To The Moon

Buffett shockingly divested 86% of Berkshire Hathaway’s TSM holdings (51 million shares) after just 1 quarter😨😨😨 While it’s not unusual at all for enterprises to rebalance their investment portfolios, this move is counterintuitive to Buffett’s philosophy since he advocated for “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years”. According to a CFRA Research analyst’s calculations, Berkshire bought TSM for roughly $68.5 & sold for $74.5, so Berkshire did make a small profit on TSM.

CNN attempted to contact Berkshire, but it did not immediately respond to a request for comment, & Taiwan Semiconductor did not issue any statement regarding Berkshire’s exiting of TSM stock. Of course no one would really know why Buffett sold TSM but there’s 2 possible reasons that could explain his unusual move:

(1) Perhaps Buffett had a change of about the prospects of the chip industry while wanting focusing more on his current positions.

⚠️ TSM last month said revenue in Q1 is likely to dip 5% as it weathers a global downturn in the chip industry because of softening consumer demand for electronics. TSM executives have said they do not expect market conditions to improve until 2H 2024.

(2) Perhaps it was Buffett’s responsible investing philosophy of avoiding risks as much as possible & the recovery of 🇺🇸-🇨🇳 relationship was not as much as he had hoped.

👍 Buffett highlighted at last year's Berkshire annual meeting that: “And we have a — we have a — extreme aversion to incurring any permanent loss with your [shareholders'] funds. You know, if I went broke, it wouldn’t really make any difference. It'd keep doing what I do. I'd figure out a way to read a paper and watch a little TV and think about things and talk to Charlie. But the idea of losing, permanently, other people's money — people who trust us — really, really — that's just a future I don’t want to have.”

⚠️ Western-aligned governments pushed TSM to build local production capabilities & TSM plans to inject up to $3.5 billion in its Arizona-based subsidiary. It’s also considering opening its 1st plant in Europe & a 2nd one in Japan. However, such efforts threaten to drive up costs, potentially negatively affecting TSM stock.

⚠️ TSM founder Morris Chang highlighted in an interview late last year that the foundry will not be spared in the event of a military conflict. Chang accentuated: “If there’s a war, I mean, [TSMC] would be destroyed. Everything will be destroyed."

What was encouraging to note was that Berkshire still retained 14% of its purchase, so Buffett probably doesn't think a war would break out anytime soon, but would like to enter at where the chip industry is recovering more &/or risks are lower. Buffett has completely exited positions before so if TSM was thought to be of poor value, he would have sold 100% instead of 86%, so I’m not too worried about holding on to my TSM share. Just take a look at the health of TSM & you’ll understand why I will still hold.

If it drops back to my cost price, I’ll just buy more🥳🥳🥳

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