Sell: TE Connectivity (NYSE: TEL)
We decided to exit our position in TEL to free up capital for better opportunities. While the company makes essential electronic connectors, many of its everyday parts have become commoditized, leading to stiff competition and pressure on margins. Furthermore, the massive boom in AI/data centers drove material gains for TEL stock last year. However, this high-growth market accounts for only a small portion of its total sales. The vast majority of their business remains tied to the traditional transportation & industrial sectors, which we believe will undershoot the growth coming from leading-edge microchips over the long haul.
Buy: Taiwan Semiconductor Manufacturing (NYSE: TSM)
We added TSM to our portfolio because they are essentially the backbone of the entire global tech sector. Instead of making their own gadgets, TSM acts as a “behind-the-scenes” factory, physically building microchips for giants like Apple, Nvidia, and Google. Because they manufacture >90% of the advanced chips powering the booming AI/datacenter market, we expect their earnings to grow by an impressive 25%+ annually over the next three years. They are highly profitable, consistently beat financial expectations, and the stock is currently trading at a reasonable value, particularly when compared to peers.
