Why Did Warren Buffett Sell Taiwan Semiconductor Manufacturing? Charlie Munger Just Offered a Clue
It was somewhat surprising when Warren Buffett's conglomerate Berkshire Hathaway $Berkshire Hathaway-A (BRK.A.US)$ $Berkshire Hathaway-B (BRK.B.US)$ purchased its first semiconductor stock, Taiwan Semiconductor Manufacturing (TSM -0.79%), last summer. Yet it was even more surprising to learn that Berkshire has already cut its TSMC stake significantly, lowering its holding by 86% in the fourth quarter -- just one quarter after purchasing the stock.
TSMC seemed like a solid bet for Berkshire. As the largest outsourced foundry in the world, TSMC makes high profit margins and seems set to benefit from the growth of semiconductors over the long term. So, why might the Oracle of Omaha have already decided to sell the stock?
It's a bit confusing that Berkshire sold its stock so soon. While there is a large amount of macroeconomic uncertainty, which would affect all semiconductor stocks, Buffett is notable for taking a longer-term view. With sentiment around the economy slightly improving since Q4, Berkshire has already missed out on TSMC's 22% year-to-date gains, including dividends. $Taiwan Semiconductor (TSM.US)$
Of course, the stock market can move in mysterious ways, and Buffett has long said it's impossible to predict the movements of stocks in the near term. But that makes the sale even harder to understand. After all, TSMC has a competitive lead in advanced node semiconductor manufacturing. And while the current semiconductor downturn has caused most stocks in the sector to fall in value, the semiconductor industry should grow above the level of gross domestic product over the long term.
A high-margin leader in a growth industry -- and one trading at just 14 times earnings -- seems right up Warren Buffett's alley: a wonderful company selling for a fair price. $Taiwan Semiconductor (TSM.US)$
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