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Trade-Ideas: Taiwan Semiconductor Manufacturing (TSM) Is Today's "Storm The Castle" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Taiwan Semiconductor Manufacturing (TSM) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Taiwan Semiconductor Manufacturing as such a stock due to the following factors:

  • TSM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $170.8 million.
  • TSM has traded 6.4 million shares today.
  • TSM is trading at 9.57 times the normal volume for the stock at this time of day.
  • TSM crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in TSM with the Ticky from Trade-Ideas. See the FREE profile for TSM NOW at Trade-Ideas

More details on TSM:

Taiwan Semiconductor Manufacturing Company Limited engages in the computer-aided design, manufacture, packaging, testing, sale, and marketing of integrated circuits and other semiconductor devices. The stock currently has a dividend yield of 2.3%. TSM has a PE ratio of 16.7. Currently there are 2 analysts that rate Taiwan Semiconductor Manufacturing a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Taiwan Semiconductor Manufacturing has been 11.2 million shares per day over the past 30 days. Taiwan Semiconductor has a market cap of $91.1 billion and is part of the technology sector and electronics industry. Shares are up 2.3% year to date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Taiwan Semiconductor Manufacturing as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, impressive record of earnings per share growth and compelling growth in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 13.8%. Since the same quarter one year prior, revenues rose by 21.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • TSM's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.27, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, TAIWAN SEMICONDUCTOR MFG CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • TAIWAN SEMICONDUCTOR MFG CO has improved earnings per share by 22.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TAIWAN SEMICONDUCTOR MFG CO increased its bottom line by earning $1.10 versus $0.86 in the prior year. This year, the market expects an improvement in earnings ($1.19 versus $1.10).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Semiconductors & Semiconductor Equipment industry average. The net income increased by 23.8% when compared to the same quarter one year prior, going from $1,391.69 million to $1,722.58 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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