Why Taiwan Semiconductor Stock Soared 35% Higher Last Month – The Motley Fool

Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
Shares of Taiwan Semiconductor (TSM -2.52%) gained 34.8% in November 2022, according to data from S&P Global Market Intelligence. The surge came in two distinct spurts.
The first hop materialized when a solid report of October revenue coincided with an encouraging inflation update. The second step up followed when Warren Buffett’s Berkshire Hathaway (BRK.A -0.82%) (BRK.B -0.90%) invested $4.1 billion in Taiwan Semi’s stock.
Warren Buffett. Image source: The Motley Fool.
Taiwan Semi, also known as TSMC, saw October revenue rise by 1% from the September reading. Investors had feared a much gloomier result based on “flattish” sales guidance in mid-October’s third-quarter report and a 4.5% sequential downtick in September. At the same time, that-morning’s inflation report showed that the consumer price index (CPI) rose just 0.4% in October — the smallest increase since January. TSMC investors embraced these separate reports, and the stock closed 9% higher.
Five days later, regulatory filings showed that Buffett’s conglomerate had invested $4.1 billion in TSMC’s American Depository Shares (ADS). Buffett controls 60 million ADS shares of TSMC, which translates into 300 million stubs of the underlying stock on the Taiwanese stock exchange. That’s far from a controlling stake in the chip manufacturer, but a 1.2% slice of the share count still makes Berkshire one of TSMC’s largest shareholders.
Whatever the size of the investment, investors tend to take heart any time Warren Buffett and his team are showing interest in a company and its stock. This is a huge vote of confidence in TSMC’s prospects for solid long-term growth, and the ADS rose 1.05% that day alone.
Buffett built his TSMC portfolio in September, encouraged by the stock’s increasingly robust discount pricing. I won’t be surprised to see a larger Berkshire stake reported when the October update comes later this week.
Taiwan Semi’s ADS had lost 30% of its value year-to-date at the start of September, and then dropped another 26% lower in October and November. Master investor Buffett loves dollar-cost averaging into new stocks, particularly when they operate in an industry far outside his normal wheelhouse.
November’s bounce didn’t spell the end of TSMC’s bargain-bin residence. The stock is still down by 38% year to date, so the buying window still looks wide open if you want to follow the Oracle of Omaha’s example.
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
Making the world smarter, happier, and richer.

Market data powered by Xignite.

source

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *