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Hedge Funds Have Never Been More Bullish On Taiwan Semiconductor Manufacturing Company Limited (TSM)

Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. TSM was in 42 hedge funds’ portfolios at the end of June. There were 39 hedge funds in our database with TSM holdings at the end of the previous quarter. Our calculations also showed that TSM isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Fisher - FISHER ASSET MANAGEMENT

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the fresh hedge fund action regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM).

What have hedge funds been doing with Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)?

Heading into the third quarter of 2019, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TSM over the last 16 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.

No of Hedge Funds with TSM Positions

When looking at the institutional investors followed by Insider Monkey, Ken Fisher’s Fisher Asset Management has the largest position in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), worth close to $1.3598 billion, amounting to 1.5% of its total 13F portfolio. The second largest stake is held by Jim Simons of Renaissance Technologies, with a $560.2 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Cliff Asness’s AQR Capital Management and Alex Snow’s Lansdowne Partners.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the most outsized position in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). Two Sigma Advisors had $48.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $32.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Ravee Mehta’s Nishkama Capital, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s also examine hedge fund activity in other stocks similar to Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). We will take a look at Novartis AG (NYSE:NVS), The Boeing Company (NYSE:BA), Oracle Corporation (NYSE:ORCL), and Comcast Corporation (NASDAQ:CMCSA). 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
NVS 30 1681993 -3
BA 74 5121698 3
ORCL 61 5536117 9
CMCSA 86 6540090 -1
Average 62.75 4719975 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 62.75 hedge funds with bullish positions and the average amount invested in these stocks was $4720 million. That figure was $4240 million in TSM’s case. Comcast Corporation (NASDAQ:CMCSA) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 30 bullish hedge fund positions. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on TSM as the stock returned 19.5% during the same time frame and outperformed the market by an even larger margin.

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

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