When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Mad Hedge Technology Letter
January 19, 2024
Fiat Lux
Featured Trade:
(ANOTHER CHIP NAME BESIDES NVIDIA)
(AVGO), (AAPL), (AI)
Broadcom (AVGO) has gone through several major transformations since its founding in 1991, and a chart of the stock looks like a hockey stick.
AVGO is now worth close to $600 billion and the show isn’t over yet folks, there is more yet to come.
AVGO has a history of buying growth using debt.
Prior to buying Broadcom, Avago had already acquired a long list of smaller companies to expand its portfolio of wireless, optical, and data storage chips.
By paying $37 billion for Broadcom, it gained even more mobile, networking, wireless, and industrial chips. That inorganic growth strategy made it one of the world's largest chipmakers.
Broadcom subsequently expanded into the infrastructure software market by buying CA Technologies in 2018, Symantec's enterprise security division in 2019, and the cloud software giant Vmware in 2023.
Those acquisitions should diversify its business away from the cyclical semiconductor market and curb its dependence on Apple, which still accounted for 20% of its revenue over the last two fiscal years.
Growth in the 20% range should be driven by three long-term catalysts.
First, the expansion of the generative artificial intelligence (AI) market should trigger stronger sales of its data center and infrastructure chips over the next few years.
Second, its sales of chips to mobile and IT infrastructure customers should heat up again as the macro environment improves.
Apple also signed a new blockbuster deal to buy Broadcom's 5G radio frequency components and other wireless connectivity components for several more years last May, so it won't lose its top semiconductor customer anytime soon.
Broadcom's aggressive expansion strategies have been lucrative, but the sprawl could weaken the company. If that happens, investors will be a lot less forgiving of its rising debt and dilution.
I fully expect strong double-digit revenue growth in the company's AI-related businesses.
I anticipate a proliferation of Gen AI across a broad set of data center workloads to drive strength in Broadcom's custom compute offload and next-generation Networking businesses both in the near- and medium term.
There is also a strong chance of a cyclical recovery in the company's non-AI business.
In addition, I expect synergy capture following the acquisition of VMware, to drive operating margin expansion and earnings growth well in excess of the industry average.
The last lever that will affect stock appreciation will come in the form of shareholder returns.
I do believe that AVGO will ramp up the dividends as revenue accelerates.
Profits went from around $11.5 billion 2 years ago to $14 billion last year.
It’s easy to see the chip company blow by $16 billion this year as well.
It is well on its way to becoming a trillion-dollar company.
I do believe they will reach that goal around 2030.
The stock has more or less gone parabolic and now sitting around $1,200 per share.
It’s been like that for a while now.
Any dip to around $1,100 or $1,000 would be classified as a buying opportunity.
(BERKSHIRE HATHAWAY REWARDS THE PATIENT LONG-TERM INVESTOR)
January 19, 2024
Hello everyone.
The Magnificent 7 have been stealing the spotlight for a significant period, but there are many other stocks worthy of attention too. One that deserves a look right now is Berkshire Hathaway. Berkshire has displayed bullish technical characteristics throughout its history: it has made higher lows, constructed bullish chart patterns, broken out, made new all-time highs, and extended after breaking out.
In the monthly chart below, BRK.B has had five major breakouts through to 2021. As we can clearly see, some of the bullish patterns took years to form, but the stock has come back each time. More importantly, each comeback has reclaimed a former high point and continued higher.
The stock is now trying to extend beyond its former 2022 and 2023 high points, which could be “major breakout number six.” The last few attempts in late 2023 failed to attract enough interest buyers to push beyond the $360-$370 zone. We are waiting for BRK.B to regain its footing and move higher. While past performance is no guarantee of future returns, patterns within long-term trends tend to repeat themselves in some form or another.
BRK.B has been trading within an upward sloping channel lately, making higher highs and higher lows since bottoming last fall. If demand does not return relatively soon, then respecting the rising 200-day moving average would be the next best thing. That’s currently near $345.
BRK.B last pushed to a new high vs. the S&P500 in late 2018, but that breakout didn’t hold. It’s since outperformed the index from the summer of 2020 and now has returned to a resistance zone that dates all the way back to 2008.
So, when the stock does make another new all-time high, it could be breaking above a 16-year trading range relative to the S&P500, as well.
Keep scaling into Berkshire. If it gets down to the 200 MA at $345 buy with both hands.
This picture was a feature wall behind my bed in a hotel I recently stayed at on the Queensland coast. A fun way to represent the sunny and laid-back state.
One of our beautiful gold coast beaches at sunset.
Cheers
Jacquie
Global Market Comments
January 19, 2024
Fiat Lux
Featured Trade:
(TESTIMONIAL),
(A CHEAPER WAY TO DO DAVOS)
Dear John,
Remember me from the QE2? You don’t miss much, but I’m forwarding this AI story, in case you find it interesting. You are the best financial advisor I have ever found.
I know you’ve been a big believer in NVIDIA (NVDA) for years. When I read this, I really understand that (NVDA) is only going to get bigger. They and Microsoft (MSFT) MSFT are the two biggest investors in AI startups.
I hope you have a great 2024, thanks for all the hard work and great newsletters. |
Bill
Santa Barbara, CA
It’s that time of year again, when finance ministers, central bank governors, hedge fund managers, and assorted rock stars hold their annual confab high in the Alps at Davos, Switzerland.
When I was a director of one of the largest banks in Switzerland, I found myself a frequent visitor to Davos. The conference is one of those things that you only want to do once. More than that is too boring.
In years gone by, we provided the loans to the Canton of Graubünden needed to build the lifts and gondolas in Davos to develop it into a world-class ski resort and watering hole for the wealthy.
Without that money, Davos would have remained a small mountain hamlet on the way to long-established St. Moritz, possibly not even warranting its own train station.
Instead of renting out hotel suites for $10,000 a day, the residents would be filling their days cutting hay, milking cows, and making goat cheese. Generous government subsidies would keep the village in the green.
Thanks to our largess, I received a lifetime ski lift ticket there which I still use on occasion.
My friend, the intrepid New York Times reporter, Andrew Ross Sorkin, tells me that the minimum cost to attend the exclusive World Economic Forum for membership and a single ticket is $71,000, and that’s for the cheap tickets.
That just gets you general admission. If you hail from an up-and-coming emerging market, like China, you get a break on the price.
To join some of the private discussion groups, you need to upgrade to a $156,000 package. More exclusive access can be had for “Strategic Partners” for prices ranging up to $696,000 after the latest price increase and Swiss franc revaluation.
That does not include the cost of travel, meals, and accommodation, which are stratospheric, now that the Swiss franc is more valuable than the US dollar (I remember when it was 3:1). $75 for a hamburger? No problem!
All of this just to rub shoulders with hedge fund manager Ray Dalio, European Central Bank governor Christine Lagarde, rock star Bono, and others of their ilk.
Certainly, you can gain many of the insights found in Davos by simply reading the Mad Hedge Fund Trader, at a much lower price. I can get more information from the high and the mighty by chatting over the phone for five minutes rather than engaging in a media scrum in the mountains.
Do you suppose they still have a Youth Hostel in Davos? I think I left my sunglasses there….55 years ago!
“If you have the word “broker” in your job title the Internet is going to disintermediate you,” said Scott McNealy, founder of Sun Microsystems.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Mad Hedge Biotech and Healthcare Letter
January 18, 2024
Fiat Lux
Featured Trade:
(A WEIGHTY IMPACT)
(LLY), (NVO), (MRNA), (AAPL), (AMZN), (GOOGL), (MSFT), (META), (NVDA)
