 Hey everyone, this is Dan. Taiwan Semiconductor TSM jumped up by more than 10% on November 15 mainly because the disclosure of that Warren Buffett bought $4.1 billion worth of TSM shares during the third quarter of 2022. Yet today, TSM is still down by 36%. Is it the right time for us to buy TSM? I looked into the fundamentals of Taiwan Semiconductor and analyzed the technical indicators. I found a few very interesting things I'd like to share with you. Let's get into the details. First of all, let's look at how TSM has been trending since the beginning of the year compared to the broad market. You can see, TSM is still down 36% year-to-day even though it recovered by about 10% in the last few days. In comparison, SPY representing the movements of S&P 500 has been down 17% and QQQ representing the movements of NASDAQ 100 has been down 29%. The Semiconductor ETF, SMH has also been down 29%. If you zoom into the last month, you can see how TSM shot up after the Buffett 13F disclosure. The trailing PE ratio of TSM is at 15 and the PIC ratio is at 0.58. Compared to the other leading semiconductor companies, these ratios for TSM are certainly very good. Let's look at a few financial charts for TSM. Sales have been going up steadily in the last few years. EPS has been going up also steadily. More impressively, TSM has avoided the dramatic dips of the industry in the last 10 years. That means TSM management are very prudent with what they do. The net margin for TSM has been heading up since 2020. It has reached 40% recently, which is very impressive. That's because TSM is very advanced technologically, which allows them to command premium prices for their products. I will talk more about that. If you think what you've seen so far is interesting, I'd like to suggest that you click the like, subscribe and notification button that will enable you to receive notifications when I post my next video. It will also encourage me to make more videos like this in the future. Thank you very much. Let's continue. We have a lot of interesting stuff to cover. In March of last year, TSM announced that they would invest $100 billion in the next three years in response to the worldwide chip shortage. Notice that the world economy has slowed down and demands for semiconductor chips have also cooled down. As a result, TSM has reduced its capital spending for 2022 by 18% to $36 billion, which is still a lot of capital investment. This flexible approach to capital expenditures also reflects the business savvy of TSM management. I see the following arguments for investing in TSM stocks. First of all, they are the number one advanced chip manufacturer in the world with 50% market share of the overall contract foundry business. And they have a 91% market share of the production capacity for chips that are less than 7nm. As you probably know, the smaller the dimension of a semiconductor chip, the faster it is and the less power it consumes, therefore the leading chip manufacturers have been racing to produce chips with smaller and smaller dimensions. TSM is a long term supplier for customers such as Apple, NVIDIA, AMD, and Qualcomm. These are the leading semiconductor companies or semiconductor design companies. They rely on TSM to manufacture the chips. They have planned volume production of the next generation 3nm chips will start in 2022. In the meanwhile, the top competitor Samsung is also planning to start the 3nm chip production in 2022, whereas Intel will not be ready for the 3nm chips until 2024. TSM is building a $12 billion fat plant in Arizona, which will be operational in 2024. They are also building a $7 billion fat plant in Japan, which will be operational in 2024 as well. Overall, TSM is protected by their technological lead, as well as the high capital investments required in the chip fabrication business, therefore it's not easy for any other competitors to take away their businesses. They have registered steady increases in revenues and EPS in recent years, very steady performance, and of course the recent purchase of $4.1 billion worth of stock by Warren Buffett is a big vote of confidence for TSM. In the meanwhile, there are some risks associated with TSM stock. For example, there are the geopolitical risks related to the China-Taiwan relationship. Some people are worried about the potential invasion of Taiwan by China. In my opinion, the invasion will not happen for at least a couple of years, if ever. Besides, the strong resistance put up by Ukraine against the Russian invasion and the support provided to Ukraine by the US and NATO will serve as a deterrent against the potential invasion of Taiwan by China. The building of TSM plants in the US, in Japan, and soon in Europe will also diversify the geopolitical risks. The US ban on sales of TSM's advanced chips to Huawei is another potential concern. Based on the revenues and EPS increases of TSM in the most recent quarters, the Huawei ban apparently has very little effects on TSM, so I'm not too worried about that. Then of course, we always have the competition from Samsung and Intel. So far, TSM is by far the leader in the field. It will take a while for Samsung or Intel to catch up. Besides, TSM is not standing still. The company continues to invest and innovate. And then the Fed, quantitative tightening and interest rate hikes are causing a bearish market trend. This is quite a valid concern. In the next few weeks, the US stock market might be testing the bottoms reached in September and October. And in mid-December, the CPI numbers and FOMC interest rate decision will very much determine the direction of the market. I will talk more about this when I discuss my investment strategies in the next few minutes. Potential worldwide recession