We recently compiled a list of the 10 Most Profitable Stocks of the Last 10 Years. In this article, we are going to take a look at where Broadcom (NASDAQ:AVGO) stands against the other profitable stocks.
In an interview with CNBC on October 14, Michael Kantrowitz, Chief Investment Officer at Piper Sandler noted that while the market is expensive, it’s not a reason to get bearish and that unless a risk arises, the market will likely stay expensive. Kantrowitz explains that the market’s valuation is driven by the pricing out of risks that existed two years ago, such as inflation and higher interest rates. He believes that if these risks were to resurface, it would be a reason to get worried, but currently, that’s not the backdrop.
He also notes that investors should focus on stocks with continued earnings momentum, as these names will likely see the best outperformance and can hold their expensive multiples for longer. Kantrowitz is not too concerned about higher bond yields but notes that they can be a problem at some point. He thinks that yields would need to reach 4.25% to show up in the broader market.
Regarding earnings revisions, Kantrowitz believes that revisions coming down have not overdone it and that it’s normal to see estimates from the sell-side start out high and then trickle down throughout the year. He expects to see more downward earnings revisions but notes that large-cap stocks have held up far better in terms of earnings, which is why they continue to outperform.
Tom Lee, Managing Partner and Head of Research at Fundstrat Global Advisors discussed the markets and his recent observations. Lee believes that the market’s resilience is due to the large amount of cash on the sidelines. He thinks that investors have been under-invested in stocks and that the market is becoming less dependent on macro data.
Lee pointed out that the market has been able to shrug off negative news and that the recent PPI and CPI reports were not enough to knock the market off track. He believes that the Fed will continue to be dovish, especially since inflation is still tracking towards the 2% target. Lee also thinks that the election, which is becoming less of a coin toss, is also contributing to the market’s conviction.
Regarding the impact of the election on the market, Lee believes that markets like visibility, but they also need to like what they see on the other side of the election. He thinks that whether Trump or Harris wins, stocks will do well next year, but there will be differences in sector and asset class performance depending on who wins.
While some may be concerned about the market’s expensive valuation, others see it as a sign of strength and resilience, with that in context, let’s take a look at the 10 most profitable stocks of the last 10 years.
Our Methodology
To compile our list of the 10 most profitable stocks of the last 10 years, we used the Finviz and Yahoo stock screeners to compile an initial list of the 30 largest companies by market cap. From that list, we narrowed our choices to companies with positive TTM net income and 10-year net income growth informed by reputable sources, including SeekingAlpha, which provided insights into 10-year growth rates, and Macrotrends, which supplied information on trailing twelve-month (TTM) net income. Our list is sorted in ascending order of the 10-year net income growth rates.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 smallcap and largecap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician working at a magnified microscope, developing a new integrated circuit.
Broadcom (NASDAQ:AVGO)
10-Year Net Income CAGR: 32.74%
TTM Net Income: $5.09 Billion
Number of Hedge Fund Investors: 130
Broadcom (NASDAQ:AVGO) is a technology company that designs, develops, and supplies semiconductor and infrastructure software solutions. The company produces chips for networking, broadband, enterprise storage, and wireless communication for industries such as telecommunications, and data centers.
Broadcom (NASDAQ:AVGO) is well-positioned to benefit from the increasing demand for AI semiconductors. According to Precedence Research, the global AI semiconductor market size was $56.42 billion in 2024 and is projected to reach $232.85 billion by 2034, growing at a CAGR of 15.23%. Broadcom (NASDAQ:AVGO) has already secured key AI customers, including Google, Meta, and ByteDance, and is expected to add Microsoft’s OpenAI as a fourth major customer. The company’s AI-specific chip designs are customized to meet the unique workload demands of hyperscale cloud providers, allowing the company to cater to their precise specifications.
Broadcom’s (NASDAQ:AVGO) acquisition of VMware, in late 2023, has significantly boosted its infrastructure software revenue, with a 200% year-over-year increase, contributing $3.8 billion from VMware in Q3. The integration of VMware has driven a 32% quarter-on-quarter increase in the annualized booking value for VMware Cloud Foundation.
Broadcom (NASDAQ:AVGO) is well-positioned to lead the AI semiconductor market, with AI contributing a growing share of its revenues. The company is expected to grow its earnings by 13.27% this year, and its leadership in AI-specific semiconductors, custom chip designs, and strong position within the AI ecosystem solidify its role as a key industry player, driving long-term growth and market leadership.
Overall AVGO ranks 6th on our list of the most profitable stocks of the last 10 years. While we acknowledge the potential of AVGO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AVGO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.