Taiwan Semiconductor Among Warren Buffett's Latest Buys

Warren Buffet’s Berkshire Hathaway (NYSE:BRKa) (NYSE:BRKb) revealed its 13F filings Monday, allowing investors to see which stocks one of the biggest investors ever and his team have been betting on. The form requires all investors that manage more than $100 million in assets to reveal their equity holdings and the size of their positions in the stock market.

The billionaire investor purchased more than $4.1 billion of Taiwan Semiconductor Manufacturing (NYSE:TSM) shares, sending the chip-maker’s stock up more than 10% in premarket trading Tuesday. The filings also revealed Berkshire’s $297-million stake in the U.S. building materials manufacturer Louisana-Pacific and a $13-million stake in Jefferies Financial Group. Berkshire is no longer invested in the real estate firm Store Capital (NYSE:STOR), which announced plans to go private earlier this year.

Huge TSMC Bet

The TSMC investment comes after shares of the chip-maker plummeted to a two-year low in October amid weak global chip demand. The investment improved investor sentiment for the biggest contract semiconductor maker in the world.

According to the regulatory filing, Berkshire now owns roughly 60.1 million American depositary shares (ADS) of TSMC. Other foreign investors that hold stakes in the Taiwanese manufacturer include the world’s largest asset manager BlackRock (NYSE:BLK), Vanguard Group, and Singapore sovereign wealth fund GIC.

Berkshire’s new investment in TSMC might come as a surprise to some, given that the conglomerate rarely bets on tech companies. However, the investment giant has historically invested in businesses that appear to have competitive advantages over their rivals.

TSMC’s profit jumped 80% last quarter, though the manufacturer issued a slightly more cautious outlook for future demand. The company produces chips for multiple tech giants, including Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA), and Qualcomm (NASDAQ:QCOM), among others.

Tom Russo, a partner at Gardner, Russo & Quinn, said:

“I suspect Berkshire has a belief that the world cannot do without the products manufactured by Taiwan Semi. Only a small number of companies can amass the capital to deliver semiconductors, which are increasingly central to people’s lives.”

‘Classic Buffett’

Berkshire’s largest investment is Apple, which Warren Buffet sees as a consumer products company. The conglomerate has accumulated massive unrealized gains on its $126.5 billion stake in the iPhone maker, which represents nearly half of Berkshire’s $306.2 billion equity portfolio.

In Q3, Berkshire increased its stakes in Chevron (NYSE:CVX), Occidental Petroleum (NYSE:OXY), Paramount Global (NASDAQ:PARA), RH (NYSE:RH), and Celanese Corporation (NYSE:CE). On the other hand, the Omaha, Nebraska-based company offloaded shares in Activision Blizzard (NASDAQ:ATVI), Bank of New York Mellon (NYSE:BK), General Motors (NYSE:GM), Kroger Company (NYSE:KR), and U.S. Bancorp (NYSE:USB).

Stock prices have declined significantly in 2022 amid a broader market cycle downturn, encouraging Berkshire to invest aggressively in recent months. The conglomerate invested around $9 billion in stocks in Q3, filings showed. Buffett said several times in the past that he is not afraid to spend cash when others are selling.

In the first nine months of 2022, Berkshire poured $66 billion into stocks, 13 times more than what it invested during the same period in 2021.

“This is classic Buffett,” said David Kass, a finance professor at the University of Maryland’s Robert H. Smith School of Business. “He is being greedy when others are fearful and fearful when others are greedy.”

The past several months have been turbulent amid the current macroeconomic environment involving record-high inflation and major consecutive interest rate hikes. Berkshire took advantage of the market turbulence to bet on energy stocks when they were trading at a discount, investing billions of dollars into Occidental Petroleum.

Shares of Occidental rose to $75.26 apiece in August, its highest mark in 2022 at the time. The conglomerate purchased almost 6 million more shares of Occidental in September in the range of $57.91 to $61.38 per share, filings showed.

The move proved more than profitable, given that Occidental’s stock started rising and climbed above $70 per share once again in the following period. In addition to Occidental, Berkshire also increased its stake in the energy giant Chevron and has held $24.4 billion of the energy giant, making it Berkshire’s third-largest investment.

Analysts view Berkshire’s energy bets as a way to take advantage of inflation, which hit a 4-decade high earlier in 2022. Moreover, Energy continues to be “underowned and cheap” by money managers, according to Bank of America) analysis.

Energy stocks have surged this year as oil prices hit new peaks following Russia’s invasion of Ukraine. Although energy costs have somewhat eased from this year’s highs, energy stocks remained resilient.

Summary

Warren Buffet’s Berkshire Hathaway disclosed new trades it made in the third quarter, causing some sharp moves in the stock market today. Among other trades, Berkshire revealed it holds a multi-billion dollar stake in TSMC, the world’s largest semiconductor manufacturer.