Rob Sechan, Managing Partner, New Edge Capital Broadcom Corp. BRCM-Q BUY Sep 01, 2023

Broadcom re-rated like all AI names, trading at 14x PE to start the year and 21x (vs. peers' 25-29x). Yesterday, they raised guidance from 10% AI exposure to 25% or more in 2024. A huge move. Has long owned this. Down 6% today, which is a gift.

Prefers this to Nvidia, because its valuation is a lot more reasonable.

Good business with steady compounding ability. Asset light business. High cash flow. Actively buying back shares. Paying steady dividend. Returns on invested capital in 30-50% range. Not founder led and founder owned, but very strong business. Would recommend holding as business is able to compound. Very good long term hold. 

It reports next week. He wants to see around 5% revenue and earnings growth with demand growing as margins hold steady. Watch for guidance about data centre demand. A great way ex-Nividia to play AI. 

Would not advise buying. Seeing stock price remain where it is. Is cheaper, but not getting growth. 

Recent market sell-off creating buying opportunity. Earnings have been strong, and getting better. A.I. cycle just beginning to start. Fundamental story appears to be getting better (earnings etc.) 

Fantastic company. Stock performance has been incredible the past 10 years. Mistake has only been to sell shares. Would recommend buying and/or holding. 

We would be fine with a full position in the company, assuming a growth-focused investor and an appropriate timeframe. Earnings dates can result in high volatility around a stock. It is a two-sided coin: earnings surprises can see a stock get called away. But upcoming earnings also tends to increase options premiums, so shareholders can still benefit. If doing an options strategy, since earnings are a regular occurence, we would not specifically work around or try to optimize strategies around earnings dates. Consistency is usually better.
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