I have always longed to own a semiconductor company and finally picked up Broadcom.
Coincidentally, Broadcom (Avago) was one of the highest volume customer in my previous job among other tech companies like Dell, AMD, Apple, Keysight etc etc.
Probably a waste not leveraging on my work exposure then?
There has been fears that over 20% of Broadcom’s revenue come from Apple but they are slowly moving away from their reliance on Apple (despite their already diversified structure).One fine example is the acquisition of CA Technologies, one of USA largest software companies. They also sold off their Wireless Iot business to Cypress Semiconductor, foreseeing the great competition and capex ahead. This will also help push their focus on things that will more likely work.
Another fear is the obvious trade war escalation since a big chunk of their revenue comes from China like many chip companies.
If you did not know yet, Broadcom is actually a shareholder centric company (while Alibaba is client centric). The company is still growing fast and some of their free cash flow are turned into dividends to reward shareholders. Their dividend yield is one of the highest in the chip industry and they also use their cash to buy back a lot of their own shares -which once again benefit investors.
The dividend will act as a buffer to volatility as compared to other chip companies like Nvidia, AMD and Micron. Still, I did rather prefer Broadcom use some of the cash to pay off short-term debts to reduce interest payments.
I was lucky to catch the latest price uptrend despite not catching the recent bottom of around $200.
As Broadcom is a great company and its uptrend still looks intact, I will give it some time to see if it will break out through the next resistance of $270.
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