Preamble: One of the main questions that I had and I see recurring on this sub is how to identify and invest in emerging stocks before it becomes mainstream news. I did not have the time to actively track social media and decided to build a program that does it for me.
How it works: The program is built using Python and uses both Twitter and Reddit API to stream comments and tweets and spot tickers that are exhibiting accelerated growth. I added sentiment analysis to the findings so as to check the general sentiment (whether what is being talked about the stock is positive or negative).
Here is the stock picked by the program and my DD
Stock: Taiwan Semiconductor Manufacturing Company ($TSM)
Week on Week increase in mentions: 130%
Month on Month increase in mentions: 324%
Average sentiment across mentions: +29.5%
DD
Core Product
TSMC was founded in 1987 by Morris Chang, who previously had worked in Texas Instruments. TSMC can be considered as possibly the most important company in the world that few people have heard of. This is because it is practically a chokepoint of the $470 Billion semiconductor industry and is instrumental in supplying chips to almost all the major players. Currently, the company supplies to Apple for their A14 chips and ARM-based chips for their Mac products, Qualcomm, MediaTek, AMD, Intel, and Nvidia.
The company is the world’s largest semiconductor foundry. They are in the pure-play foundry business. This means that they do not produce any processors for their own products but they manufacture and sell chips to companies such as AMD, Intel, and Apple. The main reason for which companies such as Apple and AMD source chips from TSMC is that they do not have to build their own expensive silicon fabrication plants (the CapEx of the plans run into 10s of billions of dollars and it takes an extremely long time to set up) to manufacture their chips. TSMC is currently the world’s 11th largest company by market capitalization ($554 B).
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TSMC absolutely dominates the advanced chip market
As you can see from the above chart, TSMC absolutely dominates the advanced chip market (<10nm, think phone processors) which also has the highest margins. The company effectively controls more than half (54% to be exact) of the world’s made-to-order chip market.
Financials
TSMC posted its best-ever quarter in Q4’20 with revenues jumping 22% to a record $12.68 Billion and profits increasing 23% to $5.1 Billion. They are also expected to invest heavily this year with capital expenditure for production and development of advanced chips to be between $25-$28 Billion. (60% higher than the amount TSMC spend in 2020)
They also have a very strong financial position with $23 Billion in cash vs a long-term liability of only $10 billion (YE 2020). The company has also predicted a record first-quarter revenue between $12.7 Billion and $13 Billion, which is almost a 30% growth from the same period last year. We do have to note that their share price has jumped more than 140% over the past 12 months giving it the current valuation of $554 Billion.
Potential and Hype Factors
Technology moat: Compared to peers, TSMC is easily the leader in chip production technology. The company has delivered over 1 Billion 7nm chips by 2020 whereas Intel is still trying to master its 7nm development process. For those who are unaware of chip manufacturing, in general, the smaller the node size (measured in nanometer (nm)), the better the performance and power management. This is why the companies making the top-end chips want the smallest node size available.
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https://preview.redd.it/w6mw9ehakrq61.png?width=624&format=png&auto=webp&s=a70944796b31b7b971e743f497854c29d9b797d1
TSMC is currently in the process of producing 5