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Warren Buffett took new positions in TSMC?

Daniel Nenni

Daniel Nenni

Admin
Staff member
"Warren Buffett's Berkshire Hathaway (NYSE:BRK.B) (NYSE:BRK.A) took new positions in Taiwan Semiconductor Manufacturing (NYSE:TSM) (~60.1M shares)"

"Berkshire Hathaway Inc. added positions in materials manufacturer Louisiana-Pacific Corp., investment bank Jefferies Financial Group, and chip manufacturer Taiwan Semiconductor Manufacturing Co. Ltd. during the third quarter, according to a filing released after Monday's closing bell."

What is the history here? Does anyone know what Warren is up to?

TSM
76.92 +4.12 (+5.66%)
After hours: 06:35PM EST
 
That was a surprise to me too. Buffett and his staff must think TSMC has a lot of growth potential or is undervalued, or both. Interestingly, BRK's largest holding is Apple, and BRK is Apple's 2nd largest stockholder, after the Vanguard Group. BRK owns 5.6% of Apple, which is currently worth about $132.7B, and AAPL represents almost 42% of BRK's portfolio.
 
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I don’t see how anyone could look at TSMC and not think it’s stock is a screaming buy. Especially at its current valuation. Insane moat with absurd profitability and way above market growth. The invasion narrative is holding the stock underwater by wallstreet clowns who think they could somehow escape the ramifications of a CCP invasion by simply not holding the stock. Fools, all of them.
 
Buffett doesn't normally invest in technology stocks. Apple was his second big investment. IBM was his first, if my memory still works, and Buffett didn't do well in that choice. Not horrible, but certainly not up to his standards. Apple has been a huge winner for him, and he seems to like it because everything Apple does is differentiated from the competition. That is apparently what he thought he saw in IBM. Buffett is a buy and hold long-term sort of guy, as is his partner, Charlie Munger, so technology firms, where your competitive advantage can be displaced by an unforeseen technical breakthrough, has never been in the BRK comfort zone. I wouldn't be surprised if TSMC is on their radar because they see Apple and TSMC as indivisible for a long time.

Buffett isn't always on the correct track, as his IBM foray and his fascination with airlines a couple of years ago proved, but he does carry a lot of weight in the investment world. But technology savvy is not what I think BRK is. On more traditional companies they're correct more consistently.

[Edit: had to correct my spelling of Warren's last name.]
 
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Mooredaddy said:
I don’t see how anyone could look at TSMC and not think it’s stock is a screaming buy. Especially at its current valuation. Insane moat with absurd profitability and way above market growth. The invasion narrative is holding the stock underwater by wallstreet clowns who think they could somehow escape the ramifications of a CCP invasion by simply not holding the stock. Fools, all of them.
Click to expand...
I think you're misinterpreting the "fools". China doesn't have to invade to tarnish the shine on TSMC stock. All that has to happen is saber rattling. Investment people aren't liking TSMC stock as much as they should, not because China is predicted to invade, but because they will almost certainly threaten and make some aggressive moves, as they already have. The more that happens, the more selling goes on. Maybe an influencer like Buffett will bump the acceptable PE ratio up by an integer or two.
 
Mooredaddy said:
I don’t see how anyone could look at TSMC and not think it’s stock is a screaming buy. Especially at its current valuation. Insane moat with absurd profitability and way above market growth. The invasion narrative is holding the stock underwater by wallstreet clowns who think they could somehow escape the ramifications of a CCP invasion by simply not holding the stock. Fools, all of them.
Click to expand...
I don't think that's it. So say the PRC invades the ROC. What happens to GF? Their logistics train is screwed up for a few years but not destroyed. Their biggest issue would definitely be loss of part of the wafer supply chain, and loss of a large share of the places their chips could be packaged. What happens to TSMC in this scenario? The company is all but totally destroyed and the stock becomes paper. Neither gets out unscathed, but one is objectivity higher risk in this situation.

I think part of TSMC's valuation is a market cap ceiling. The main way TSMC can grow is if the semi industry grows. TI, Infineon, memory makers, NXP, etc will never go fabless. Intel will probably not go fabless anytime in the foreseeable future. UMC and GF have certain capabilities that TSMC doesn't have, and Samsung (and maybe Intel) are important diversification options that also keep TSMC honest on pricing. As a result TSMC's market share of the current semiconductor market cannot grow much from what it is right now. When we are in the middle of a semiconductor downcycle, it makes sense for investors to wait for the (semi/world) market to bottom out. Once it has, TSMC becomes a safer bet as the leading edge market starts growing again (and with it TSMC's share of the semis market). The way investors see it, buying shares in TSMC at the moment is kind of like buying shares in Boeing, Airbus, or AT&T. Do they make tons of money? Yes. Can their market shares grow? Not really. So what is the point of buying now when these markets are doing poorly. To them might as well wait for times to be better before pumping up the stock. When say the airline market grows, that is when Airbus or Boeing can sell more planes (unlike now where their sales are just filling old orders).
 
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Mooredaddy said:
I don’t see how anyone could look at TSMC and not think it’s stock is a screaming buy. Especially at its current valuation. Insane moat with absurd profitability and way above market growth. The invasion narrative is holding the stock underwater by wallstreet clowns who think they could somehow escape the ramifications of a CCP invasion by simply not holding the stock. Fools, all of them.
Click to expand...

