Broadcom Inc. (NASDAQ:AVGO) traded at around $377 on October 7, little changed on the day and 8.92% higher over twelve months. A caller on the October 6 episode of Mad Money said the company had excellent numbers and the stock had barely moved.
Cramer told him not to sell it there, then disclosed that he had trimmed the position himself because the trust held too much of the sector.
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The Caller’s Complaint Is Measurable:
The gap the caller described is the most striking figure in this company’s accounts. Revenue grew 85.50% in the most recent quarter, and earnings grew 216.10%. The stock rose 8.92% over the same twelve months.
Tripling profit while the shares move single digits means the multiple contracted by roughly as much as the earnings expanded. The shares also sit 24% below their 52-week high of $495.00, which is where that contraction shows up on a chart.
So the complaint was accurate, and the explanation is the valuation rather than the business. Billionaire investors hold ten semiconductor stocks. The one ranked first has returned 24% since June.
What Cramer Was Pointing At When He Said Hold:
Broadcom runs a 75.52% gross margin and a 54.31% operating margin. Keeping more than half of revenue as operating profit is what switching costs in networking silicon and enterprise software produce together.
Return on equity of 44.25% on book value of $20.88 a share is the same advantage expressed as a return. The cash backs all of it. Free cash flow of $39.40 billion arrived against $38.26 billion of net income.
His trim was about position sizing rather than about the company, and he said so plainly on the show. Debt-to-equity of 59.60% on $59.42 billion of borrowings is the one figure that has grown with the acquisitions.
Against that, $23.98 billion of cash and a current ratio of 2.50 mean those borrowings are serviced without strain. In January, we ranked ten stocks for high returns. The one we put first has returned almost 30% since.
The Valuation Case:
Broadcom traded at around $377 on October 7 and is worth $1.80 trillion. Sustainability rests on custom accelerator programmes at a small number of very large customers. On earnings, the stock sits at 46.37 times trailing and 19.41 times forward, with a PEG ratio of 0.37.
That forward figure is the whole reason the multiple is compressed, because it says profit is expected to more than double again. The dividend yields 0.69% on a $2.60 rate and consumes 32.44% of earnings, so it is not what holders are paid for.
Conclusion:
The caller was right, and Cramer’s answer was consistent with the figures. Revenue grew 85.50% at a 54.31% operating margin, free cash flow of $39.40 billion exceeded reported net income, and the stock still rose only 8.92%. However, the shares are 24% below their 52-week high, and a forward multiple of 19.41 against 46.37 trailing means the price already assumes profit will more than double again. Debt stands at $59.42 billion. The number to watch is operating margin, because 54.31% is what has to hold for the forward multiple to make sense.
Market Sentiment:
Broadcom Inc. was held by 170 hedge funds with a combined stake value of about $29.08 billion at the end of Q2 2026 in the Insider Monkey database. This is down from 173 hedge fund holders with a cumulative investment value of around $32.84 billion in the previous quarter.
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This article is originally published at Insider Monkey.
