Were Hedge Funds Right About Taiwan Semiconductor Mfg. Co. Ltd. (TSM)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM).

Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) was in 76 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 72. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. TSM investors should be aware of an increase in enthusiasm from smart money recently. There were 72 hedge funds in our database with TSM holdings at the end of December. Our calculations also showed that TSM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

To most market participants, hedge funds are assumed to be slow, old financial tools of yesteryear. While there are greater than 8000 funds trading today, We choose to focus on the aristocrats of this group, approximately 850 funds. These money managers manage the lion’s share of the hedge fund industry’s total asset base, and by paying attention to their finest picks, Insider Monkey has identified a number of investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .


Cliff Asness of AQR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the new hedge fund action surrounding Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM).

Do Hedge Funds Think TSM Is A Good Stock To Buy Now?

At the end of March, a total of 76 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the fourth quarter of 2020. On the other hand, there were a total of 54 hedge funds with a bullish position in TSM a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (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, Ken Fisher’s Fisher Asset Management has the number one position in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), worth close to $3.151 billion, amounting to 2.2% of its total 13F portfolio. On Fisher Asset Management’s heels is Masayoshi Son of SB Management, with a $1.3205 billion position; 8.5% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Cliff Asness’s AQR Capital Management and Panayotis Takis Sparaggis’s Alkeon Capital Management. 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 21.43% of its 13F portfolio. SB Management is also relatively very bullish on the stock, designating 8.5 percent of its 13F equity portfolio to TSM.

As aggregate interest increased, key money managers have jumped into Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) headfirst. Rokos Capital Management, managed by Chris Rokos, initiated the largest position in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). Rokos Capital Management had $158.4 million invested in the company at the end of the quarter. Renaissance Technologies also made a $156 million investment in the stock during the quarter. The following funds were also among the new TSM investors: Stanley Druckenmiller’s Duquesne Capital, Benjamin A. Smith’s Laurion Capital Management, and Edmond M. Safra’s EMS Capital.

Let’s now review hedge fund activity in other stocks similar to Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). We will take a look at Berkshire Hathaway Inc. (NYSE:BRK-B), JPMorgan Chase & Co. (NYSE:JPM), Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), Mastercard Incorporated (NYSE:MA), and UnitedHealth Group Inc. (NYSE:UNH). This group of stocks’ market values are similar to TSM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BRK-B 111 19880791 1
JPM 111 5253689 -1
V 164 26588103 -2
JNJ 81 6913373 0
WMT 58 5881223 -12
MA 151 17097200 -3
UNH 89 12091302 -2
Average 109.3 13386526 -2.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 109.3 hedge funds with bullish positions and the average amount invested in these stocks was $13387 million. That figure was $10871 million in TSM’s case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 58 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 overall hedge fund sentiment score for TSM is 47.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.8% in 2021 through August 6th and surpassed the market again by 6.7 percentage points. Unfortunately TSM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TSM investors were disappointed as the stock returned 0.3% since the end of March (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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