Billionaire Cliff Asness Dumps Taiwan Semiconductor, Bets Big on Ultra-High-Yield Dividend Stock

Billionaire investor Cliff Asness, co-founder and managing principal of AQR Capital Management, has made a significant move in his portfolio by selling 92% of the fund's stake in Taiwan Semiconductor Manufacturing (TSM) and increasing its position in ultra-high-yield dividend stock Altria Group (MO). This strategic shift reflects Asness's focus on stable, income-generating investments and his concerns about the potential AI bubble.

Asness's AQR Capital Management sold 1,411,917 shares of Taiwan Semiconductor, representing 92% of its stake, during the June-ended quarter. This move comes as TSM has more than doubled in value over the past year, driven by the demand for AI-GPUs and the company's dominant position in chip fabrication. However, Asness's decision to sell suggests concerns about the aggressive earnings multiple and the potential for an AI bubble.

Geopolitical risks, such as trade tensions and import tariffs, may also have played a role in AQR's decision to sell its stake in Taiwan Semiconductor. Although the company has expanded its operations into Japan and the U.S., it still generates the majority of its revenue from its home market of Taiwan. The potential for import tariffs or poor trade relations between the U.S. and other countries could have sapped the optimism surrounding Taiwan Semi.

Asness's AQR Capital Management has been buying Altria Group hand over fist, increasing its stake by 112% over a 12-month stretch to 6,490,441 shares. Altria, the company behind the premium tobacco brand Marlboro, offers a reliable dividend yield of around 7.5%. This move aligns with Asness's preference for stable, income-generating investments, as seen in his fund's focus on sectors like utilities, renewable energy, and REITs.

Altria Group's stable cash flow and dividend history contribute to AQR's income-focused strategy. The company's Marlboro brand ensures a steady revenue stream, and its dividend has grown for 54 consecutive years. This stability and growth make Altria an attractive choice for AQR's income-driven approach.

The tobacco industry's position also plays a significant role in AQR's sector diversification. By increasing its stake in Altria, AQR has demonstrated a strategic shift towards stable, high-yielding investments. This move complements AQR's broader income-focused strategy, which prioritizes stable, inflation-protected income.

AQR's increased stake in Altria Group reflects the fund's long-term investment horizon. This move underscores Asness's preference for stable, income-generating investments and his adaptability in diversifying his portfolio beyond traditional sectors like utilities and REITs.

Altria Group's dividend yield compares favorably to other ultra-high-yield dividend stocks in AQR's portfolio. With a yield of 8.1%, Altria's dividend is higher than the average yield of 2.5% for S&P 500 stocks. Compared to other ultra-high-yield dividend stocks in AQR's portfolio, Altria's yield is higher than that of AT&T (7.5%) and Verizon (7.2%), but lower than that of Philip Morris International (8.7%).

In conclusion, Cliff Asness's decision to sell 92% of AQR's stake in Taiwan Semiconductor and increase its position in Altria Group reflects his focus on stable, income-generating investments. Asness's preference for sectors that generate consistent profits and cash flows, such as utilities, renewable energy, and the REIT sector, over speculative AI ventures highlights his commitment to an income-focused strategy. The tobacco industry's position in AQR's portfolio underscores the fund's adaptability and commitment to diversification. Altria Group's high dividend yield, combined with its strong brand and steady cash flows, makes it an attractive investment for income-focused investors like AQR.