We recently compiled a list of the 10 Best Fundamental Stocks to Invest In. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against other best fundamental stocks.
As per Ameriprise Financial, the broader stock market continued to climb in Q3 2024, despite surprises that occurred on the way. Particularly, the stocks were resilient during September. In July, weaker-than-anticipated jobs data raised concerns that the US labor trends have been slowing faster than expected. As a result, there were worries that the US Fed left the rates too high for too long. Furthermore, in August, an unexpected increase in the rate from the Bank of Japan weighed over the global stocks for a brief period.
Moving forward, the results of the US Presidential election are likely to decide the course of the broader market in 2025. As per Fidelity Investments, the November election outcomes should shape the economic policy debate in 2025. Some of the examples of proposals from the Republican party consist of corporate tax cuts and lower regulatory pressures on some industries, but elevated tariffs and tighter immigration restrictions can be inflationary. Democratic party proposals consist of a focus on increasing taxes to finance public spending.
Fidelity Investments added that the fiscal deficit is expected to remain large over the upcoming several years (6%–7% of GDP), with interest payments grabbing an even larger share of the overall federal budget.
Q4 2024: What Lies Ahead?
Ameriprise Financial believes that, economically, the US consumer and business activity has demonstrated signs of healthy moderation in Q3, with inflation ebbing lower and labor/spending/savings trends slowing but staying firm throughout the quarter. The corporate profits saw a healthy growth in H1 2024 and this trend is likely to continue in H2 2024. The labor conditions are expected to remain healthy. Overall, the investment firm believes that the macroeconomic backdrop might remain strong and supportive for asset prices in Q4, outside of periods of brief volatility.
Another factor that should help companies and broader equities is an expectation that inflation and interest rates are on the path to move lower. After reducing the policy rate by a strong 50 bps in September, the US Fed might cut its policy rate by at least another 50 bps before 2024 ends. The September cut was the first since 2020 and likely concludes an aggressive rate-hiking cycle. As per the Fed projections, the policymakers might continue to cut rates through 2024-end and into 2025, supporting growth and labor moving forward.
While some sort of weak seasonality factors might be visible in Q4, Ameriprise Financial highlighted that S&P 500 managed to deliver an average return of ~4.2% in the fourth quarter since 2000 and an average of ~9.8% over the last 5 years.
The IMF’s chief economist hinted that the US remains close to achieving a “soft landing” by navigating challenges, such as inflation, without prompting a prolonged recession. While global growth is slowing, the US is still a positive exception. The inflation in the US appears to be easing towards the US Fed’s target, and the labor market, despite some cooling, remains resilient. As per State Street Global Advisors, despite the US election uncertainty and Middle East geopolitical tensions, the US Fed’s dovish pivot and still-solid US economy continue to make the case for a soft landing.
IMF’s chief economist stated that, globally, an inflation picture seems to be coming very close to central bank targets in the course of the next year. Also, several supply-side factors are aiding the US economy, including good US productivity data, and a significant increase in the number of foreign-born workers, which supported spurring growth without driving inflation.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM): Among 10 Best Fundamental Stocks to Invest In
A businessperson giving a presentation on a graph demonstrating the growth of a mid-capitalization equity market.
Our Methodology
To list the 10 Best Fundamental Stocks to Invest In, we conducted extensive research using Finviz screener and online rankings. To select the stocks, we chose companies with stable and reliable 10-year revenue and net income growth rates. We also mentioned the hedge fund sentiment around each stock, as of Q2 2024. Finally, the list has been arranged in the ascending order of their hedge fund holdings.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
10-Year Revenue Growth Rate: ~14.4%
10-Year Net Income Growth Rate: ~16.5%
Number of Hedge Fund Holdings: 156
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is engaged in manufacturing, packaging, testing, and selling integrated circuits and other semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the US, and internationally.
Market experts opine that Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s long-term growth trajectory is expected to be aided by its competitive advantages. These primarily includecost advantage and intangible assets. The company has been solidifying its position as a critical player in the technology landscape. With the surge in demand for advanced chips, thanks to AI applications and high-end smartphones, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) remains at the forefront of a technological revolution.
The company’s technology leadership forms the basis of its competitive advantage. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s focus on advanced nodes, mainly its N2 technology, has been attracting high-profile customers and fueling demand. The company’s strength is evident from the increased interest in its advanced manufacturing processes.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s dominance in the semiconductor foundry market is strengthened by its ability to cater to increasing demand for AI-related chips. Wall Street believes that the company is the primary beneficiary of the ongoing growth in AI, which should continue its upward trend.
Analysts at Needham & Company LLC restated a “Buy” rating on the shares of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), issuing a $210.00 target price on 17th October. Diamond Hill Capital, an investment management company, released its second-quarter 2024 investor letter. Hereis what the fund said:
“On an individual holdings’ basis, top contributors to return in Q2 included our long positions in Alphabet, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and Microsoft. Semiconductor manufacturer Taiwan Semiconductor’s (TSMC) fundamentals remain solid as demand for its chips continues growing — particularly as the machine learning and cloud computing trends gain more traction.”
Overall TSM ranks 3rd on our list of 10 Best Fundamental Stocks to Invest In. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than TSM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
