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Should You Buy Taiwan Semiconductor-Heavy ETFs Now?

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Warren Buffett’s Berkshire Hathaway Inc. (BRK-B) grabbed a stake of about $5 billion in Taiwan Semiconductor Manufacturing Co. (TSM - Free Report) , as the veteran investor thinks the world’s leading chipmaker has bottomed out after a selloff of more than $250 billion. Shares of Taiwan Semiconductor Manufacturing Company Limited surged 10.8%.

The Omaha-based conglomerate acquired about 60 million American depository receipts in TSMC in the three months ended September, it said in a filing. The Taiwanese company produces semiconductors for clients like Nvidia Corp. (NVDA - Free Report) and Qualcomm Inc. (QCOM - Free Report) and is the exclusive supplier of Apple Inc.’s custom Silicon chips. Apple remains the most valuable single holding in Berkshire’s portfolio.

Assuming Buffett purchased TSMC’s ADRs at the average price for the third quarter, the stake would equal to cost of $5.1 billion. They currently trade at $72.80. TSMC’s shares rose as much as 10% just after the disclosure, the largest uptick in more than two years.

Notably, Marvell Technology (MRVL - Free Report) recently unveiled a comprehensive 3 nano-meter (nm) silicon technology platform to enhance its solution portfolio across cloud data center, carrier, enterprise and automotive markets. The 3nm silicon platform is currently in fabrication with Taiwan Semiconductor Manufacturing Company (TSM - Free Report) on its 3nm shuttle.

Earnings estimates of TSMC for the upcoming quarter is 53.04% while the year 2022 is 51.94%. Sales estimates of TSMC for the upcoming quarter is 28.96% while the year 2022 is 27.25%. Taiwan Semiconductor has a top-grade VGM score of A.              

Taiwan Semiconductor Manufacturing Company has the manufacturing capabilities to make the world’s most-advanced chips, important to advancing every nation’s future commercial industries like EVs and AI. TSMC said in October it cut capital spending to about $36 billion this year, which would still be a record high, down from at least $40 billion planned previously.  

Against this backdrop, below we highlight a few Taiwan-Semiconductor-heavy ETFs that could be tapped following Buffett’s decision. A company-approach is always better than the basket approach.

ETFs in Focus

Invesco BLDRS Emerging Markets 50 ADR Index Fund – TSMC has a 19.28% Weight

The underlying S&P Emerging 50 ADR Index is capitalization-weighted and designed to track the performance of approximately 50 emerging market-based ADRs. The fund charges 29 bps and yields 5.23% annually.

VanEck Semiconductor ETF (SMH - Free Report) – TSMC has a 10.07% Weight

The underlying MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment. The fund charges 35 bps and yields 0.71% yields annually.

Viridi Bitcoin Miners ETF – TSMC has a 5.89% Weight

This ETF is active and does not track a benchmark. The Viridi Bitcoin Miners ETF is an actively managed exchange-traded fund focused on the cryptocurrency mining industry. The fund charges 90 bps.

Emerge EMPWR Sustainable Emerging Markets Equity ETF – TSMC has a 5.63% Weight

This ETF is active and does not track a benchmark. The Emerge EMPWR Sustainable Emerging Markets Equity ETF seeks long-term growth of capital. The fund charges 85 bps.

Freedom 100 Emerging Markets ETF (FRDM - Free Report) – TSMC has 5.49% Weight

The underlying Life + Liberty Freedom 100 Emerging Markets Index uses human and economic freedom metrics as primary factors in the investment selection process. The fund charges 49 bps.


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