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Broadcom (BRCM): 'First class' in chips
"It's now time to watch for buying opportunities - and one of the companies on my personal list is Broadcom Corp. (NASDAQ: BRCM), whose shares are in buying range right now," says analyst Glenn Rogers. insert.a.chart.BRCM The contributing editor to Gordon Pape's Internet Wealth Builder explains, "This semiconductor maker is a good choice for investors who would like to add to their information technology position with shares of a first-class company." "Broadcom, located in Irvine, California, designs semiconductors for the wired and wireless communications industry. They are a major supplier to Apple's iPhone, which has taken the world by storm this past year. "Specifically, they power the brilliant display screen that has captivated users since the launch of the iPhone last year. (Full disclosure: I've just picked up my new 3G iPhone). "They also provide the chip that delivers the GPS navigation in the new iPhone. The company holds over 2,000 U.S. and foreign patents and has more than 7,400 pending patent applications. "But Broadcom is not just an iPhone supplier. They also power the Motorola TV set top boxes, Netgear wireless routers, Bluetooth and Blu-ray applications, digital television, VOIP, etc. "There are lots of chipmakers out there but Broadcom operates in the areas that offer the highest growth potential and the least commoditization in this sector. "Financially, the company is solid with annual revenues in 2007 of about $3.8 billion and net income of $213 million (37c a share fully diluted, figures in U.S. dollars). "For the latest quarter, ending June 30, Broadcom reported net revenue of $1.2 billion, an increase of 16.3% over the first quarter of 2008 and up by 33.7% from the $897.9 million reported for the second quarter of 2007. "Net income was $134.8 million (25c per share), compared with $74.3 million (14c) for the first quarter and $34.3 million (6c per share) for the second quarter of 2007. "That represents a year-over-year profit improvement of more than 300% on a per-share basis. The company also raised guidance for the rest of the year. "Broadcom shares traded as high as $43.07 last October so the stock looks inexpensive at this level and value buying right now seems very sensible. The 2009 P/E estimate is 16 which is reasonable for a high-growth business and well below the five-year median level of 24 times earnings. "There are also some outstanding legal issues between Broadcom and Qualcomm but those seem to be going Broadcom's way. "The company is debt-free and recently authorized a share buy-back of $1 billion that extends to 2011. I would prefer a dividend instead of a buy-back, but you can't have everything. Buy with a target of $35." by Steven Halpern (TheStockAdvisor) Disclaimer: Please note that charts and commentary provided by the moderator are for educational purposes only. Any trades placed upon reliance on the moderator’s charts or information is taken at your own risk for your own account. Past performance is no guarantee of future results. While there is great potential for reward trading stocks, futures and options, there is also substantial risk of loss and you must decide your own suitability to trade. Future trading results can never be guaranteed. This is not an offer to buy or sell stock, futures, options or commodity interests. Most trading systems are based on historical formulas which have worked in the past. However, what has happened before may or may not happen again. You can lose all your money trading stocks, futures, and options and you must decide your own suitability as to whether or not to trade. Only trade with true risk capital you can afford to lose. Only trade markets you can properly afford to trade. Properly funded trading accounts typically perform better than those that are not. Never risk more than 2-3% of your account on any one trade. Always define your risk before entering a trade and place a stop to limit your risk. There are no guarantees or certainties in trading. Trading involves hard work, risk, discipline and the ability to follow rules and trade through any tough periods during a system’s draw downs. If you are looking for a guarantee, trading is probably not for you. Most people lose money trading. One of the reasons is that they lack discipline and are unable to be consistent. A system can help you become consistent. Ironically, worrying about the monetary aspect of trading can contribute to and cause a trader to make trading errors. Therefore, it is important to only trade with true risk capital. |
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