What happened
Shares of Taiwan Semiconductor (TSM +0.42%) gained 34.8% in November 2022, according to data from S&P Global Market Intelligence. The surge came in two distinct spurts.
The first hop materialized when a solid report of October revenue coincided with an encouraging inflation update. The second step up followed when Warren Buffett's Berkshire Hathaway (BRK.A 0.23%) (BRK.B 0.13%) invested $4.1 billion in Taiwan Semi's stock.
Warren Buffett. Image source: The Motley Fool.
So what
Taiwan Semi, also known as TSMC, saw October revenue rise by 1% from the September reading. Investors had feared a much gloomier result based on "flattish" sales guidance in mid-October's third-quarter report and a 4.5% sequential downtick in September. At the same time, that-morning's inflation report showed that the consumer price index (CPI) rose just 0.4% in October -- the smallest increase since January. TSMC investors embraced these separate reports, and the stock closed 9% higher.
Five days later, regulatory filings showed that Buffett's conglomerate had invested $4.1 billion in TSMC's American Depository Shares (ADS). Buffett controls 60 million ADS shares of TSMC, which translates into 300 million stubs of the underlying stock on the Taiwanese stock exchange. That's far from a controlling stake in the chip manufacturer, but a 1.2% slice of the share count still makes Berkshire one of TSMC's largest shareholders.
Whatever the size of the investment, investors tend to take heart any time Warren Buffett and his team are showing interest in a company and its stock. This is a huge vote of confidence in TSMC's prospects for solid long-term growth, and the ADS rose 1.05% that day alone.
NYSE: TSM
Key Data Points
Now what
Buffett built his TSMC portfolio in September, encouraged by the stock's increasingly robust discount pricing. I won't be surprised to see a larger Berkshire stake reported when the October update comes later this week.
Taiwan Semi's ADS had lost 30% of its value year-to-date at the start of September, and then dropped another 26% lower in October and November. Master investor Buffett loves dollar-cost averaging into new stocks, particularly when they operate in an industry far outside his normal wheelhouse.
November's bounce didn't spell the end of TSMC's bargain-bin residence. The stock is still down by 38% year to date, so the buying window still looks wide open if you want to follow the Oracle of Omaha's example.
