Hedge Funds Have Never Been This Bullish On Taiwan Semiconductor Mfg. Co. Ltd. (TSM)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM).

Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) has experienced an increase in support from the world’s most elite money managers of late. TSM was in 52 hedge funds’ portfolios at the end of September. There were 42 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 (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Ken Fisher of Fisher Asset Management

We’re going to take a gander at the recent hedge fund action regarding Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM).

Hedge fund activity in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM)

Heading into the fourth quarter of 2019, a total of 52 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from the second quarter of 2019. On the other hand, there were a total of 42 hedge funds with a bullish position in TSM a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).


More specifically, Fisher Asset Management was the largest shareholder of Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), with a stake worth $1576.8 million reported as of the end of September. Trailing Fisher Asset Management was Renaissance Technologies, which amassed a stake valued at $579 million. AQR Capital Management, Arrowstreet Capital, and Lansdowne Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. 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 20.17% of its portfolio. Jericho Capital Asset Management is also relatively very bullish on the stock, dishing out 10.57 percent of its 13F equity portfolio to TSM.

As one would reasonably expect, some big names have been driving this bullishness. Jericho Capital Asset Management, managed by Josh Resnick, assembled the most valuable position in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). Jericho Capital Asset Management had $185.2 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $76.5 million investment in the stock during the quarter. The other funds with brand new TSM positions are Leon Shaulov’s Maplelane Capital, Larry Chen and Terry Zhang’s Tairen Capital, and Kevin Cottrell and Chris LaSusa’s KCL Capital.

Let’s now review 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 The Walt Disney Company (NYSE:DIS), Royal Dutch Shell plc (NYSE:RDS), The Coca-Cola Company (NYSE:KO), and Intel Corporation (NASDAQ:INTC). 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
DIS 105 4233957 -8
RDS 29 1386135 -5
KO 50 23639411 2
INTC 58 4800111 15
Average 60.5 8514904 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 60.5 hedge funds with bullish positions and the average amount invested in these stocks was $8515 million. That figure was $5162 million in TSM’s case. The Walt Disney Company (NYSE:DIS) is the most popular stock in this table. On the other hand Royal Dutch Shell plc (NYSE:RDS) is the least popular one with only 29 bullish hedge fund positions. Taiwan Semiconductor Mfg. Co. Ltd. (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 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. A small number of hedge funds were also right about betting on TSM as the stock returned 13.6% during Q4 (through 11/22) and outperformed the market by an even larger margin.

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