks increases due to the hype surrounding AI and the prospect of rate cuts, these companies’ fortunes are expected to soar. To satisfy market demand, businesses are making significant investments in AI. AI’s impact on altering work patterns was highlighted by Satya Nadella du. According to them,:
“A growing body of evidence makes clear the role AI will play in transforming work. Our own research, as well as external studies, show as much as 70% improvement in productivity, using generative AI for specific work tasks.”
Our Methodology
To identify the most profitable stocks, we looked at the 20-year annualized returns of publicly traded companies in the US market from 2004 to 2024 and selected and ranked those with the highest 20-year annualized returns.
A close-up of a complex network of integrated circuits used in logic semiconductors.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
20-Year Annualized Return: 20.48%
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has emerged as one of the most profitable stocks of the last 20 years, establishing itself as a global leader in semiconductor manufacturing. TSM shares returned more than 300% over the last 5 years.
TSMC is currently advancing with its 2nm (N2) process node which is set for risk production by late 2024 or early 2025, promising enhanced performance and energy efficiency. They are also improving 3D chip stacking for compact, high-performance solutions and developing AI-optimized chip designs to boost efficiency across various applications.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) reported strong profitability in Q1 2024, with net income reaching NT$225.49 billion ($7.18 billion), an 8.9% increase year-over-year, and earnings per share of NT$8.70 ($1.38 per ADR unit), surpassing analyst expectations. Revenue for the quarter totaled NT$592.64 billion ($18.87 billion), up 16.5% from the previous year which was driven by strong demand for advanced chips, particularly in AI applications utilizing 3nm and 5nm technologies. TSMC’s leadership in technology innovation, serving key clients like Nvidia and Apple, and its dominance in the global foundry market with a 61% share in Q4 2023, underscore its strategic advantages. The shift towards higher-margin products, such as 7nm and smaller chips, further bolstered TSMC’s impressive profitability and market position.
In Q1 2024, there were around 135 hedge fund holders in the company, up from 105 in the previous quarter. Fisher Asset Management held the largest position in the company with around 29,008,073 shares worth $3,946,548,478.
Four analysts rate TSMC stock as “Strong Buy,” with price targets ranging from $168 to $200, averaging $184.5. This predicts a potential increase of approximately 1.10% from the current stock price of $182.49, emphasizing the high upside potential according to analysts.
Overall TSMC ranks 13th on our list of the most profitable stocks of the last 20 years. You can visit 20 Most Profitable Stocks of the Last 20 Years to see the other profitable stocks that are on hedge funds’ radar. While we acknowledge the potential of TSMC 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 timeframe. If you are looking for an AI stock that is more promising than TSMC 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.
