Berkshire Hathaway CEO Warren Buffett isn’t known for delving into tech stocks very often, but he was willing to make an exception with Taiwan Semiconductor (TSM). TSM is an industry giant with a decent yield and undeniable value, making it a perfect investment opportunity.
Taiwan Semiconductor isn’t a household name in the U.S., but perhaps it ought to be. The company is, by far, the world’s biggest semiconductor manufacturer. No American chipmaker even comes close.
If you’ve been following Buffett’s investments over the years, you’ll find that he prefers big companies that are proven leaders in a particular field. Plus, he waits patiently until the stocks of these companies are trading at an undervalued price. As it turns out, Taiwan Semiconductor fits this description perfectly.
Consider, first and foremost, that Taiwan Semiconductor is an industry leader with a market cap of $424 billion. Next, Taiwan Semiconductor’s dividend yield is 2.3% on a forward basis (1.9% on a trailing-12-month basis), and that’s bound to catch Buffett’s attention as an income-focused investor.
A Bargain Stock
Is TSM stock a “Buffett bargain,” though? It likely is, as the share price is nowhere near its 52-week high of $142.62. Moreover, Taiwan Semiconductor’s P/E ratio is extremely reasonable at just 13.7x. It’s not often that traders get to grab shares of a global market leader at such a low multiple.
Maybe you’re not convinced yet of TSM’s qualities. If you’re still skeptical, consider that Taiwan recently enacted a set of rules to take effect this year, which are similar to the incentives provided in the CHIPS Act by the U.S. government.
According to a Bloomberg report, Taiwan’s recently enacted incentives “let local chip firms turn 25% of their annual research and development expenses into tax credits.” Taiwan’s chip companies will also get to claim “tax credits on 5% of the annual costs of buying new equipment for advanced process technologies,” Reuters reports.
Strong Revenue Growth
Taiwan Semiconductor has strong momentum in its revenue growth. During Q4, Taiwan Semiconductor’s revenue increased 43% year-over-year to the equivalent of $20.6 billion. Also, the company’s December sales grew 24%. It just goes to show that Buffett has a keen eye for resilient companies, regardless of their location in the world.
About Taiwan Semiconductor
Taiwan Semiconductor Manufacturing Company (TSMC) is a semiconductor foundry that designs and manufactures integrated circuits (ICs) and other semiconductor devices. It is based in Hsinchu, Taiwan, and is the largest dedicated independent semiconductor foundry in the world, manufacturing chips for a wide range of customers and end markets. TSMC’s primary customers include companies in the computer and communications industries, such as Apple, Qualcomm, and Nvidia. The company’s product portfolio includes a wide range of process technologies, such as advanced node technologies like 5nm, 7nm, and 12nm. TSMC’s revenue is heavily reliant on its manufacturing and design services of ICs, it also provides wafer foundry and technology licensing services.
