Buy Alert: Taiwan Semiconductor (TSM)

By Jim Pearce • April 5, 2017

TRADE INSTRUCTIONS
Date: April 5, 2017
Name: Taiwan Semiconductor Manufacturing Company Ltd.
Symbol: TSM (NYSE)
Type: Open
Limit: Buy below $33

TRADE TARGETS
Holding Period: 3 months
Target Return: 13.3%
Annualized Return: 53.2%
Target Price: $37.40
Stop Loss Level: $28.50

COMPANY DESCRIPTION
Taiwan Semiconductor Manufacturing Company Limited is a semiconductor foundry. The Company is engaged in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks. Link to company website.

TRADE RATIONALE
Our Rapid Profits Matrix likes TSM due to its consistency in earnings growth. Over the past ten years it has increased EPS at a 13% annual rate, yet is priced at less than 15 times forward earnings. Throw in a dividend yield of almost 3% and you have a growth company priced like a value stock. Sooner or later one or the other reverts to the mean, and in this case I think TSM’s earnings multiple will soon expand to 17x – in line with the market average – to make this trade pay off.

Here’s why: During the past month the stock market flattened out as the so-called “Trump trade” lost steam in the face of legislative gridlock within the president’s own party over health care reform. That has investors nervous that Trump may not be able to deliver on some of the other key pro-growth elements of his campaign platform including income tax reduction, trade policy, and infrastructure spending.

That has left investors scrambling for quality stocks that are not dependent on a friendly White House occupant for future earnings growth. Over the past three months Apple has soared nearly 25%, leading dozens of blue chips stocks up the charts. But now that those obvious names are fully valued, investors will set their sights on the next tier of consistently profitable companies to own, and TSM should be near the top of that list.

I am issuing this alert in advance of Trump’s meeting with Chinese President Xi Jinping tomorrow since that exchange of views should also serve to draw attention to large Asian companies such as TSM that are major marketing partners with some of America’s biggest tech firms. Hurting TSM would also hurt the dozens of U.S. manufacturers that use its integrated circuitry in their tech products.

However, if the conversation (or early morning tweets) becomes bellicose, since TSM is a Taiwanese company any trade policy directed specifically at China may not affect TSM given the Taiwanese semiconductor sector’s trade surplus with the United States. Either way, I think TSM comes out of this week’s meeting looking good. That timing may prove fortuitous, since TSM releases first quarter earnings results next week on Thursday, April 13 before the open.

NOTE: TSM is optionable.

Stock Talk

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Jim Pearce

04/05/17 ‐ 9:40am ET April 5, 2017 at 9:40am ET

TSM gapped up on the opening this morning above my buy limit price. Don’t chase it, but if it doesn’t drop back below it by tomorrow then I will consider raising the limit.

Janis Bell

04/05/17 ‐ 12:00pm ET April 5, 2017 at 12:00pm ET

I put in a limit order at 32.90 for today only so I don’t have to keep watching it for a dip. If it doesn’t go through, will see what you come up with Jim.

Janis Bell

04/05/17 ‐ 3:55pm ET April 5, 2017 at 3:55pm ET

Price dropped at end of day. Got it.

black arrow

04/05/17 ‐ 10:17am ET April 5, 2017 at 10:17am ET

A parallel idea, I was thinking about some more diversity and Taiwan could provide that. I have added a fairly new indicator from The inventor of RSI [relative strength index] namely Tushar Chande he calls this TSM stands for Chande trend meter. It is simple to look at, and although several things go into it the darker green trends mean it is positive right now its score is 85.84. here is a link: http://schrts.co/VjItHf
A short while ago I was looking at a 10 minute chart and the third candle was down a little. Just droping off high of the day – for now will keep an eye on it thanks for the alert.

black arrow

04/05/17 ‐ 11:53am ET April 5, 2017 at 11:53am ET

Here is an idea from a webinar by Steve Nison a candle author. Beofre you enter check a 10 minute chart here is a link to a 10 min chart: http://schrts.co/4XVHdH you can quickly see it dropped to the 20 MAon this 10 min chart and then found the bottom and the candle became positive and starting up. So I got in. Note up near the top there is abbrev SCTR sthis is stockchartstechnical rank 67.3 this is a good SCTR number for some upside. I went to an option chain on think or swim. I went to July strikes. I BTO the 21 JUL strike at 1.55. Dont think this is your winning ticket I AM NO OPTIONS GURU.
Cheers

Jimmy Cook

04/07/17 ‐ 9:23am ET April 7, 2017 at 9:23am ET

What was your strike price? I gambled and bought the 21 JUL at a strike price at $36. I did this because of your vast knowledge of charts. I also thought that our President would do something about Syria, which he did. I think that will help the stock market. I also believe that TSM will have a positive earnings report. But this is from someone who has made 3 option trades in his life. Just my 2 cents. Everyone have a good weekend.

