Warren Buffett’s chip purchase is a prime example of why you want to ‘just be greedy when others are fearful’

Berkshire opened three new stock positions in the third quarter:

Click on the codes to know more about each company. Read Tomi Kilgore’s detailed guide to loads of free information on the MarketWatch quotes page.

The 13F filing doesn’t say exactly when the shares were bought, but Berkshire built up its $4.1 billion position in Taiwan Semiconductor
TSM

after the semiconductor industry fell seriously. Semiconductor manufacturing has traditionally been a cyclical business, and TSM is the largest-volume computer chip manufacturer in the world.

Semiconductor stocks tumbled as investors saw the group enter a bear cycle. iShares Semiconductor ETF hits a 2022 close at a low on October 14 when it fell 44% for the year, before rising 25% through November 14.

When SOXX bottomed, Taiwan Semiconductor was hit even harder, with a 46% drop, possibly reflecting tensions between China and the United States over China’s claims to Taiwan. (All profits in this article include reinvested dividends.)

Taiwan Semiconductor fell to a 2022 low on November 3, down 49% for the year. Berkshire built up its position on TSM between June 30, when the stock fell 35% for 2022, and September 30, when it fell 41% for the year.

It seems that Buffett has chosen the timing very well, following part of the long-term strategy he discussed in his annual report. letter to shareholders included in Berkshire’s 1986 annual report. Buffett explains that market disruptions are unpredictable.

“Our goal is more modest: We are simply trying to be fearful when others are greedy and greedy only when others are fearful,” he wrote.

You can see the full list of Buffett’s letters to shareholders here.

And now, with the words of President Biden he did not expect a quick Chinese attempt to invade Taiwan After a meeting with Chinese President Xi Jinping, followed by the Berkshire reveal (both on November 14), shares of TSM spiked on November 15.

Read: High quality and dividends set these 5 semiconductor stocks apart from underperforming competitors

Other Stocks Berkshire Adds, Sells or Cuts

In the third quarter, Berkshire added the following stocks to its holdings. They are sorted by market value of shares held as of September 30:

While Berkshire adds to its stake in Paramount Global
PARA

and Celanese Corp.
CE

in the third quarter, the position value of September 30th fell compared to June 30th as the stock fell 22% and 23% respectively.

Berkshire sold all of its shares in Store Capital Corp. in the third quarter. The location was valued at $385 million as of June 30.

Here are other stock positions that Berkshire partially sold in the third quarter:

Berkshire’s Performance: How to Take a Break Easier

Here’s a 5-year chart showing the return of Berkshire’s Class B
BRK

stocks versus benchmark S&P 500
SPX

until November 14:

Berkshire’s five-year total return is slightly higher than that of the S&P 500. Your first reaction might be that the performance is unimpressive.

If you had looked at Berkshire’s performance against the index for the same five years as a year ago, you would have seen Berkshire’s 81% return trailing the S&P 500’s 136% return and would have believed it. into the idea that Buffett’s value investing philosophy is outdated.

But over the past year, the S&P 500 is down 14%, while Berkshire’s Class B stock is up 8.5%.

For many investors, the ability to sleep better at night could make Buffett’s approach to value all the more worthwhile.

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