The Oakmark International Fund led by guru David Herro (Trades, Portfolio) boosted its stake in Taiwan Semiconductor Manufacturing Co. (TPE:2330) during the second quarter.
The fund added 14,738,000 shares in the company at an average price of 156.22 New Taiwan dollars ($4.93). The trade had a 0.33% impact on the fund’s portfolio. It now owns 33,463,000 shares.
Taiwan Semiconductor was founded in 1987, and it is headquartered in Hsinchu Science Park, Taiwan. The company was the world’s first dedicated semiconductor foundry, and it has been among the industry's leaders for a long time.
The company currently serves most fabless semiconductor companies including Apple Inc. (AAPL), Qualcomm (QCOM), NVIDIA (NVDA), Marvell (MRVL), STMicroelectronics (STM), Advanced Micro Devices (AMD, Financial), MediaTek (TPE:2454, Financial) and Broadcom (BRCM). Taiwan Semiconductor has account management and engineering service located around the world with offices in China, Europe, India, Japan, North America and South Korea.
Taiwan Semiconductor has a market cap of 4.51 trillion New Taiwan dollars, an enterprise value of 4.06 trillion New Taiwan dollars, a price-earnings (P/E) ratio of 16.04 and a price-book (P/B) ratio of 3.79.
GuruFocus gives Taiwan Semiconductor an 8 of 10 financial strength rating with a cash-debt ratio of 3.07 and an equity-asset ratio of 0.66. It has an Altman Z-Score of 6.41. The company has an 8 of 10 profitability and growth rating with an operating margin of 37.81%, a net margin of 33.49%, an ROE of 23.92% and ROA of 16.82 ranking it above 95% of the 859 companies in the global semiconductors industry.
Herro may have decided to boost his stake for the following reasons:
- The company is established with 29 years of operating experience, and it has reported strong financial statements over the previous five years. The company has reported revenue growth of (16.70%), EBITDA growth of (19.60%), operating income growth (18.20%), EPS without NRI growth (16%), book value growth (16.30%) and free cash flow growth of (47.80%)
- The company has a broad range of customers, some of whom are among the largest companies in the world.
- The company is currently expanding its operations with a healthy operating margin of 37.81% ranking it above 98% of the companies in its industry.
- The company has increased its gross profits by an estimated 13% annually over the previous 10 years.
- The company is paying a healthy dividend yield of 3.45.
The Oakmark International Fund invests in good undervalued companies located outside of the United States. Taiwan Semiconductor has gained an estimated 11% since Oakmark added to its stake.
Disclosure: Author does not own any shares of this company.
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