Roadmap 2 Wealth is switching this up with a new format. The newsletter will now focus on stock analysis with the goal of helping you understand which companies are good investments and which ones are not. An analysis of the fundamentals and the story of the company is performed and presented in this newsletter! Each week, you’ll receive a summary analysis with a link to the full analysis. This week is Taiwan Semiconductor Manufacturing Company, ticker symbol $TSM ( ▲ 0.46% ).

Meet Accio Work—the agentic workspace for business owners and solopreneurs. Our specialized agent team manages operations for you—sourcing products, negotiating with suppliers, managing stores, and launching marketing—all on autopilot.

With verified skills and business tool APIs, Accio Work takes action while you stay in control. Powered by Alibaba.com’s 1B+ products and global supplier data, it handles product selection and execution seamlessly. No setup required—just results.

Try Accio Work Now!

The biggest reason stocks had a solid week is simple companies putting up strong results. Investors responded the way they usually do when they’re relieved by investing at already high valuations because they’re willing to take on more risk. These positive earnings reports are enough to solve all problems, but they do make people feel more comfortable.

The market is getting what it wants most, strong earnings, strong guidance, and a picture of demand that is not as fuzzy as it was before. When you’re in a market where headlines can change the mood overnight, earnings are the closest thing to “real proof.” And this week, investors got enough proof to keep buying.

In plain terms: the market isn’t rallying because everything is perfect, it’s rallying because the biggest companies are still making real money.

The Fed didn’t change rates, but what mattered was the tone and the vote split. When you see more disagreement inside the Fed about what to say next, it’s basically the Fed telling markets: we’re not ready to promise cuts, and we’re still watching inflation closely.

That matters because a lot of investors are still mentally anchored to the idea that rate cuts are “automatic.” This week was a reminder that cuts are not automatic, the market has to “earn” the cut. If prices stay sticky or energy spikes again, the Fed will be slower and more cautious.

Trade policy popped back up with reports of higher tariffs on European autos. At a high level, tariffs matter because they can do two things at once:

So even if you’re not an auto investor, this matters as a “market” story, because it’s the kind of policy that can make inflation harder to manage. High inflation is what keeps interest rates high.

View full analysis here ⬇️

Most AI investing attention goes to chip designers, but many of these companies are “fabless” and rely on manufacturers like TSMC. TSMC focuses solely on producing chips for major designers such as Nvidia and Apple, handling manufacturing while keeping designs secure. Its dominance—producing 60–70% of global chips and about 90% of high-performance chips—gives it strong pricing power and a significant competitive advantage.

TSMC’s growth is the kind don’t see from an established manufacturing company. This is why this stock is enticing. Established AND in the leading position of the fastest growing industry. In the last 10 years, TSMC has only one year where revenue and margins were down (2023).

Margins are just as important as revenue, especially in a capital-intensive business.

Gross profit margins - how much money is left after paying for the cost of delivering the product or service to the customer.
Net profit margin - how much money is left after paying for all expenses including selling and administrative expenses (salaries, tools, maintenance and repairs, rent, utilities, etc.)

For a manufacturer, these are standout margins. Typical manufacturing companies land between 15% and 30% gross margins. After delivering the product to the customer, they have $0.59 on every dollar they bring in. After all expenses are paid, they walk away with $0.45 on every dollar. OUTSTANDING!

One nuance worth noting: revenue has grown faster than margins. Like we’re seeing with many companies, costs of doing business have risen recently and they can push some of the costs to the customer, but not a the rate of the cost increase. Still, the direction over time remains positive: TSMC has improved profitability while scaling.

When ROC is meaningfully higher than WACC, the company is creating value. This is the quality check most investors miss!

That is outstanding, especially for a manufacturer. It reinforces the idea that TSMC’s competitive position is strong and sustainable.

A simple way to sanity-check balance sheet risk is to compare debt to free cash flow (FCF).

Reminder:

We want businesses to have a debt to FCF ratio of less than 3-5 years, depending on the type of business model. TSMC has an average D/FCF ratio of 1.4 over the past five years! That implies that, on average, TSMC could pay off its debt in roughly a year and a half with the cash flows they’re generating. That is a strong position and suggests solid balance sheet flexibility. If this company were to run into trouble, they’ll be able to get out of debt quickly.

Valuation is not an exact science. The goal is to be directionally right and avoid paying a price that bakes in unrealistic expectations.

In the valuation framework discussed, the assumptions included:

Based on my assumptions

See the full analysis of TSMC to understand balance sheet health, assessment of how well management is deploying cash flow, valuation, and an ETF with major holdings in TSMC so you can invest in to get exposure to AI with less risk.