****

Walgreen (NYSE: WAG)

18.0%

2.2

****

Source: Capital IQ, a division of Standard & Poor's, and CAPS as of April 29. TTM = Trailing 12 month.

While these aren't meant to be formal recommendations, they're a great place to kick off some more research. In fact, why don't we start by taking a closer look at Taiwan Semiconductor.

The anatomy of a growth stock
Manufacturing semiconductors is no small endeavor. The highly specialized semiconductor fabrication plants can cost billions to construct and many millions to maintain, and they don't make any sense to own unless you're churning out massive volume.

So, what do you do if you're NVIDIA (Nasdaq: NVDA) or Microsoft (Nasdaq: MSFT) and want to design and sell semiconductor-based devices, but don't want to shell out billions to build a foundry? You turn to a dedicated foundry like Taiwan Semiconductor who will do the fabrication for you.

Where it gets more interesting for TSMC is when we consider the fact that though the overall semiconductor industry is maturing, as of 2007, only 19% of global semiconductor revenue came from dedicated foundries. According to a report from research firm IC Insights, this could grow to 27% by 2012, giving TSMC a great opportunity to grab a larger piece of the overall semiconductor pie.

CAPS or bust
There's little question how CAPS members feel about TSMC -- the stock has a perfect five-star rating with nearly 1,200 outperform ratings versus just 33 underperform ratings. Two of the main points that CAPS members cite in their bullish pitches are the dependability of TSMC's business and the strength of its balance sheet.

CAPS All-Star mkyorai presented myriad reasons to like TSMC's stock when giving it a thumbs up back in August of last year:

Sitting on a mountain of cash, minimal debt, consistent earnings growth, high insider ownership, and semiconductor manufacturing is slowly working its way into the world of the boring. They are repurchasing shares (albeit only to reduce share dilution from the company profit sharing plan), and they are paying a decent dividend. I am watching their inventory numbers with concern, doubly so because unlike commodities, getting a good handle on the value of semiconductors that can depreciate rapidly isn't easy, but overall, I feel this is a solid performer at a decent price.

I joined the bullish chorus myself back in mid-January when the stock was about 26% lower. Given the jump in the stock price, I'm not quite as excited about the valuation today, but the stock's 4.4% dividend gives me good reason to hang on to that outperform rating as long as the valuation doesn't get too out of control.

But here's the real question: What do you think of Taiwan Semiconductor's prospects? Let the CAPS community know what you think by clicking over and sharing your opinion with the 130,000 investors already participating.

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