Jim Cramer Latest Portfolio: 10 Best Stocks to Buy

2. Broadcom Inc (NASDAQ:AVGO)

Number of Hedge Fund Investors: 115

Jim Cramer was recently asked about his thoughts on  semiconductor-based connectivity solutions company Astera Labs. Cramer instead recommended the caller to buy Broadcom Inc (NASDAQ:AVGO), saying Astera Labs is a “good stock, not a great story.”

“I’d rather have you stick with something like Broadcom Inc (NASDAQ:AVGO) which is still cheap even after this remarkable run.”

Broadcom Inc (NASDAQ:AVGO) shares have gained about 66% so far this year.

JPMorgan is a latest report said that Broadcom Inc (NASDAQ:AVGO) can “dominate” the high-end of the custom chips market.  JPMorgan expects the high-end of the application-specific integrated circuit, or ASIC, market to reach anywhere between $20 billion and $30 billion, up from its previous estimate of $20 billion to $25 billion.

While Broadcom Inc (NASDAQ:AVGO) is directly exposed to the AI semiconductor market, some believe the stock is priced for perfection, with a P/E multiple of 52 and YTD share price gain of 30%. In the first quarter Broadcom Inc (NASDAQ:AVGO) saw a 34% revenue growth, which surprised the Wall Street. However, adjusted earnings clocked in growth that was significantly less than revenues, indicating limited margins. Broadcom Inc’s (NASDAQ:AVGO) EV/EBITDA  is 22.5, much higher than its five-year average of 14 and sector median of 14.  Broadcom Inc’s (NASDAQ:AVGO) debt levels are also worrying for many. It has $73,429 million in long-term debt and $2,374 million in current debt. Broadcom Inc’s (NASDAQ:AVGO) revenue growth is expected to come in at 13% next year and 15.10% over the next five years on a per-annum basis. This means Broadcom Inc (NASDAQ:AVGO) is a laggard when compared to industry leaders like NVDA. The stock’s one-year average analyst price estimate set by Wall Street is $1533, representing an upside potential of just 9%.

Carillon Eagle Growth & Income Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its first quarter 2024 investor letter:

Broadcom Inc. (NASDAQ:AVGO) continues to trade higher as a beneficiary of generative artificial intelligence (AI). Management recently highlighted that AI-related silicon now comprises a significant percentage of all semiconductor solution sales. The company also is focused on integrating its acquisition of VMware.