Broadcom Ltd (AVGO): Are Hedge Funds Right About This Stock?

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Broadcom Ltd (NASDAQ:AVGO).

Broadcom Ltd (NASDAQ:AVGO) was in 76 hedge funds’ portfolios at the end of September. AVGO shareholders have witnessed an increase in hedge fund sentiment recently. There were 74 hedge funds in our database with AVGO holdings at the end of the previous quarter. At the end of this article we will also compare AVGO to other stocks including Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU), Enterprise Products Partners L.P. (NYSE:EPD), and China Life Insurance Company Ltd. (ADR) (NYSE:LFC) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Hedge fund activity in Avago Technologies Ltd (NASDAQ:AVGO)

At the end of the third quarter, a total of 76 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 3% uptick from the second quarter of 2016, and the third consecutive quarter in which hedge fund ownership has risen. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Jim Davidson, Dave Roux and Glenn Hutchins’ Silver Lake Partners has the biggest position in Broadcom Ltd (NASDAQ:AVGO), worth close to $1.84 billion, comprising 38% of its total 13F portfolio. The second most bullish fund manager is Andreas Halvorsen of Viking Global, with a $786 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include Ken Griffin’s Citadel Investment Group, Stephen Mandel’s Lone Pine Capital and Doug Silverman and Alexander Klabin’s Senator Investment Group.

Now, specific money managers have jumped into Broadcom Ltd (NASDAQ:AVGO) headfirst. Lone Pine Capital, managed by Stephen Mandel, established the most valuable position in Broadcom Ltd (NASDAQ:AVGO). Lone Pine Capital had $449.7 million invested in the company at the end of the quarter. Robert Boucai’s Newbrook Capital Advisors also initiated a $78.3 million position during the quarter. The other funds with brand new AVGO positions are Stanley Druckenmiller’s Duquesne Capital, Citadel Investment Group, and Louis Bacon’s Moore Global Investments.

Let’s now review hedge fund activity in other stocks similar to Broadcom Ltd (NASDAQ:AVGO). These stocks are Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU), Enterprise Products Partners L.P. (NYSE:EPD), China Life Insurance Company Ltd. (ADR) (NYSE:LFC), and The Chubb Corporation (NYSE:CB). This group of stocks’ market caps are similar to AVGO’s market cap.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $484 million. That figure was $8.27 billion in AVGO’s case. The Chubb Corporation (NYSE:CB) is the most popular stock in this table. On the other hand China Life Insurance Company Ltd. (ADR) (NYSE:LFC) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Broadcom Ltd (NASDAQ:AVGO) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers and have an immense amount of money invested into it, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None