We recently compiled a list of “Top 10 Stocks” for Harvard University’s stock portfolio. In this article, we’ll take a look at how Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM) stands compared to other Harvard stocks.
When it comes to university prestige, Ivy League universities lead the rankings. For an investment that could amount to nearly $60,000 per year in tuition and fees as of the 2022-2023 school year, these schools promise an elite education and a promising career after graduation. Opinions may differ on which Ivy League schools offer the best education, but there is no debate as to which schools have the largest endowments. Harvard University’s endowment is a whopping $53.2 billion, supported by generous gifts and strategic investments managed by Harvard Management Company (HMC).
Founded in 1974, Harvard Management Company provides a dedicated funding source to support the University’s teaching and research, contributing more than one-third of Harvard University’s annual operating budget. Harvard’s endowment distributions totaled $2.4 billion in fiscal year 2024, accounting for 37% of the university’s annual revenue. These funds supported key areas such as financial aid, faculty, and research activities. The university has allocated $749 million in financial aid to all schools, including $250 million for undergraduates. Harvard University’s endowment portfolio is heavily weighted toward private equity and hedge funds, with private equity accounting for 39% of the portfolio and hedge funds accounting for 32%.
The fund targets an 8% return, and the seven-year annualized return of 9.3% exceeds that goal, said NP “Naab” Narvekar, CEO of Harvard Management Company. . This track record currently ranks among the Ivy League and other elite organizations. Its fiscal year 2024 profit margin fell short of Columbia University’s 11.5% and Brown University’s 11.3%, but it exceeded the returns of MIT, Cornell University, Dartmouth College and the University of Pennsylvania. Despite 2024 being a strong period for public equities, with the S&P 500 frequently hitting record highs, Narvekar said HMC’s strategy of lower public equity exposure continued to deliver strong returns. states.
“FY24 was highlighted by the strong performance of public equity and hedge fund portfolios. Despite HMC’s hedge fund portfolio having less equity exposure than most hedge fund indexes, it was a strong year for equities. This is a particularly positive indicator as it continues to outperform.
In particular, HMC has significantly reduced the fund’s exposure to real estate and natural resources, shrinking from 25% in 2018 to just 6% in fiscal year 2024. This strategic shift contributed positively to the fund’s overall returns. Large-cap technology stocks, particularly in the IT sector, may also have boosted the fund’s returns. Michael Markov, founder of Markov Processes International, suggested that Harvard likely benefited from “overvaluing IT and Mag 7 relative to the broader S&P 500.” Markov believes 2024 will be a success for Harvard and a testament to HMC CEO Narvekar’s strategy to overhaul the university’s complex portfolio during his seven-year tenure.
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our methodology
This analysis examined Harvard Management Company’s stock portfolio from Q3 2024. Stocks are ranked based on the company’s equity value for each holding.
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Is TSM stock a good long-term buy?
Close-up of a complex network of integrated circuits used in logic semiconductors.
Harvard Management Company stock: $84.88 million
Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM) is based in Taiwan and supplies integrated circuits and other semiconductor devices to major technology companies such as Apple and NVIDIA.
For the third quarter, Taiwan Semiconductor Manufacturing Company (NYSE:TSM) reported net revenue of $23.5 billion, an increase of 36% year-over-year. The company’s gross profit margin also rose to 57.8% from 54.3% in the same period last year. Looking ahead, the company expects fourth-quarter sales to be in the range of $26.1 billion to $26.9 billion. The guidance indicates a 13% quarter-over-quarter increase and a 35% year-over-year increase at the midpoint. Additionally, TSMC Chairman and CEO CC Wei emphasized during the third quarter earnings conference that the demand for AI is “real” and highlighted TSMC’s unparalleled industry growth. did.
“We’ve been constantly talking to our customers, including hyperscaler customers who are building their own chips, and almost every AI innovator is working with TSMC.”
On October 19, Needham raised the price target for Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM) stock from $210 to $225, expecting further growth in gross profit. Needham last year predicted TSMC’s 2025 sales of $110 billion, well above the consensus estimate at the time of $96 billion. TSMC has consistently delivered “beat-and-raise” quarters, and the consensus forecast has since matched Needham’s, reflecting strong market confidence in TSMC’s growth prospects. TSMC’s revenue in 2024 is expected to reach approximately $90 billion, and is expected to grow by 23% in 2025.
Baron Global Advantage Fund said the following about Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM) in its Q3 2024 investor letter:
“We established a small position in Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:TSM). Morris Chang founded TSMC in 1987 as the world’s first dedicated semiconductor foundry. were always designed and manufactured by the same company, and TSMC introduced a revolutionary new business model of operating purely as a contract manufacturer, and TSMC was highly successful in improving its manufacturing process technology. This continued focus has enabled the emergence of innovative fabless design companies such as NVIDIA, Apple, and Qualcomm, which have become TSMC’s major customers.Today, TSMC has over 60% share of the total semiconductor foundry market. TSMC has a market share of more than 90% in the advanced manufacturing sector. TSMC faces high barriers to entry as the cost and technological complexity of semiconductor manufacturing continues to rise, while depreciation has been completed. TSMC also benefits from scale, as cutting-edge manufacturing is a latecomer. Increased profits lead to increased R&D and capital expenditures, further technological differentiation. TSMC is poised for strong double-digit revenue growth over the next few years due to continued market share gains, strong pricing power, and structural growth in AI demand. According to CC Wei, CEO of TSMC, “Nearly every AI innovator is working with TSMC to meet the insatiable demand for AI.” We expect revenue from server AI chips, such as and other AI accelerators, to grow rapidly. It is expected to grow at a CAGR of 50% from 2022 to 2028, accounting for over 20% of TSMC’s revenue by 2028. The eventual proliferation of edge AI devices, such as AI smartphones and AI PCs, will require significantly more computing power and will inevitably further increase the demand for TSMC’s cutting-edge technology. ”
Overall, TSM ranks No. 8 on Harvard University’s list of top stocks. While we see TSM’s potential as an investment, we believe certain AI stocks are more likely to deliver higher returns and in shorter time frames. If you’re looking for AI stocks that are more promising than TSM but are trading at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: BlackRock’s 8 Best Widemot Stocks to Buy Now and 30 Most Important AI Stocks.
Disclosure: None. This article was originally published on Insider Monkey.