Warren Buffett and Charles Munger like to invest a company if the target company meets some or all the following attributes:

1. Near term and long term growth especially large scale growth (multi billion dollar is the best)

2. Steady and nice dividends.

3. Product and technology leadership in the respect industry.

4. Unique position in product and services.

5. Superior management team and great strategy.

6. Great execution.

7. Good corporate governance.

8. Solid financial management and reporting;

9. Integrity.

10. Stock price is not too high and not being inflated.

11. Management team is expected to stay. Berkshire Hathaway can't and won't try to be an expert in each industry it invested.

12. Low maintenance. The company and management team don't create unnecessary news and distractions. For example CC Wei is not involved in a love triangle and is not having two additional partners who are expecting babies and is not getting into multiple SEC investigations.


IMO, TSMC matches all the above criteria.
 
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Daniel Nenni said:
I wonder if Warren talks to Tim Cook? Tim is a powerful ally and he is in TSMC's corner, absolutely.
Click to expand...
Hmmm... let's see... Buffett controls about $150B worth of Apple stock, is still said to be buying, is a big fan of Cook's, and is one of the most influential investors in the world. I'd bet $100 easy that Cook takes Buffett's calls. :)
 
Fred Chen said:
In the big perspective, he didn't just buy TSMC but also other unrelated companies. https://www.marketwatch.com/story/w...eedy-only-when-others-are-fearful-11668526053
Click to expand...
True, but TSM is now BRK's 10th largest holding, in the context that BRK has a closely watched Top 50 investment list. Buffett is also well-known for not being comfortable with technology stocks. Given the geo-political situation, and that in the long view TSM and other chips stocks are depressed, the BRK investment is quite significant.
 
nghanayem said:
I don't think that's it. So say the PRC invades the ROC. What happens to GF? Their logistics train is screwed up for a few years but not destroyed. Their biggest issue would definitely be loss of part of the wafer supply chain, and loss of a large share of the places their chips could be packaged. What happens to TSMC in this scenario? The company is all but totally destroyed and the stock becomes paper. Neither gets out unscathed, but one is objectivity higher risk in this situation.
Click to expand...

There are hundreds of hard to replace consumables all being single source in Taiwan, including materials. It will shut down the entirety of the industry.
 
Paul2 said:
There are hundreds of hard to replace consumables all being single source in Taiwan, including materials. It will shut down the entirety of the industry.
Click to expand...
Samsung and SK also have single source vendors in SK. It is my understanding that most of the TSMC support companies that only exists in the ROC only support companies operating in Taiwan. The most complicated equipment does not come from the ROC; and the single source Taiwan folks make more simple tools that have local equivalents in the rest of Asia and the west, or just supply chemicals and the like.

The one big exception is that they produce like 1/3 of the world's wafers, and this would be a massive disruption to all companies. My point being that this wouldn't shutdown GF, TI, intel, Micron, etc. Rather this would greatly disrupt their business for a few years (to say nothing of the demand from former TSMC customers). This is in stark contrast to TSMC which would be all but totally destroyed.
 
nghanayem said:
Samsung and SK also have single source vendors in SK. It is my understanding that most of the TSMC support companies that only exists in the ROC only support companies operating in Taiwan. The most complicated equipment does not come from the ROC; and the single source Taiwan folks make more simple tools that have local equivalents in the rest of Asia and the west, or just supply chemicals and the like.

The one big exception is that they produce like 1/3 of the world's wafers, and this would be a massive disruption to all companies. My point being that this wouldn't shutdown GF, TI, intel, Micron, etc. Rather this would greatly disrupt their business for a few years (to say nothing of the demand from former TSMC customers). This is in stark contrast to TSMC which would be all but totally destroyed.
Click to expand...

Super-thin wafer thinning will impact recent stacked die products, and other tricky wafer handling tech will be a problem too. But plastics... you are to quick to dismiss how much tech, and RnD went into small thing like ultra-low outgas, ultra-low particle, fluorine, or plasma etch survivable plastics.

You absolutely cannot do some modern semi processes without that, but the entire corpus of works on that may well be one man's head, who may only leave it on napkin notes to his family enterprise successor, and there is no "next best substitute" available which will do at all.

Rails bearings for steppers for example is another tech of absolutely irreplaceable value, who nobody notices. Such examples are numberous.

Probing tech, AMHS programming, fab underfloor equipment, etc, etc
 
Paul2 said:
Super-thin wafer thinning will impact recent stacked die products, and other tricky wafer handling tech will be a problem too. But plastics... you are to quick to dismiss how much tech, and RnD went into small thing like ultra-low outgas, ultra-low particle, fluorine, or plasma etch survivable plastics.

You absolutely cannot do some modern semi processes without that, but the entire corpus of works on that may well be one man's head, who may only leave it on napkin notes to his family enterprise successor, and there is no "next best substitute" available which will do at all.

Rails bearings for steppers for example is another tech of absolutely irreplaceable value, who nobody notices. Such examples are numberous.

Probing tech, AMHS programming, fab underfloor equipment, etc, etc
Click to expand...
I agree. But at least at my fab things like AMHS programming subfab equipment/piping and the like comes from American companies.
 
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