The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 30th. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM).
Is Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) a first-rate investment right now? The smart money was becoming less hopeful. The number of bullish hedge fund bets dropped by 12 in recent months. Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) was in 64 hedge funds’ portfolios at the end of June. 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 Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. We check out articles like Warren Buffett’s 3 money saving tips that provide inflation and volatility hedges. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a glance at the fresh hedge fund action encompassing Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM).
Do Hedge Funds Think TSM Is A Good Stock To Buy Now?
At second quarter’s end, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TSM over the last 24 quarters. So, let’s examine 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 number one position in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). Fisher Asset Management has a $3.1219 billion position in the stock, comprising 2% of its 13F portfolio. Coming in second is Rajiv Jain of GQG Partners, with a $1.1058 billion position; 3.2% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Cliff Asness’s AQR Capital Management and Masayoshi Son’s SB Management. 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 29.36% of its 13F portfolio. SB Management is also relatively very bullish on the stock, designating 9.54 percent of its 13F equity portfolio to TSM.
Seeing as Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedgies who sold off their entire stakes heading into Q3. It’s worth mentioning that Daniel S. Och’s OZ Management dumped the largest position of the 750 funds monitored by Insider Monkey, totaling an estimated $87.2 million in stock, and Stanley Druckenmiller’s Duquesne Capital was right behind this move, as the fund sold off about $46.3 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 12 funds heading into Q3.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) but similarly valued. These stocks are Alibaba Group Holding Limited (NYSE:BABA), Visa Inc (NYSE:V), NVIDIA Corporation (NASDAQ:NVDA), JPMorgan Chase & Co. (NYSE:JPM), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), and UnitedHealth Group Inc. (NYSE:UNH). This group of stocks’ market caps are similar to TSM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BABA | 146 | 16793500 | 11 |
| V | 162 | 27609638 | -2 |
| NVDA | 86 | 9098047 | 6 |
| JPM | 108 | 4928203 | -3 |
| JNJ | 88 | 7057087 | 7 |
| WMT | 71 | 8048192 | 13 |
| UNH | 105 | 13124871 | 16 |
| Average | 109.4 | 12379934 | 6.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 109.4 hedge funds with bullish positions and the average amount invested in these stocks was $12380 million. That figure was $10694 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 18.3. 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 dodged a bullet by taking a bearish stance towards TSM. Our calculations showed that the top 5 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th but managed to beat the market again by 2.3 percentage points. Unfortunately TSM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); TSM investors were disappointed as the stock returned -5% since the end of the second quarter (through 10/29) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Taiwan Semiconductor Mfg Co Ltd (NYSE:TSM)
Follow Taiwan Semiconductor Mfg Co Ltd (NYSE:TSM)
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Disclosure: None. This article was originally published at Insider Monkey.
