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Should Value Investors Buy Taiwan Semiconductor (TSM) Stock?

Bonsai Partners recently released its Q2 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 101.8% for the quarter (net of fees), outperforming their benchmark, the S&P 500 Index which returned 20.5% in the same quarter. You should check out Bonsai Partners’ top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Bonsai Partners highlighted a few stocks and Taiwan Semiconductor Mfg Co Ltd (NYSE:TSM) is one of them. Taiwan Semiconductor Mfg Co Ltd (NYSE:TSM) is a semiconductor company. Year-to-date, Taiwan Semiconductor Mfg Co Ltd (NYSE:TSM) stock gained 38.0% and on August 17th it had a closing price of $80.19. Here is what Bonsai Partners said:

“Taiwan Semiconductor is the world’s largest outsourced foundry of semiconductor chips.

Taiwan Semiconductor roughly grew in line with the market: appreciating approximately 20% during the quarter.

While TSMC typically stays out of the limelight, the company was an object of media attention during the quarter due to the U.S.-China trade war. In particular, the Trump administration blocked TSMC from selling chips to its second-largest customer, the Chinese company Huawei.

I won’t get too deep into the specifics, but this was a remarkable development considering TSMC is a Taiwanese company with a limited U.S. presence. Fortunately, the market for semiconductor chips is a large and growing one, which led TSMC’s management to indicate that they expect to quickly replace Huawei’s lost volumes (which represent around 10-15% of sales). I continue to monitor this development.

This recent issue surprisingly highlights part of the rationale behind our TSMC investment – as the leading player in the outsourced foundry market, not having access to TSMC puts even a very large and capable company like Huawei at a significant disadvantage. Taiwan Semiconductor is an increasingly crucial partner for most players in the world of fabless semiconductors.”

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In Q1 2020, the number of bullish hedge fund positions on Taiwan Semiconductor Mfg Co Ltd (NYSE:TSM) stock decreased by about 14% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Taiwan Semiconductor’s growth potential. Our calculations showed that Taiwan Semiconductor Mfg Co Ltd (NYSE:TSM) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. You can subscribe to our free enewsletter below to receive our stories in your inbox:

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