We recently published a list of 10 Good Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against other good stocks to buy according to hedge funds.
When seeking investment opportunities, individual investors often look to hedge funds for guidance. Hedge funds are known for their sophisticated investment strategies, high-level expertise, and significant market influence. Hedge funds are massive players in the global investment landscape, managing trillions of dollars in assets. According to Preqin, as of Q3 2024, hedge funds manage approximately $4.87 trillion in assets globally. This significant amount of capital means that hedge funds have substantial market power. When they invest in certain stocks, their actions can impact stock prices, drive market trends, and influence broader economic sentiment. As such, their decisions are followed closely by institutional and retail investors alike.
A key reason hedge fund stock picks are worth paying attention to is their wide diversification across various sectors and strategies. Multi-strategy hedge funds, which allocate capital across various investment strategies, have gained prominence. According to WealthBriefing from 2017 to the third quarter of 2024, the number of multi-strategy fund launches grew at an annual rate of 4%.
Hedge Funds’ Dual Investment Strategy (Long and Short Positions)
Hedge funds are also known for using a dual approach—investing in both long and short positions. This allows them to profit from rising and falling markets, giving them a comprehensive view of market dynamics. According to data from BarclayHedge, hedge funds that employed a long/short strategy in 2024 saw returns of around 9%.
Hedge funds have increasingly focused on artificial intelligence (AI) and technology sectors, adjusting their portfolios to capitalize on emerging opportunities. According to a Goldman Sachs report analyzing 695 hedge funds with $3.1 trillion in gross equity positions at the start of Q1 2025, there has been a notable shift in investment strategies. The report indicates that hedge funds have become more selective within popular sectors and themes. Notably, they have incrementally added positions to AI Phase 3 companies with AI-enabled revenues. Companies like Salesforce are ranked among the “Rising Stars,” reflecting a significant increase in hedge fund popularity during the last quarter.
Our Methodology
We used a consensus-based approach by using opinions from financial websites like Forbes Advisor, Motley Fool, and Morningstar to first compile a list of good stocks to invest in right now. We then shortlisted and ranked these stocks by using Insider Monkey’s hedge fund data for the fourth quarter of 2024. The stocks are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest number.
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 373.4% since May 2014, beating its benchmark by 218 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)
No of Hedge Fund Holders: 186
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a leading Taiwan-based semiconductor company specializing in integrated circuit manufacturing services. The company offers advanced process technologies, including 5nm mass production, and is actively developing 3nm and 2nm process nodes.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) faced operational challenges in January 2025 after a 6.4-magnitude earthquake in southern Taiwan led to wafer losses, though facilities remained structurally intact. Meanwhile, speculation around a potential investment in Intel surfaced, though Taiwan’s Economy Ministry denied receiving official information. It reaffirmed that any major overseas joint ventures would require government approval. These developments highlight the company’s resilience in managing disruptions.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) delivered strong Q4 2024 results, with net revenue rising 14.3% YoY to $26.88 billion, driven by solid demand for advanced chip technologies. Net income surged 15.2% YoY to $11.39 billion, while EPS climbed 57% to $0.44, reflecting strong profitability. Operating expenses increased 20.6% YoY to $2.63 billion, in line with business expansion.
On February 18, 2025, Charles Shi of Needham reiterated his “Strong Buy” rating on the stock, maintaining a $225 price target.
Overall, TSM ranks 6th on our list of good stocks to buy according to hedge funds. While we acknowledge the potential for TSM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI 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.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
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