Tech Stock Sensei

Join Buffett in Buying This Semiconductor Star

Taiwan Semiconductor (TSM) has been my favorite semiconductor company for a very long time. It is the world’s largest contract manufacturer of advanced processor chips.

And now, Warren Buffett has joined the Taiwan Semi fan club. On November 14, a filing with U.S. securities regulators showed that Buffett’s Berkshire Hathaway (BRK.B and BRK.A) had purchased a $4.1 billion stake TSM.

The purchase of 60 million of the ADRs (American Depositary Receipts) of TSM was Berkshire’s largest new stock investment during the third quarter of 2022. TSM is now the 10th  biggest position in the Berkshire portfolio.

The purchase is the latest move by the conglomerate into blue-chip technology companies. Buffett has, in recent years, shown a greater willingness to invest in technology stocks. The Berkshire portfolio now contains most prominently Apple, as well as computer and printer maker HP and cloud database firm Snowflake among its holdings.

Why Buffett Bought TSM

So why did Buffett buy Taiwan Semiconductor?

If you look at Apple, HP and Taiwan Semi, you will find one common theme – when purchased, all three looked cheap, with low price/earnings ratios. In TSM’s case, the PE is 12, thanks to the more than 40% drop in the stock year-to-date before the news broke of the purchase by Berkshire. 

Buying cheaply-valued stocks like Taiwan Semi is hardly a surprise for a value investor like Buffett.

Also, there is a certain logic to Buffett’s TSM purchase and his $130 billion investment in Apple stock. After all, it is Taiwan Semiconductor that makes most of the advanced chips that go into Apple’s products like the iPhone.

Buffett buying shares in TSM purchase is…

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