St. James Investment Company has released its “Value Investors” third-quarter 2026 investor letter, outlining an increasingly difficult environment for value investors. Rising interest rates, higher energy prices, record government debt, and geopolitical conflicts are testing market fundamentals, even as the S&P 500 trades near all-time highs and stock valuations remain elevated.
The letter does not disclose a specific third-quarter return for the Select Value portfolio. Instead, it highlights the widening gap between stocks and bonds since the pandemic. According to the firm, U.S. equities have outperformed bonds by an average of 28% annually over that period, while stocks now account for 52% of U.S. households’ financial assets.
St. James warns that rising oil prices and long-term Treasury yields could intensify inflationary pressures and increase the risk of stagflation. The letter cites a 10-year Treasury yield of 5.23% and a 30-year yield of 5.55%, underscoring the higher borrowing costs facing consumers, businesses, and the government.
Looking ahead, the firm remains cautious about a market increasingly shaped by enthusiasm for artificial intelligence. Its message is straightforward: resist chasing compelling narratives and focus on businesses with durable competitive advantages, sound economics, and prices that leave room for unexpected setbacks. St. James continues to emphasize patience, valuation discipline, and a sufficient margin of safety.
For a closer look at the firm’s stock selections, explore its top five holdings in 2026.
In its third quarter 2026 investor letter, St. James Investment Company mentioned Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSMC). TSMC is a semiconductor foundry that manufactures chips designed by other companies. Its fabrication technologies support processors and other semiconductors used in smartphones, high-performance computing, artificial intelligence, automotive systems, and industrial equipment. Its position in advanced chip manufacturing makes it an important supplier across the technology industry. On November 6, 2026, its U.S.-listed American depositary shares closed at $375.13, an increase of 6.24%, or $22.03, from the previous session. Its reported market capitalization was approximately $1.79 trillion.
Here’s what St. James Investment Company has to say about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSMC):
“The introduction of the smartphone reshaped the battlefield through extreme power efficiency, a different instruction set (ARM), and a foundry model in which the best factories no longer belonged to chip designers. Intel tried to respond with x86 Atom chips but failed. It treated the new market as a sideshow rather than recognizing it as the place where volume, talent, and the next computing platform were emerging. AMD’s answer, beginning in 2008, was to go “fabless” and later stake everything on a clean-sheet architecture (Zen) manufactured at TSMC’s facilities. Because AMD could not match Intel’s capital spending, it spun off its factories and outsourced its chip production to TSMC. This innovation removed the requirement that a challenger be a world-class manufacturer while TSMC’s rise made the fabless chip company possible. A competitor no longer had to control the entire channel; it could buy access to the best process while Intel shouldered the cost of the entire production value chain.1
Intel planned to launch its first 10-nanometer (nm) CPUs in 2016, but its development never arrived on schedule. The delay pushed Intel away from its long-running Tick-Tock cadence (a two-year process-development cycle), kept the company at 14 nm for years, and helped TSMC and AMD narrow the manufacturing gap. While TSMC shipped 7 nm and then 5 nm, Intel spent years refreshing its 14 nm products. By the time “Intel 7” (a rebranded 10 nm process) reached critical production volume, its competitors had already closed the performance and efficiency gap. Intel assumed its largest customers would never leave the x86 island, but its dominant moat no longer existed. Apple was once Intel’s most prestigious PC customer, yet beginning in 2020, it transitioned the entire Mac line to its own ARM-based M-series chips. Hyperscalers, a market segment Intel once completely dominated, began dual-sourcing AMD’s EPYC processors and later designed their own silicon. Microsoft promoted Windows on ARM, while OEMs that had treated Intel as the default began viewing it as just one option. The moat that had once protected Intel’s business quickly disappeared.
x86 compatibility had once been a genuine barrier to competition: rewriting the world’s software was unthinkable while Intel chips kept getting faster. Once process leadership vanished and new platforms (phones, then Macs, then parts of the cloud) no longer required x86, Intel’s structural moats began to erode. Compilers, emulation, and new operating-system support removed the assumption that “everything important runs on Intel.” AMD did not need to destroy x86; it only needed to make “good enough, cheaper, better efficiency” available on the same instruction set, and then let customers decide. An overconfident Intel had beaten back AMD in the early 2000s and assumed that its process leadership and installed base were permanent. Yet Intel’s dominant moat slowly eroded: first its manufacturing leadership, then its performance leadership, then its pricing power, and finally its market share. Server market share, ~95% in the late 2010s, fell to 50–70%; client PC share, once overwhelmingly Intel’s, became contested. The company that once earned more profit than TSMC, Nvidia, and AMD combined began generating large losses while its competitors pulled ahead.”
In its October 15 earnings release, TSMC reported third-quarter 2026 revenue of $46.72 billion, an increase of 41.2% year over year in U.S. dollar terms. Revenue measured in Taiwan dollars increased 50.9%, while net income and diluted earnings per share both rose 68.7%. Earnings reached $4.60 per American depositary share, and the company reported a gross margin of 66.4% and an operating margin of 58.7%. Its manufacturing mix also continued moving toward newer technologies, with 2-nanometer chips accounting for 8% of wafer revenue and 3-nanometer chips contributing 33%.
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Disclosure: No material interests to disclose. This article was originally published on Global Market Bulletin.
