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Warren Buffett’s Berkshire Hathaway offloaded 86% of the TSMC stock it holds roughly 3 months after acquiring it.
Berkshire Hathaway reportedly (NYSE: BRK.A) cut the amount of Taiwan Semiconductor Manufacturing Company (TSMC) stock it holds by 86% last quarter. The Warren Buffett-led holding company slashed its TSMC holdings just months after revealing a major stake, which surprised many.
TSMC stock initially jumped in November following news that Berkshire Hathaway had acquired a stake worth $5 billion. However, the globally-renowned chip foundry saw its shares slide 4% in Taipei, amid broader market losses, following the latest Berkshire news. Despite this decline, TSMC stock is still up by more than 40% from its October low amid positive operational developments.
Taishin Securities Investment Advisory Co vice president Tony Huang is among those surprised by Berkshire’s decision to offload much TSMC stock. As he put it:
“It’s surprising that Berkshire cut its holding so much in just a quarter, which differs from its past practice of long-term investment and continuing to add shares.”
Assuming Berkshire sold the TSMC stock at the average price across the period, the stake sale should amount to $3.7 billion. However, CFRA Research analyst Cathy Seifert opined that the Buffett company “made a small profit on TSMC,” contradicting the “huge, huge win” assumptions. According to Seifert, Berkshire bought the TSMC stock for roughly $68.5 a pop and sold for $74.5.
Berkshire Hathaway TSMC Stock Sale Seemingly Validates Earlier Gloomy Economic Prognostications by Chip Giant
Last month, TSMC forewarned of a revenue downswing for the first quarter of the new year. The reason is that the Taiwan-based semiconductor-manufacturing giant weathered global supply chain constraints which impacted demand. As these Covid-induced hurdles linger on, TSMC executives do not expect market conditions to improve for another four months.
Previously, the Taiwanese chip contract manufacturing and design company cut its spending budget by 10% last year to $36 billion. These reductions came about after the US government imposed new restrictions on China’s access to essential technologies. However, economic optics remain bright for TSMC as Tokyo and Brussels push to help the company establish local production capabilities. It is worth noting that this development also threatens to further drive up TSMC’s operating costs.
Although TSMC’s stock might suffer short-term following Berkshire’s turnaround sale, the chip company’s longer-term outlook is positive, with Huang saying:
“Many global investors continue adding its shares with its fundamentals improving, including better utilization rates and its leadership role in advanced technology.”
Although the quick turnaround sale of TSMC’s shares is a rarity for Berkshire, it is not unprecedented. The billion-dollar investment platform has swiftly undone high-value investments in other companies before. In the first quarter of last year, Berkshire offloaded nearly all of what, at the time, amounted to an $8.3 billion stake in Verizon Communications (NYSE: VZ). The Omaha-based multinational holding company had procured the telecoms stock in late 2020 before the sale.
In other developing news, Berkshire also slashed its holding in a number of banks during the fourth quarter. Conversely, the investment-driven powerhouse bolstered its stake in tech giant Apple (NASDAQ: AAPL).