Broadcom (AVGO)

(A Top Pick Jan 27/18, Up 20%) The takeover was rejected and the stock retreated, but he still holds it. It is still reasonably priced at 12 times. He likes the valuation, business and yield.

Chip maker. $12 billion dollar buy back. Tons of free cash flow. Cheap stock. (Analysts’ price target is $312.30)

Broadcom makes chips. It merged with Avgo, which also made chips. The are producing chips across the board, including chips for automobiles and for mobile devices. This business is very capex heavy and is changing rapidly. They have the scale to continuously innovate and pump capital in. The stock trades at 12x earnings with a dividend of $2 (3%). (Analysts' price target is $319.26).

This company has such a tight grip on the chip side of things, and you see evidence of that with how much Apple (AAPL-Q) has gotten into bed with them, in terms of making them a quasi-exclusive chip manufacturer for some parts of the iPhone. Thinks the acquisition with Qualcomm (QCOM-Q) is going to happen. Dividend yield of 2.6%. (Analysts' price target is $320.)

A $100 billion market cap company. Think Cloud, think big data, think automation. They have wireline products, wireless products, enterprise storage, industrial automation, etc. They’ve been making a huge rate of return. It is undervalued. Dividend yield of 1.6%. (Analysts’ price target is $290.)

QCOM-Q vs. AVGO-Q. Broadcom is getting closer to closing their deal. They have great price momentum, although valuation is catching up. QCOM-Q has poor price momentum and poor valuation.

Broadcom (AVGO-Q), Nvidia (NVDA-Q) or Amazon (AMZN-Q) for a long-term hold? He likes all of them. They are all very interesting companies. We all know the story of Amazon, and Nvidia is on fire with their new graphic chips. Broadcom has been doing a great job of consolidating the traditional computer chip industry. This one is probably the low PE, lowest growth of the bunch, but thinks you would be happy to own it.

This plays into the new iPhone theme. They expect to have 40% more content in the new iPhone than they did in the last iPhone. They make RF chips which are going into everything. The only semiconductor company that has a long-term contract with Apple. Dividend yield of 1.6%. (Analysts’ price target is $277.50.)

(A Top Pick June 14/16. Up 55%.) The whole semiconductor group has been on fire since March/April of last year. This one is a key company in that space. You could also use the SPDR ETF XSD-N.

He recommended this in January, and since then it has had a tremendous run. This is really an amalgamation of Broadcom and AVGO coming together. They are both in the chip space. By coming together, there are cost synergies that are still playing out. When you buy an iPhone, you are going to have a Broadcom chip in there. They also have the chips in automobiles. Dividend yield of 1.6%. (Analysts’ price target is $275.)

This is a merger of AVGO and Broadcom, both leaders in the chip space. AVGO was in defence and automotive and Broadcom was mobile. It was the perfect marriage. By coming together, it was the cost synergies, but more so it allowed them to innovate much more quickly by having them under the same umbrella. This is essentially the largest Wi-Fi chip provider. They have established relationships with top of class companies, and it’s a space that continues to grow. Dividend yield of 1.99%. (Analysts’ price target is $215.86.)

This was a merger of Broadcom and Avago, both leaders in their market. Today they are the leader in RF chips which are in every Apple device. Their product offering is so strong that they were able to get a 2-3 year contract out of Apple (AAPL-Q) which Apple does not do. They have a locked-in loaded position in the next generation of iPhones and iPads, which is an expanding market. The 2^nd market they are in is automotive. Cars are all becoming more connected to the Internet. This company is going to generate about $5 billion in cash over the next year. It is generating a return on capital of about 7%. Dividend yield of 1.26% which will grow at about 10% a year.

They basically supply line filters to a lot of products including the iPhone. Have done a couple of big acquisitions. Trading at 15X PE which is a good multiple in the space. They have a lot of room to run.