Opinions
Shane Obata
Taiwan Semiconductor MFG.
TSM-N
PAST TOP PICK
May 29, 2025
Stock price when the opinion was issued
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Takes about 10 years to build a foundry, and you need access to water. So there goes Texas, Arizona, etc. In Japan, a foundry was rejected because they didn't want to divert water that's needed to grow food. Overhang of geopolitical risk of China invading Taiwan. Only 10% of foundries are in the US.
Great products. Leader. Alternative in Europe is ASML, which he owns. He wouldn't own both. No problems with TSM, but you have to understand geopolitical and cost risks.
His preference in the space. Leading manufacturer, so over time everything flows through them. Essential company in global economy. Because of the threat of Chinese takeover, will always trade at reasonable valuation. Now ~15x PE. Diversifying manufacturing footprint across mature markets in US and Europe.
You can see the difficulty with taking news bites, such as on tariffs, and trying to formulate an investment opinion. They can change so quickly.
On his shortlist. One of the biggest chip companies in the world. 21-22% growth rate forecast, but the price is overbought. Wants to see it come down a bit, to low $200s if it can. Also likes how it's more global and less US-centric.
New addition to his firm's dividend growers mandate. Payout ratio about 35%. Expects earnings and dividends to grow 20% over coming 3 years. Trades at only 17.5x PE. Great combination of value and growth.
Industry leader by far. Sustainable competitive advantage. Clear technological leadership. Outstanding manufacturing capabilities. Scale advantages to decrease unit cost and increase margins. Crucial partnerships with some of world's biggest companies. Secular winner from demand for high-performance chips. Yield is 1.43%.
Great example of a direct AI beneficiary. World's leading foundry business -- they make all the chips for everyone. Completely dominant via size, scale, and expertise. Though spending billions on building fabs, it extends competitive advantage because no one can compete.
One of the few stocks you can still get at inexpensive valuations, due to Taiwan invasion risk. Concern is not going away, but it's not near term. Smart to offer Trump additional investment, but to be vague on the timeline. Strong demand for US production, but it will come at higher costs of production.