Is Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) going to take off soon? The best stock pickers are becoming more confident. The number of bullish hedge fund bets increased by 5 in recent months. TSM was in 32 hedge funds’ portfolios at the end of the third quarter of 2015. There were 27 hedge funds in our database with TSM holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as CVS Health Corp (NYSE:CVS), Allergan, Inc. (NYSE:AGN), and Altria Group Inc (NYSE:MO) to gather more data points.
Follow Taiwan Semiconductor Mfg Co Ltd (NYSE:TSM)
Follow Taiwan Semiconductor Mfg Co Ltd (NYSE:TSM)
In the 21st century investor’s toolkit there are tons of metrics that market participants employ to appraise stocks. A couple of the best metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the S&P 500 by a very impressive amount (see the details here).
Now, let’s take a look at the new action surrounding Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM).
Hedge fund activity in Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM)
Heading into Q4, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the number one position in Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM). Fisher Asset Management has a $571 million position in the stock, comprising 1.2% of its 13F portfolio. The second most bullish fund manager is AQR Capital Management, managed by Cliff Asness, which holds a $233.6 million position; 0.5% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish consist of Jim Simons’s Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Richard Driehaus’s Driehaus Capital.
As industrywide interest jumped, some big names were leading the bulls’ herd. Prince Street Capital Management, managed by David Halpert, established the most valuable position in Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM). Prince Street Capital Management had $27.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $25.1 million position during the quarter. The other funds with new positions in the stock are Lawrence Sapanski’s Scoria Capital, Israel Englander’s Millennium Management, and Jacob Gottlieb’s Visium Asset Management.
Let’s now review hedge fund activity in other stocks similar to Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM). We will take a look at CVS Health Corp(NYSE:CVS), Allergan, Inc. (NYSE:AGN), Altria Group Inc (NYSE:MO), and Amgen, Inc. (NASDAQ:AMGN). This group of stocks’ market values resemble TSM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CVS | 60 | 2210254 | 3 |
| AGN | 151 | 20469067 | 0 |
| MO | 41 | 1626592 | -2 |
| AMGN | 73 | 4466393 | 5 |
As you can see these stocks had an average of 81.25 hedge funds with bullish positions and the average amount invested in these stocks was $7.19 billion. That figure was $1.29 billion in TSM’s case. Allergan, Inc. (NYSE:AGN) is the most popular stock in this table. On the other hand Altria Group Inc (NYSE:MO) is the least popular one with only 41 bullish hedge fund positions. Compared to these stocks, Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) is even less popular than MO. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is required.
