Was The Smart Money Right About Taiwan Semiconductor Mfg. Co. Ltd. (TSM)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) has experienced an increase in hedge fund interest of late. Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) was in 67 hedge funds’ portfolios at the end of September. The all time high for this statistic is 76. Our calculations also showed that TSM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s go over the key hedge fund action encompassing Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM).

Rajiv Jain of GQG Partners

Do Hedge Funds Think TSM Is A Good Stock To Buy Now?

At the end of September, a total of 67 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TSM over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the largest position in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). Fisher Asset Management has a $2.8336 billion position in the stock, comprising 1.8% of its 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $1.1891 billion position; the fund has 1.5% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish encompass Rajiv Jain’s GQG Partners, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Keywise Capital Management allocated the biggest weight to Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), around 30.63% of its 13F portfolio. Lansdowne Partners is also relatively very bullish on the stock, designating 7.21 percent of its 13F equity portfolio to TSM.

As industrywide interest jumped, specific money managers have jumped into Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) headfirst. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, established the largest position in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). LMR Partners had $49.1 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $41 million investment in the stock during the quarter. The other funds with brand new TSM positions are Brandon Haley’s Holocene Advisors, Campbell Wilson’s Old Well Partners, and Jonathan Lourie and Stuart Fiertz’s Cheyne Capital.

Let’s now review hedge fund activity in other stocks similar to Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). We will take a look at NVIDIA Corporation (NASDAQ:NVDA), JPMorgan Chase & Co. (NYSE:JPM), Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), Alibaba Group Holding Limited (NYSE:BABA), Walmart Inc. (NYSE:WMT), and UnitedHealth Group Inc. (NYSE:UNH). This group of stocks’ market valuations resemble TSM’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 99.4 hedge funds with bullish positions and the average amount invested in these stocks was $11224 million. That figure was $9511 million in TSM’s case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 71 bullish hedge fund positions. Compared to these stocks Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is even less popular than WMT. Our overall hedge fund sentiment score for TSM is 34.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on TSM as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on TSM as the stock returned 10.3% since Q3 (through January 31st) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.