Led by CEO Warren Buffett, Berkshire Hathaway stands as one of history’s successful investment conglomerates. With the company’s Class A stock trading at roughly $482,000 per share, Berkshire has a market capitalization of approximately $703 billion and ranks as the sixth-largest publicly traded company in the world.
Starting from a price of roughly $18 per share when Buffett purchased the company and made it the foundation for his investing empire, Berkshire Hathaway has grown by incredible leaps and bounds through the years — and its moves are closely monitored by investors around the world. Read on for a look at two stocks that Berkshire purchased in its last reported quarter that are capable of creating growing wealth for your portfolio as well.
1. Taiwan Semiconductor Manufacturing Company
Berkshire’s initiation of a position in Taiwan Semiconductor Manufacturing Company (TSM 0.32%) was arguably the holding company’s most eye-catching purchase in the third quarter. Since selling out of a small position in Intel in 2012, Berkshire hasn’t really dabbled in the pure-play semiconductor space. And it’s notable that Buffett’s company didn’t exactly tiptoe into buying TSMC stock.
With its roughly $4.1 billion purchase of TSMC shares in the third quarter, the chip fabrication leader immediately became Berkshire’s 10th-largest overall stock holding. Why has Buffett’s company suddenly gone gung-ho on the Taiwan-based semiconductor stalwart?
For one, TSMC has an incredible moat. The company’s chip fabrication capacity and technologies are quite literally unmatched. TSMC claims roughly 55% market share in the contract chip fabrication market, and it’s responsible for manufacturing more than 90% of the world’s high-end semiconductors.
Even Intel, one of TSMC’s largest competitors in the fabrication space, relies on the Taiwan-based company for some of its manufacturing needs. High-performance semiconductors will only become increasingly important for the technology sector and broader global economy, and TSMC’s dominance in the category positions it to capture the vast majority of chip fabrication profits.
With such powerful competitive advantages and a strong set of long-term industry tailwinds at TSMC’s back, it’s not shocking that Berkshire Hathaway initiated a substantial position in the chip leader’s stock. Crucially, the semiconductor fabrication specialist has also been looking attractive from a valuation perspective.
Trading down roughly 35% from its lifetime high, TSMC now trades at less than 14 times expected forward earnings.
With the company boasting an incredibly strong position in an essential industry and also paying a dividend yielding roughly 2.3%, TSMC stock offers an appealing combination of value and growth potential at current prices.
2. Paramount Global
Paramount Global (PARA -0.99%) is a media stalwart with a business setup that allows it to monetize content through multiple distribution channels. A hit movie or cable-television series can go on to be a big asset for its Paramount+ streaming service, and this dynamic puts the company in better position to make the budgetary allotments needed to deliver high-quality content.
Paramount has a solid collection of franchise properties, and the company has been showing that its studios are capable of serving up big hits lately. The company’s 2022 blockbuster Top Gun: Maverick generated roughly $1.5 billion in ticket sales, making it the 12th-highest-grossing film in history and one of the most profitable films ever. Beyond theatrical revenue and home video sales, Top Gun: Maverick will also be a boon to the Paramount+ streaming platform.
While the company has scored some big hits with its theatrical business lately, it’s the streaming unit that’s shaping up to be most central to Paramount’s long-term success. Paramount+ is much smaller than competing services from Netflix and Disney, but it’s growing at an impressive rate.
Aided by 4.6 million net subscriber additions, Paramount+’s revenue was up 95% year over year in the third quarter. Meanwhile, the company’s overall direct-to-consumer video revenue grew 38% year over year in Q3 to reach roughly $1.23 billion.
With the company valued at roughly 40% of expected forward sales and 14 times expected forward earnings, Paramount Global looks like a classic Buffett-style value play, and its current market capitalization of roughly $12.4 billion leaves plenty of room for long-term upside.
Keith Noonan has positions in Walt Disney. The Motley Fool has positions in and recommends Berkshire Hathaway, Intel, Netflix, Taiwan Semiconductor Manufacturing, and Walt Disney. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, long January 2023 $57.50 calls on Intel, long January 2024 $145 calls on Walt Disney, long January 2025 $45 calls on Intel, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, short January 2024 $155 calls on Walt Disney, and short January 2025 $45 puts on Intel. The Motley Fool has a disclosure policy.