Barbarian At The Gate: Taiwan Semiconductor Manufacturing (TSM)

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 "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) 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 $227.3 million.
  • TSM has traded 10.9 million shares today.
  • TSM traded in a range 210% of the normal price range with a price range of $0.54.
  • TSM traded above its daily resistance level (quality: 294 days, meaning that the stock is crossing a resistance level set by the last 294 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on TSM:

Taiwan Semiconductor Manufacturing Company Limited is engaged in manufacturing, selling, packaging, testing, and computer-aided designing integrated circuits and other semiconductor devices. It also manufactures masks. The stock currently has a dividend yield of 2.1%. TSM has a PE ratio of 18.0. Currently there is 1 analyst that rates Taiwan Semiconductor Manufacturing a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Taiwan Semiconductor Manufacturing has been 10.3 million shares per day over the past 30 days. Taiwan Semiconductor has a market cap of $97.9 billion and is part of the technology sector and electronics industry. Shares are up 7.6% 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 revenue growth and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.3%. Since the same quarter one year prior, revenues slightly increased by 2.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • TAIWAN SEMICONDUCTOR MFG CO reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TAIWAN SEMICONDUCTOR MFG CO increased its bottom line by earning $1.21 versus $1.10 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $1.21).
  • In its most recent trading session, TSM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry average. The net income has decreased by 0.5% when compared to the same quarter one year ago, dropping from $1,466.10 million to $1,458.32 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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