LH

04/05/17 ‐ 4:59pm ET April 5, 2017 at 4:59pm ET

TSM FILLED FOR 32.90

Benny K

04/06/17 ‐ 7:42pm ET April 6, 2017 at 7:42pm ET

Just wondering why TSM isn’t shown in the SW portfolio.

Jim Pearce

04/10/17 ‐ 11:21am ET April 10, 2017 at 11:21am ET

Hi Benny. I don’t know either, but our I.T. department is working on it now. Sorry about that.

black arrow

04/07/17 ‐ 9:54am ET April 7, 2017 at 9:54am ET

Hi Jimmy, I bt the 33 strike and paid 1.55 right now it is at 32.84 – the underlying stock price.

Jimmy Cook

04/07/17 ‐ 4:07pm ET April 7, 2017 at 4:07pm ET

Well that shows you what I know about the stock market. Closed down.

black arrow

04/07/17 ‐ 5:19pm ET April 7, 2017 at 5:19pm ET

I’m sorry Jimmy, I ought to have named the strike price I was picking. I picked the one I did because jim P. said buy under 33, so I picked the closet one to that number which was in the money. There are thousands of stories about errors many of us have made – definately myself included. I hope you will have all components just right the next time.
In general it is a tough time in the markets because money rotates. Today I was rading a HUGE number of doillars worth of money has left the S&P500. This past week I bt the etf on Latin America [ILF], and also the etf on india [INDA] both are ishares etF’s. I had read from several sources emerging markets were doing well. I think we have lost a lot of momentum in markets at this time.

black arrow

04/10/17 ‐ 10:03am ET April 10, 2017 at 10:03am ET

Hi Jimmy, I think it is human nature to not want to think about a mistake we may have made. But this can be the worst thing for us as traders not wanting to admit an error.
I can tell you right now I have made many and so has everyone.

Think of it like you have a splinter – pull the splinter out.
It is best to sell TSM in your case because it is statistically unlikely you will make much of a profit.
Next time around you will have a new chance. Dont dwell on it we all make errors.

Jimmy Cook

04/10/17 ‐ 11:20am ET April 10, 2017 at 11:20am ET

I agree, I will probably sell and live to fight another day. I knew I would make mistakes. But I am learning a lot also. Thanks for all your help.

black arrow

04/10/17 ‐ 4:52pm ET April 10, 2017 at 4:52pm ET

It seems like you are recieving it in the spirit in which I sent it. I am glad of that. Author William O’Neil tells us to “weed our Garden”. Not to say I have looked at that strike I have not. I figured if the lower one isnt up then its likely neither is the upper one. Anyway I am just trying to be helpful.

black arrow

05/03/17 ‐ 11:08am ET May 3, 2017 at 11:08am ET

Hi Folks,
TSM is looking good today, in my unprofessional opinion. Here is a link to a chart I just made some changes to. http://schrts.co/xbWkHd. I wanted to point out an idea I got from Greg Scnellwho is a professional Canadian Technician for stock charts.com he likes to add a small but useful area in this case it is right at the top showing us two things. 1) a Horizontal line in the viewing pane set at 75 which he considers a significant area to be or higher. as I worked on the chart it actually went up a little to 68, I like this because it means to me there is room to go up. The ‘squiggly lineis the plot of the SCTR – Stock charts technical Rank. In the main viewing pane we see the 200 day in red toward the bottom higher up the dark green dashed line for the 50 EMA , and a bonus to BB is the dashed centerline is the 20 day MA. At a glance we quickly discern a higher TOP already in May. than in previous months. The short term PPO is strong and measures a % and moves a little faster than the MACD. CMF shows $ flowing back into the stock. STOCH RSI is very strong which was made by another pro Tushar Chande who also made the CMT Chande Trend Meter that number is large which is very good. Hope everyone with a position makes a profit!
Have a good day

Kevin P

05/12/17 ‐ 1:19pm ET May 12, 2017 at 1:19pm ET

Picked up two contracts of 7/21/17 34 C on April 5th for $0.95. Sold them May 10th when it hit my stop at $1.60. Ended up with a 58% gain after commission!

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