My adult life has been defined by geopolitical shocks perpetrated directly and indirectly by Iran. But as soon as ships sail through the Strait of Hormuz, we think oil prices will melt down, and investors’ attention will return to fundamentals. I still like Broadcom Inc. (AVGO) here, writes Nancy Tengler, CIO of Laffer Tengler Investments.
We’ve lived with hijacked planes, bomb threats, brutal executions, and so on. I believe this is a generational opportunity for peace and stability in the Middle East. That would be good for Europe, for the global economy, and growth.
Meanwhile, worries about tech capex are likely overblown. Oh, and one man’s capex spend is another man’s revenues, i.e., Broadcom. It’s one of the largest long-term holdings across all large cap strategies at LTI, and it delivered another triple play.
We have been focused on an analysis which shows tech capex slightly above the historical mean – versus the 1990s when the debt-fueled capex binge spiked to two standard deviations above the mean. This time the Mag 7 companies, in particular, are largely funding their spending out of free cash flow and cash on their balance sheets.
Some have said buybacks will end and dividends (for those who pay one) will flatline. With AVGO top of mind, the company announced a $10 billion share repurchase program – and it has been growing the dividend in the low double digits. Finally, it seems FCF is hooking back up.
