This month’s pick is Broadcom Limited (AVGO). This tech powerhouse is one of the top players in the semiconductor market and is poised to reign for decades to come alongside the likes of Intel, Nvidia and Texas Instruments. I was hesitant to recommend AVGO since it is one of the top holding in the SOXX ETF that I recommended last month, but I believe that Broadcom’s recent sell-off presents a fantastic buying opportunity.
So what drove AVGO down? Some market analysts recently suggested that the newest iPhones will not sell as many units as originally expected. Because AVGO is one of the largest suppliers of chips for iPhones and Apple represents about 20% of Broadcom’s revenue overall, this news hit AVGO’s stock price. While I cannot say if these iPhone sales guestimates will turn out to be true or false, I can say that reports hating on Apple tend to be fake news and totally overblown (from what I’ve seen in the past).
Additionally, AVGO has taken backlash from their attempted buyout of Qualcomm and the uncertainty surrounding that deal has also affected Broadcom’s stock price. Even if the Broadcom/Qualcomm deal doesn’t happen, AVGO is poised and ready to buyout another large competitor in the coming year.
On the numbers side, AVGO currently trades a little more than 10% below their 52-week high of just over $280 per share. Broadcom’s price-to-earnings ratio based on 2018 projected earnings is a shade under 13 and well below the industry average of 27 (that’s a good thing as far as upside potential is concerned). AVGO also sports a 2.79% dividend rate which provides a nice incentive on top of their long-term growth potential.
In the near term, AVGO may well fluctuate in price as news regarding Apple and Qualcomm continue to weigh. Irregardless of what happens with Broadcom in the next 6-9 months, I view this company as one that I want to own for the next 10-20 years as they’ve cemented themselves as a key player in an industry that is going to be the backbone of technology’s future. Personally I view AVGO’s current price as an opportunity to plus-up my already about 3% position in my portfolio and I’ll be adding to my position next week.
If AVGO is a little too exciting for you, I recommend you take a look at Starbucks (SBUX) and Target (TGT). Starbucks stock just got pummeled after a less than stellar quarterly earnings report. I’ve got my eye on it and may initiate a position in the next week as SBUX has been in a bit of a down spell over the past 6 months but I view it as a solid long-term hold. Target, on the other hand, has been on a nice run and I wish I had picked some up two months ago. It’s stock has recovered from the beating that it and other retailers took last year over fears that Amazon is going to put them all out of business. With a solid dividend at over 3% and a niche in a crowded industry, I think Target has some room left to run and I just initiated a position.
Before purchasing any stocks or ETFs, you should do your own research and consult a financial professional because, disclaimer, I’m not a paid finance professional.