We recently compiled a list of the Billionaire Prem Watsa’s Top 15 Long-Term Stock Picks. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against Prem Watsa’s other long-term stock picks.
Prem Watsa is a Canadian billionaire, entrepreneur, and investor often referred to as the Canadian Warren Buffett for his value-based investment approach and long-term focus. As the founder, chairman, and CEO of Fairfax Financial Holdings, Watsa has built a reputation for transforming his company into one of the leading insurance and investment firms in the world. His ability to identify undervalued opportunities and navigate financial crises has cemented his place as one of the most respected figures in global finance. Watsa was born in India in 1950 to a middle-class family. He earned a degree in chemical engineering from the Indian Institute of Technology, one of India’s premier institutions. In 1972, Watsa immigrated to Canada to pursue an MBA at the University of Western Ontario’s Richard Ivey School of Business.
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After completing his MBA, Watsa began his career in the insurance industry, where he gained valuable experience that would later shape his business philosophy and success. In 1985, Watsa acquired control of Markel Financial, a struggling Canadian insurance company. He renamed it Fairfax Financial Holdings, short for Fair and Friendly Acquisitions, and set out to implement his vision of combining insurance underwriting with value-oriented investing. Fairfax operates as a holding company, similar to Berkshire Hathaway, with investments spanning insurance, reinsurance, and other businesses. Under Watsa’s leadership, Fairfax has grown exponentially.
As of the end of the third quarter of 2024, Fairfax manages over $1 billion in 13F securities. The company has delivered a compound annual growth rate of approximately 15% in book value per share since its founding. Prem Watsa is a staunch proponent of value investing, inspired by the teachings of Benjamin Graham and Warren Buffett. His strategy involves identifying undervalued assets, particularly during times of market distress, and holding them for the long term. Watsa has been a strong advocate of investing in India, acquiring stakes in companies like Thomas Cook India and launching the Fairfax India fund to capitalize on the country’s growth. Watsa famously anticipated the 2008 financial crisis, using derivatives to protect Fairfax’s portfolio and earning over $2 billion in profits during the crash.
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For this article, we selected stocks by combing through the 13F portfolio of Fairfax Financial Holdings at the end of the third quarter of 2024. Only the companies that have been in the 13F portfolio of the fund consistently for the past three years were selected. These stocks are also popular among other hedge funds. 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 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)
Number of Hedge Fund Holders: 158
Fairfax Financial Holdings’ Stake: $24.6 million
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) makes and sells integrated circuits and semiconductors. The first quality that makes this company worth investment is its robust financial growth, as illustrated in the report for the third quarter of 2024. For instance, a 39% increase in revenue year-over-year, reaching NT $759.69 billion, and a 54.2% rise in net income was reported. The company attributes its growth to robust demand for its advanced 3-nanometer and 5-nanometer technologies, driven by smartphone and AI-related markets. TSMC’s impressive financial performance underscores its leadership in the semiconductor industry, making it an attractive prospect for investors. Secondly, the US Department of Commerce and TSMC Arizona announced up to $6.6 billion in direct funding under the CHIPS and Science Act, fulfilling a goal to bring the most advanced chip manufacturing in the world to the United States. TSMC also announced plans to build a third fab at TSMC Arizona. This third fab brings TSMC’s total US investment to more than $65 billion, making this the largest foreign direct investment (FDI) in Arizona’s history and the largest FDI in a greenfield project in US history.
Overall TSM ranks 4th on our list of billionaire Prem Watsa’s top long-term stock picks. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that some stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a 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.
