We recently compiled a list of the Jim Cramer’s Latest Lightning Round: 11 Stocks to Watch. In this article, we are going to take a look at where Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stands against the other stocks in Jim Cramer’s watchlist.
Jim Cramer, the host of Mad Money, urged investors to refrain from making any investments in high-value stocks, particularly in the Big Tech sector, ahead of upcoming earnings reports, which will attract considerable scrutiny. Cramer expressed concern over significant price movements in various stocks leading into earnings, stating, “you can’t make up these moves.”
READ ALSO Jim Cramer on Tesla and Other Stocks and Jim Cramer is Talking About These 12 Stocks
He emphasized that these surges create heightened risks for those looking to purchase stocks before a company’s earnings announcement. He pointed out that there is underlying volatility affecting nearly every major company. He noted that the stocks that he mentioned on Friday were trading erratically high on October 28. You can read which stocks Cramer discussed on Friday in our article, Jim Cramer’s Latest Game Plan: 20 Stocks to Watch.
He went on to highlight that:
“First you need to understand that no one knows these earnings numbers ahead of time except the CEO, the CFO, and a very small group of very important people at each company, and they are tight-lipped.”
Cramer criticized analysts for their attempts to predict earnings, stating, “We’ve seen how wrong they can be over and over again.” According to Cramer, when a stock spikes before earnings, it does not indicate insider knowledge but rather excessive enthusiasm. He further cautioned that these price increases are occurring without any solid basis, making it perilous for investors. He said, “In other words, these stocks are going up on nothing and that I think makes it very dangerous.”
Cramer reiterated his advice and said:
“I am indeed trying to discourage you from trading these stocks ahead of the quarters. It’s just a roulette game based on nothing. Often the game feels rigged, you just don’t know which way it’s rigged because companies really and truly do not let this stuff drip out.”
Concluding his remarks, he said:
“Bottom line, no one on Wall Street knows what any of the quarters will look like, except for the principals. So don’t bother to follow the money that you see trading right now in anticipation. You know why? It’s a fool’s errand.”
Our Methodology
For this article, we compiled a list of 11 stocks that were discussed by Jim Cramer during the lightning round of his episodes of Mad Money on October 25 and 28. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a complex network of integrated circuits used in logic semiconductors.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 156
When a caller referred to Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) PE ratio, this is what Cramer had to say about it:
“The reason why that price-to-earnings multiple is so high is because they blow away the numbers. Turns out, it’s actually a lower price-to-earnings multiple. I think this company is the best in the business. They’re terrific. They are partners with Nvidia and I think you should own it.”
Taiwan Semiconductor (NYSE:TSM) plays an important role in the global semiconductor industry, specializing in the production, packaging, testing, and distribution of integrated circuits and a wide range of semiconductor components. As the largest semiconductor foundry worldwide, its facilities are integral to the operations of leading chipmakers, including Nvidia, AMD, Broadcom, and Qualcomm.
At the close of 2023, Taiwan Semiconductor (NYSE:TSM) reported an extensive customer base of 528, reflecting its capability to manufacture nearly 12,000 distinct products. In the third quarter, the company’s revenue surged by 36% year-over-year, reaching $23.5 billion. A fifth of this revenue was generated from the company’s cutting-edge 3-nanometer chip technology, highlighting the growing importance of advanced manufacturing processes in its business model. The company is preparing for the launch of its next-generation 2-nanometer chips, anticipated to debut in 2025 and ramp up in production by 2026. This upcoming technology is projected to deliver substantial efficiency improvements.
Overall TSM ranks 1st on Jim Cramer’s stock watchlist. While we acknowledge the potential of TSM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.