How can one determine whether Broadcom Limited (NASDAQ:AVGO) makes for a good investment at the moment? The Insider Monkey team analyzes the sentiment of a select group of top investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right, but data show that their consensus long positions have historically outperformed broader market benchmarks. In support of this thesis, Goldman Sachs’ VIP list, which includes 50 most-owned stocks among hedge funds’ ten largest holdings, has beaten the S&P 500 gauge on a quarterly basis 64% of the time since 2001. Interestingly, this basket of stocks compiled by Goldman delivered a gain of 23% in 2015, so it does pay off to follow hedge fund activity. That being said, let’s take a close look at the hedge fund activity around Broadcom Limited during the final quarter of 2015.
Broadcom Limited (NASDAQ:AVGO) was in 62 hedge funds’ portfolios at the end of December. AVGO has seen a decrease in hedge fund sentiment in recent months. There were 66 hedge funds in our database with AVGO positions at the end of the previous quarter. At the end of this article we will also compare AVGO to other stocks, including PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ), Delta Air Lines, Inc. (NYSE:DAL), and Caterpillar Inc. (NYSE:CAT) to get a better sense of its popularity.
If you’d ask most shareholders, hedge funds are viewed as unimportant, outdated financial vehicles of years past. While there are over 8000 funds in operation at the moment, Our researchers look at the upper echelon of this group, about 700 funds. These money managers have their hands on the majority of the hedge fund industry’s total capital, and by watching their highest performing investments, Insider Monkey has determined various investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.
In May 2015, semiconductor company Avago Technologies agreed to buy Broadcom Corporation in a cash-and-stock deal valued at $37 billion. The multi-billion-dollar merger was completed on February 1 this year, after which the name of the freshly-combined company was changed to Broadcom Limited. Broadcom Limited (NASDAQ:AVGO), the successor of the Broadcom-Avago merger, published its financial results for the first quarter of fiscal year 2016 that ended January 31, which triggered a wave of demand for the company’s shares and analyst upgrades. Following the release of the earnings report, analysts at Deutsche Bank reiterated the ‘Buy’ rating on the stock and lifted the price target to $180 from $157, citing an impressive guidance for the second quarter of fiscal 2016. Moreover, analysts at Credit Suisse reiterated their ‘Outperform’ rating on Broadcom and raised the price target to $180 from $160.
It is widely known that Broadcom Limited (NASDAQ:AVGO) represents a long-time supplier of communication chips to Apple Inc. (NASDAQ:AAPL), so the recent worries about slowing iPhone sales might have put some pressure on the company’s stock performance. Analysts at Pacific Crest Securities recently suggested that iPhone inventories have started to steady despite disappointing iPhones sell-through (actual sales to end users). These analysts believe that the second quarter will most likely represent the bottom for Apple component suppliers, including Broadcom Limited. The shares of Broadcom are currently trading at 11.42-times expected earnings, slightly above the forward P/E multiple of 12.9 for the Semiconductor Equipment industry.
Now, let’s go over the latest action surrounding Broadcom Limited (NASDAQ:AVGO).