Broadcom (AVGO)

Portfolio construction and management are paramount for his firm. In his dividend growers mandate. Opportunity in front of them is fantastic with AI and data centres. But it's now at a point where it's subject to idiosyncratic risk if it becomes too big a position size in a portfolio. Be prudent.

Chips are difficult because they're cyclical. Cycles tend to be long, and painful on the downside. An upcycle means great days, but you have to time the entry and exit. See his Top Picks for a name with less of a risk profile.

Chart's gone parabolic, indicators are screaming overbought. The thing about mean reversion, is there's no justice in the market and it doesn't have to happen that way. You either say you'll buy more when it goes down, but it never does. Or you decide to buy on the downswing, and it just keeps diving.

Be cautious, just because of the steep parabolic move on the chart. Look for it to go sideways. If you don't own, don't jump in now. If you do own, clip some profits now but keep your base position.

In the hot part of the market. Momentum of the business is decidedly positive. Not cheap, but the return has been great. His firm doesn't buy at high prices, because when there's a hiccup (which you can't forecast) it can turn into pneumonia. That's the risk.

In his dividend growers mandate. Very compelling organic growth. Over coming 3 years, earnings expected to grow 20% and the dividend along with them. Capital allocation framework and organic growth prospects are better than ADBE. 

Software companies are spending all the $$ in the AI race. Who's getting it? The hardware makers, so chip makers are well positioned. Continues to buy.

NVDA is the clear winner, because its chips make AI possible. There is some competition out there, but AVGO isn't one of them. 

He likes it for the AI market. It sells custom AI chips to companies like Google and Meta for specific applications. It is very efficient and manages margins very tightly at 60% of EBITA. Trades at 37X earnings so it is not cheap.                Buy 47  Hold 5  Sell 1

Want to own leading stocks in sectors that are in favour. Breadth in the semi sector is improving. Made a new 5-year high. Trades better than 94% of companies in the S&P over last 52 weeks. Follow with a trailing stop, which lets you stay in a winning position until you see something changing.

(Stock split 15 July 2024)  His colleagues really did some great research on this last year. In his dividend growers portfolio, and it's increased mightily over the last 8-9 years. On vanguard of supplying chips to hyperscalers. Long runway of growth.

Is making new highs, breaking out. Looks good but is likely overbought. Will pull back to its last peak, a support level.

One of the things his team's looking at right now is that it seems some of the regulations surrounding the semiconductor industry will be reduced (specifically China, but other countries as well). That could mean an expanded market for the semi manufacturing equipment companies, such as KLAC. AVGO has also been a strong performer, and he owns some NVDA. Those two names have strong relative price performance, are economically sensitive, cyclical, and have pricing power.

It sold off after last Thursday's report: revenues +2-% YOY, EPS +44% YOY with semis and infrastructure software numbers also impressing. Also, guidance was healthy. However, shares ran up before that report, their non-AI semis business disappointed and guidance says it will be slow to recover. Also, AVGO didn't comment on current or prospective cuctoemrs. Gross margins for Q2 were in-line, but guidance was weak. He still likes the stock: AI semis revenues beat and are expected to grow next quarter from $4.4 to $5.1 billion. Their networking side is also growing.

Big pullback in April. Pushing out to new all-time highs, quite positive. Long-term chart looks fantastic. Great name. Definitely doesn't mind adding at these levels. Looks technically strong, and in the right place as semis have really started to strengthen and lead the market higher again.

It reports Thursday. He expects it to be great, because software is getting great margins.

Clearly isn't going to topple NVDA from the throne on which it finds itself. Every time someone thinks they can do that, NVDA comes out with a new version of the chip that's even better. This name isn't a bad alternative play to NVDA.