and slowdown of the semiconductor business is not a concern. This is due to the quantitative tightening by the various central banks. It is indeed a valid concern. I will talk more about this in a few minutes. Let's look at the valuation of TSM. I assumed the EPS growth to be 21.5% a year for the next five years based on the historical growth of 26.59% for the last five years. Therefore, the assumption of 21.5% is fairly conservative. The current PE ratio of TSM is 15, but at one point about a year ago it was as high as 32. I took a conservative assumption of 19 for PE ratio for the next two, three years. And based on the trailing 12 month net income, the current stock price, PE ratio, current market cap and the above assumptions, I extrapolated the stock prices at the end of 2022, 2023 and 2024 to be $115, $139 and $170 respectively. If I took the more conservative assumptions of EPS growth of 15% and PE of 15, I arrived at the stock prices of 90, 104 and 120 for the three years. From the above calculations, I set a target of $95 to be reached by the end of 1st quarter, 2023. Let's look at the professional analyst ratings. First of all, the current price of TSM is at $82.27 and my target price for the end of 1st quarter next year is $95. Yahoo Business rates TSM as a strong buy with 1.7 out of 5, the smaller the number the better for the buy rating and the high target is $160, average target is $97, the low target is $60. Lewis-Nevillea rates TSM overall as a D rating, that's not a good rating by Nevillea standards although Nevillea puts a lot of emphasis on the chart and as we know so far yet today, TSM has been going down only to recover a little bit in the last few days. Then the quantitative rating which is more driven by the chart is a D and the fundamental rating is a C, looks like Lewis-Nevillea doesn't like TSM much. However, tipRanks.com begs to be different, they rate the stock as a strong buy with a high target of $110, average target of $99 and low target of $89, then CNMoney rates the stock as a buy with a high target of $113, median target of $89 and low target of $60, the street.com rates the stock only as a C+, which is a HODE recommendation and they didn't mention a target price although the rating was given on November 10, 2022 which was before the Warren Buffett disclosure of purchase of the $4.1 billion worth of TSM stock. I'm pretty sure when the street.com refreshed their TSM rating, it'll be substantially better. Let's look at the charts for TSM. This is the daily chart, TSM is at the top of the bowling japan. RSI is very high at about 75, that means it's overboard in the last 2-3 days. Both the DMI and MHCD indicators are bullish, I believe TSM will most likely drop in the next few days. I'm bullish on TSM for the long term however, I've bought some shares after the Buffett 13F disclosure and will buy more shares when the RSI gets lower. Depending on how much TSM and the broad market will fall in the next few days, I might sell some of my TSM shares bought in the last few days for a quick profit, then I will try to buy the shares back in a couple of days or a couple of weeks at lower prices. Based on the technical indicators, this is definitely not the best time to buy TSM shares yet. One of my strategies, I'll wait for the RSI indicator to drop to less than 60, currently remember it's at 75, I'll wait for it to drop before buying more shares, and I'll wait for the November CPI numbers to be announced on December 13th, if the November all-item CPI decreases by more than 0.4 of a percentage point from October, the market will most likely go up, that means TSM will most likely go up as well. And if the November CPI comes in too high, the market will most likely drop, and TSM will drop as well. I will monitor the December 14th FOMC press conference. If the December rate hike after the FOMC conference is higher than half a percentage point, the market will most likely drop, and a tone of the Fed Chair Jerome Powell in the post FOMC press conference will also affect the market. If the market is bullish after the December 13th CPI and December 14th FOMC press conference, I will buy more TSM shares and other long positions. But if the market is bearish after the December 13th and December 14th data, I will sell some TSM shares, and I will sell long positions and probably buy short positions such as SQQQ and SPXS. I am bullish on TSM for the long term. At this point, I would like to suggest for you to subscribe to my Twitter account, which is DanMarketL, in addition to subscribing to my YouTube channel. By way of my Twitter account, I keep my subscribers updated on important news developments about the market and related to the companies that I invest in. I also share some of my trades in my Twitter messages. For example, on November 16, I tweeted that I sold half of the AMD shares I bought on November 10th at 15% gain. And I sold half of the ASML shares bought on November 10th at 9% gain. And then I bought SQQQ because I believe that the market was ready to drop for a few days. Thank you for watching all the way here. I would like to remind you to click the like, subscribe and notification buttons. As usual, I will very much appreciate your comments, suggestions and questions. I would like to remind you that I am not a financial advisor. I share my stock trading strategies and analyses for educational and entertainment purposes only. If you want to buy or sell stocks, you should make your own decisions and you should definitely consult with your financial advisors before you do so. This wraps up my video for now. I will chat with you again in the next few days. In the meanwhile, I would like to wish you the very best of luck with your financial investments.