We recently compiled a list of the 8 most profitable blue chip stocks to invest in. In this article, we’ll take a look at how Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM) stands compared to other profitable blue-chip stocks.
September’s inflation report was better than expected, showing that inflation remains strong. Headline inflation rose 2.4%, slightly above expectations of 2.3% and down from 2.5% in August. Month-on-month, the CPI rose by 0.2%, exceeding expectations of 0.1%.
The core inflation rate, which excludes food and energy, also exceeded expectations at 3.3%, compared to the expected 3.2%, marking a slight increase from August. On a monthly basis, core CPI rose 0.3%, in line with August’s figure but above expectations for a 0.2% rise.
Following this report, markets are predicting either a 25 basis point rate cut or no rate cut at the next Fed meeting. According to the CME FedWatch tool, 79.9% of interest rate traders expect rates to be cut by 450 to 475 bps at the next Fed meeting, while 20.1% expect rates to remain unchanged. At the beginning of the month, 32.1% expected a 50bp rate cut, and 67.9% expected a 25bp cut.
Understand inflation trends and the Federal Reserve’s strategy
Despite continued inflation, IBM Vice Chairman Gary Cohn believes the Fed will cut interest rates by 100 bps this year. In an interview on CNBC’s “Money Movers,” he suggested the U.S. is experiencing something of a soft landing, with inflation falling but not steady. He said inflation is likely to hover around this level, making it difficult to reach the Fed’s 2% target.
Cohn noted that for the first time in nearly 20 years, the Fed is balancing its dual responsibilities of employment and price stability, focusing primarily on both at once. He believes the Fed is making the right decision, but is now in a delicate position after missing the opportunity to meet this year.
Cohn expects the Fed to cut rates by a total of 100 basis points this year, and perhaps 25 basis points in the coming months. In response to a question about the inflation target, he said he thought it would be better to slightly exceed the target inflation rate, and that an inflation rate of around 2.2% would be more acceptable if the economy was growing than below the target. He suggested that it would be possible.
Cohn also highlighted concerns about geopolitical risks, saying global tensions could lead to inflationary pressures through supply chain disruptions and higher transportation costs.
the story continues
our methodology
In this article, we use a stock screening tool to identify nearly 30 stocks with market caps of over $100 billion and TTM net income of over $10 billion. We then narrowed the list to the eight stocks that have a five-year compound annual growth rate of net income of greater than 10% and are most widely held by institutional investors. The most profitable blue chip stocks are listed in ascending order of hedge fund sentiment from Insider Monkey’s Q2 database of 912 hedge funds.
Why are we interested in stocks that hedge funds invest in? The reason is simple. Our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming the benchmark by 150 percentage points (Learn more ).
Close-up of a complex network of integrated circuits used in logic semiconductors.
Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM)
Market capitalization: $970.523 billion
5-year net profit CAGR: 22.90%
TTM Net Income: $29.98 billion
Number of hedge fund holders: 156
Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM) pioneered the pure foundry model and has maintained its position as a top semiconductor foundry for decades. By 2023, the company served 528 customers and produced nearly 12,000 products for multiple sectors including high-performance computing, smartphones, IoT, automotive, and consumer electronics.
The company uses advanced technology and design solutions to collaborate with customers and partners around the world to drive innovation in the semiconductor industry. We have operations in Asia, Europe, and North America. The company’s manufacturing facilities, which include several wafer fabs in Taiwan, the United States, and China, produced more than 16 million 12-inch equivalent wafers last year.
The company is further expanding its business at a fast pace, especially since the rise of AI. On August 20, ESMC, a joint venture between Taiwan Semiconductor (NYSE:TSM), Bosch, Infineon and NXP, celebrated the groundbreaking of its first semiconductor factory in Dresden, Germany. European Commission President Ursula von der Leyen announced a €5 billion package to support the project.
The facility will produce advanced semiconductors for the European automotive and industrial sectors, with a target production capacity of 40,000 wafers per month. The total investment is expected to exceed EUR 10 billion and create approximately 2,000 direct high-tech jobs and further indirect employment opportunities.
Taiwan Semiconductor (NYSE:TSM) announced on October 9 that its net revenue for September 2024 reached approximately NT$251.87 billion (NT$=US$0.031) on a consolidated basis. This corresponds to an increase of 0.4% compared to August 2024 and an increase of 39.6% compared to September 2023. Total revenue for the period from January to September 2024 exceeded NT$2 trillion, representing a growth of nearly 32% compared to the same period in 2023. The company is scheduled to announce its full financial results on October 17th.
The company ranks 7th on the list of most profitable blue chip stocks.
Diamond Hill Capital said the following about Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM) in its Q2 2024 investor letter:
“On an individual holding basis, stocks with the highest returns in the second quarter included long positions in Alphabet, Taiwan Semiconductor Manufacturing Company (NYSE:TSM), and Microsoft. Fundamentals for Taiwan Semiconductor Corporation (TSMC) remain strong as demand for the company’s chips continues to grow, especially as trends in machine learning and cloud computing gain further momentum.
Overall, TSM ranks 7th on our list of the most profitable blue-chip stocks to invest in. While we recognize TSM’s potential as an investment, we believe AI stocks have a better chance of delivering higher returns and achieving them in the short term. shorter period. If you’re looking for AI stocks with more promise than TSM, but trading at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: $30 trillion opportunity: Morgan Stanley’s 15 best humanoid robot stocks to buy and Jim Cramer says NVIDIA has ‘become a wasteland.’
Disclosure: None. This article was originally published on Insider Monkey.
