We recently published a list of Jim Cramer Latest Portfolio Update: Top 10 Stocks. Since Broadcom Inc (NASDAQ:AVGO) ranks 4th on the list, it deserves a deeper look.
Jim Cramer during his October 14 program on CNBC looked excited as he celebrated the rebound of major tech stocks, saying these companies are showing their “staying power” despite the odds.
“We’re back. That’s right. Whatever you want to call them, these big tech plays are demonstrating their staying power no matter what happens.”
Cramer said that the latest earnings season would be critical for the overall market and investor portfolios. He also pointed out the broadening of the rally, saying other groups besides the tech industry are also rebounding.
“This rally is not a zero-sum equation where the rest of the market does nothing. Other groups can work, too, in this market. There’s a lot of money going around, and we know there’s a lot of money coming into the market. The Fed is cutting rates, and friendly cash won’t be worth as much as it was. But the staying power of the Magnificent 7 is truly unbelievable.”
For this article we watched several latest programs of Jim Cramer aired on CNBC and picked 10 important stocks he’s talking about. With each company we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 130
Talking about Broadcom Inc (NASDAQ:AVGO) in a latest program, Jim Cramer said that when he talked to the CEO of the company on his program, he was impressed by the story he told.
“He told an incredible story. I was jazzed about it. But nobody listened. Now they listen. The stock hit an all-time high today. It’s not done. I’d hold on to it, especially since its VMware Center helps companies operate more efficiently.”
In its last reported results, Broadcom Inc (NASDAQ:AVGO) beat estimates on both EPS and revenue, but guidance failed to impress the Street, resulting in a share price decline. However, Jefferies said the dip was a buying opportunity.
“Guidance came in a bit lighter than expected, but management has been messaging lumpiness in AI revenue and growth is set to reaccelerate in 4Q,” said Jefferies analyst Blayne Curtis, in a note. “The cyclical correction in non-AI revenue is in-line with peers, and our view is the long-term trend in AI still favors an industry shift to custom ASICs, where Broadcom Inc (NASDAQ:AVGO) remains well-positioned. Factor in the added benefit of the VMware acquisition running ahead of schedule on both revenue and earnings, and it’s easy to look past one minor bump in the road.”
Broadcom Inc (NASDAQ:AVGO) continues to be a leader in the AI ASCI and networking chips market. The company expects about $12 billion in AI revenue in fiscal 2024, which means 20% of its total revenue will come from AI and counting.
Broadcom Inc (NASDAQ:AVGO) has 3nm AI ASIC chip deals with Alphabet and Meta in addition to many other tech giants aiming massive spending for AI hyperscaling.
The company’s Ethernet business is also strong amid partnerships with Arista Networks (ANET), while the company is also collaborating with Dell (DELL), Juniper (JNPR), and Super Micro (SMCI) in the networking business and other segments.
ClearBridge Large Cap Value Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q3 2024 investor letter:
“In IT, we bought Broadcom Inc. (NASDAQ:AVGO) as we believe the company has a long runway for growth with its custom silicon business, which should be more durable and less volatile than other components within the AI food chain. We also believe the acquisition of VMware creates another opportunity for steady, subscription-based durable growth that is still in its early innings. We believe the stock has an attractive risk/reward profile given the reasonable visibility toward mid-teens EPS growth at a low-20s P/E multiple. We made room for Broadcom by exiting Lam Research, whose shares we believed priced in a full recovery, while we grew increasingly concerned that China exposure might create an air pocket.”
Overall, Broadcom Inc (NASDAQ:AVGO) ranks 4th on Insider Monkey’s list titled Jim Cramer Latest Portfolio Update: Top 10 Stocks. While we acknowledge the potential of Broadcom Inc (NASDAQ:AVGO), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AVGO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.