We recently published a list of Jim Cramer is Talking About 10 Falling Stocks Amid Latest Market Rotation. Since Broadcom Inc (NASDAQ:AVGO) ranks 7th on the list, it deserves a deeper look.
Jim Cramer in a program last week tried to make sense of the decline in tech stocks, saying companies with the “best fundamentals” got “hammered once again.”
“I did not expect that to happen.”
Cramer said that sometimes it’s difficult to own the “winners.” The CNBC host said it’s important to understand the bear cases around stocks otherwise you will never know what “you are up against.”
Jim Cramer tried to find out whether the latest decline in top tech stocks was just a “periodic selloff” that presented an “opportunity.”
“When we get this kind of rotation, you never know whether these stocks are selling off because there’s something wrong or because they are up huge.”
Jim Cramer pointed to a caveat when it comes to holding winning stocks. When you have the losers, there are no profits, but when you own winners in your portfolio, you can see losses because people want to take some profits off the table, Cramer said.
The CNBC host said when top stocks go down, people holding those in their portfolios often end up thinking about whether they should also sell these stocks and if something has “changed.”
“From what I can tell you, nothing has changed about the stocks we are going talk about tonight. But it is true that the stocks are a heck of a lot more expensive than they were one year ago.”
In this program, we took a look at some top tech stocks that fell last week and explained the reasons they lost value according to Jim Cramer. We also discussed these companies’ fundamentals and hedge fund sentiment. 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: 115
Jim Cramer was recently asked about his thoughts on American Superconductor. Here is what he said:
“When I see stocks like Nvidia and Broadcom go down huge, I cannot reach for American Superconductor, not with these high quality stocks that are just on plain old on sale.”
TD Cowen in a fresh note named Broadcom Inc (NASDAQ:AVGO) as one of the stocks that can benefit from the rise in AI spending. Analysts at the firm said there are “no signs” of generative AI demand abating and highlighted that Broadcom Inc (NASDAQ:AVGO) recently raised its full-year AI outlook. Broadcom Inc (NASDAQ:AVGO) expects AI-related revenue for 2024 at $11 billion.
Broadcom Inc (NASDAQ:AVGO) recently reported second-quarter results. Revenue in the quarter rose about 43% year over year. AI revenue in the period rose a whopping 280% year over year. Broadcom’s revenue stream is diverse and does not rely on a single source. It includes enterprise, networking, storage, data center/hyperscaler, industrial, and consumer space. For 2024 AVGO has increased its annual revenue guidance to over $51 billion, anticipating growth of over 40%. A significant portion of this growth is expected to come from software, which would also help margins.
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. Broadcom has also developed ASIC AI chips in partnership with Google and Meta Platforms.
JPMorgan in its latest report said that Broadcom Inc (NASDAQ:AVGO) can “dominate” the high-end of the custom chips market. JPMorgan expects the high-end of the application-specific integrated circuit, or ASIC, market to reach anywhere between $20 billion and $30 billion, up from its previous estimate of $20 billion to $25 billion.
ClearBridge Global Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its first quarter 2024 investor letter:
“Among secular growth names, Broadcom Inc. (NASDAQ:AVGO) was another notable addition. Through organic growth and accretive acquisitions, Broadcom has developed into one of the largest global technology providers serving a number of industries with its semiconductor and software products. The company generates high levels of earnings and free cash flow, which will be driven in the coming years by revenue growth and margin expansion due to the acquisition of VMware and strong adoption of the Broadcom’s AI custom silicon chips. The acquisition of VMware is off to a good start and has shifted the business mix to 60% software and 40% semiconductors, enhancing growth prospects while also providing greater downside protection from higher recurring revenue.”
Overall, Broadcom Inc (NASDAQ:AVGO) ranks 7th on Insider Monkey’s list titled Jim Cramer is Talking About 10 Falling Stocks Amid Latest Market Rotation. 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.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
Hedge Fund Resource Center