Taiwan Semiconductor Mfg. Co. Ltd. (TSM) vs. Top 20 Hedge Fund Stocks in 2019

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by almost 14 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) a safe investment right now? Money managers are taking an optimistic view. The number of long hedge fund bets inched up by 10 recently. Our calculations also showed that TSM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). TSM was in 52 hedge funds’ portfolios at the end of the third quarter of 2019. There were 42 hedge funds in our database with TSM positions at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Ken Fisher of Fisher Asset Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to take a gander at the latest hedge fund action surrounding Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM).

How are hedge funds trading Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM)?

At the end of the third quarter, a total of 52 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TSM over the last 17 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is TSM A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the number one position in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). Fisher Asset Management has a $1.5768 billion position in the stock, comprising 1.7% of its 13F portfolio. On Fisher Asset Management’s heels is Renaissance Technologies, with a $579 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions encompass Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Alex Snow’s Lansdowne Partners. 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 13F portfolio. Jericho Capital Asset Management is also relatively very bullish on the stock, designating 10.57 percent of its 13F equity portfolio to TSM.

Consequently, key hedge funds have been driving this bullishness. Jericho Capital Asset Management, managed by Josh Resnick, assembled the most outsized 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 initiated a $76.5 million position 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 also examine hedge fund activity in other stocks similar to Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). 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). All of these 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
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 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. A small number of hedge funds were also right about betting on TSM as the stock returned 65.2% in 2019 through December 23rd and outperformed the market by an even larger margin.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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