Should You Consider Increasing Your Taiwan Semiconductor (TSM) Shares?

Wedgewood Partners, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. For the first quarter of 2022, the fund’s Composite (net) declined by -10.6%. The S&P 500 Index declined by -4.6%. The Russell 1000 Growth Index declined -by 9.0%, while the Russell 1000 Value Index declined -by 0.7%. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Wedgewood Partners mentioned Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and explained its insights for the company. Founded in 1987, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)  is a Hsinchu, Taiwan-based multinational semiconductor contract manufacturing and design company with a $510.0 billion market capitalization. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) delivered a -18.24% return since the beginning of the year, while its 12-month returns are down by -16.89%. The stock closed at $98.36 per share on April 15, 2022.

Here is what Wedgewood Partners has to say about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q1 2022 investor letter:

Taiwan Semiconductor pulled back on geopolitical concerns and periodic market fears about the end of the “cycle” in semiconductors. First, we think the Company might be one of the most – if not the most – important Companies in the world. Taiwan Semiconductor has a near-monopoly on semiconductor processing at advanced nodes, which makes it irreplaceable to customers such as Apple, AMD, NVIDIA, Mediatek, Amazon, and even Intel. Second, much less important manufacturers have more direct geopolitical risk than Taiwan Semiconductor, yet they trade at substantial premiums – both multiple and market cap. For example, Tesla is a heavy manufacturer of only about 1 million automobiles with significant production capacity located in the heart of China, yet it trades at double the market cap of Taiwan Semiconductor. Third, while it is hard to know when the current semiconductor “cycle” will slow or end, we see very few signs of it, as Taiwan Semiconductor continues to generate bookings well in excess of its current capacity – unlike any previous cycle. Taiwan Semiconductor traded to levels that are much too pessimistic given its competitive positioning and opportunity for growth driven by a more robust semiconductor cycle, driven by high-performance computing. As such, we added to our position during the quarter.”


Our calculations show that Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was in 72 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 67 funds in the previous quarter. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) delivered a -29.33% return in the past 3 months.

In March 2022, we published an article that includes Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

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