Buffett may have invested in TSMC too early, analyst says
Legendary investor Warren Buffett may have overpaid for his latest investment in chipmaker Taiwan Semiconductor , according to one equity analyst. This could also be good news for those following in the footsteps of the “Oracle of Omaha” though, as it gives investors another opportunity to buy the stock. Buffett’s Berkshire Hathaway bought more than 60 million shares of TSMC worth $4.1 billion (1.2% of TSM) in the third quarter, according to a quarterly regulatory filing . New York-listed shares in the chip stock rose 5.8% in after-hours trading to $77.08. “What’s interesting about it is he kind of got in early on this trade,” John Blank, chief equity strategist at Zacks Investment Research, told CNBC early Tuesday. “I would have probably waited for $50 or $60 on the shares like this, because you’ve got enough downside pressure on that stock.” Chip stocks have sold off this year, with the iShares and VanEck Semiconductor ETFs down by about 30%. TSMC has also declined by almost 40% over the year to date. Blank said Buffett, 92, was not as interested in buying the bottom as other investors, given Berkshire Hathaway’s long-term investment horizon. “He just decides: ‘I have got the foundation stock of the chip business globally on sale, and I simply don’t care to buy the bottom,” Blank said of Buffett’s thinking on the investment. TSMC is the smallest of Buffett’s top 10 holdings and is the second-largest tech allocation following his investment in Apple – the largest holding in Berkshire. Bank of America analysts said in a note to clients last week that the semiconductor sector is likely to rebound in the second half of 2023. The Wall Street bank’s analysts also said that chipmakers’ high profitability, a high entry barrier for new competitors, and dependence on chips for growth in the electric car and robotics sectors make a convincing argument for investing in chip stocks. The median price target of 30 analysts covering TSMC indicates a 29.8% potential upside from its share price prior to Buffett’s investment, according to FactSet.
