We recently compiled a list of the Jim Cramer’s Best Performers List: 12 Stocks Cramer is Talking About. In this article, we are going to take a look at where Broadcom Inc. (NASDAQ:AVGO) stands against the other best performers on Jim Cramer’s list.
On a recent episode of Mad Money, Jim Cramer took a moment to celebrate the two-year anniversary of the current bull market. He mentioned that this particular bull market has been quiet and gentle, which he attributes to the unusual circumstances surrounding its rise. “The whole first year of this bull’s life was an anomaly. That’s because the Fed was furiously tightening and the market went up anyway,” Cramer explained.
He emphasized that for the past two years, opportunities have been evident, stating, “Every night I say there’s always a bull market somewhere, and for the last two years, well, it’s been right in front of you.”
Cramer then went on to discuss the lead performing stocks and ended the segment, saying:
“The bottom line, if you’re going to buy these stocks, I’d go first with Nvidia, then with Broadcom, and finally Fair Isaac, if only because we need something that’s not connected to the data center, even as we know, it will remain a strong story for the ages.”
Cramer also advised investors to shift their focus away from the consumer price index (CPI) report, suggesting that its significance has diminished since the Federal Reserve began cutting rates.
“We had to be concerned about this stuff when the Fed was on the warpath, either raising rates or leaving them higher for longer. Now, though, the Fed is your friend, so I wouldn’t obsess about the details.”
He did emphasize, however, that the monthly labor report remains important in the current climate. He remarked on the tendency for many to become “Fed watchers,” suggesting that this reliance on government data can detract from the deeper analysis of individual companies. Cramer referenced Austan D. Goolsbee, president of the Chicago Fed, who advised against an overemphasis on CPI data, as the Fed is unlikely to base decisions on it. Cramer explained:
“When the Fed’s raising rates in order to stamp out inflation, it can be very important. When we’re in a rate hike cycle, you’re trying to figure out when that’s going to end. But we’re not in that kind of cycle anymore. We’re in a rate cutting cycle.”
Cramer explained that last month the Fed implemented a double rate cut, setting a downward trend that is expected to continue. He added:
“Sure, if we had a huge spike in the CPI this morning, then maybe the Fed would change its stance. But that would have to be an extreme reading. And there’s nothing extreme about today’s 2.4% inflation number, just a tick above the expected 2.3, still down from the 2.5% reading from the prior month.”
Cramer concluded with a strong reminder about the nature of investing. “Forget the macro, people. It’s not that meaningful when the Fed’s cutting rates. And keep your eyes on the prize: Earnings,” he urged. Ultimately, he reinforced that earnings dictate stock prices in the long run, and that’s where the focus should be for those looking to make money in the market.
Our Methodology
For this article, we compiled a list of 12 stocks with the biggest gains over the past 2 years that were mentioned by Jim Cramer during his episode of Mad Money on October 10. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? 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 small-cap and large-cap 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 Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 130
Cramer highlighted that he has been excited about Broadcom Inc. (NASDAQ:AVGO) for some time and made a note of its VMware division.
“Broadcom makes data center plumbing, but also has a broadband infrastructure business, including cell phones. Now, we had CEO Hock Tan on when he went to San Francisco. He told an incredible story. I was so excited, I was jazzed about it, but nobody listened.
Well, now they’ll listen. Stock just hit an all the time high today. It’s not done. I’d hold onto it, especially since its VMware division helps data centers cut harbor costs and operate much more efficiently. And it has really turned the corner. I like that stock very much.”
Broadcom (NASDAQ:AVGO) is a nearly $850 billion company and is engaged in designing, developing, and supplying a wide range of semiconductor devices, with a rich history in semiconductor design. The company has established a formidable portfolio of intellectual property that positions it well in the competitive industry of artificial intelligence among major technology firms.
Broadcom’s (NASDAQ:AVGO) networking chips play an essential role in the infrastructure of AI data centers, facilitating the rapid and efficient transfer of data between servers, which improves overall data center performance. In addition to its networking chips, the company has expanded its footprint in AI through its acquisition of VMware in late 2023, which allows users to create virtual desktops in the cloud. It has further solidified its position in high-growth sectors, as AI networking chips for Ethernet and VMware’s software are expected to account for more than half of the company’s revenue in the near future, potentially accelerating overall growth.
During the third-quarter earnings call, CEO Hock Tan noted the impressive scale-up of AI operations among hyperscale customers. He highlighted that custom AI accelerators have seen a remarkable year-on-year growth of three-and-a-half times.
Overall AVGO ranks 3rd on Jim Cramer’s list of best performing stocks. 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.