By Rick Walter
Can Broadcom Inc. (symbol: AVGO) continue to deliver the goods? On December 18th, 2019, the company announced that they were looking to sell one of its wireless-chip units. The move would accelerate the company’s shift away from its roots as a semiconductor maker. According to some company officials, the unit could be worth up to $10 billion. I personally thought that the move generated a confusing long-term growth outlook for the company, because wireless chips have always been the backbone of the company’s core businesses. Selling-off one of the units that generate core revenues for the business, I believe, caught many investors and analysts by surprise. The company’s stock sank from a high of $320 a share to roughly $301 shortly thereafter. However, since we are not privy to the company’s long-term business strategy, certain business moves may at first glance seem odd and confusing to investors looking in. On January 23, 2020, the company recently announced a multi-year supply agreement with Apple Inc. AAPL to provide wireless components for Apple products into 2023, a deal that could generate billions of dollars- $15 billion in revenues. The announcement sent the stock roaring to $329 a share on Thursday January 23, 2020.
Our success as traders and advisors depends on companies like Broadcom. We look for companies that lead by innovation and consistently grow shareholder’s value. Suffice to say, that even though recent business moves by the company may have had investors like us scratching our heads, we still believe that Broadcom Inc. AVGO, still fits the bill of a company that can continue to grow earnings and deliver consistent returns to shareholders over the next five years which bodes well for higher trading profits and better returns on our client portfolios.