There was a range of possibilities with the tariffs. But the market’s worst fears came to fruition and the S&P crashed more than 5% on consecutive days last week for the first time since the onset of the pandemic. Meanwhile, Broadcom Inc. (AVGO) is a stock that can make up for lost time fast when it moves higher again, opines Tom Hutchinson, editor of Cabot Income Advisor.
The S&P just came within a whisker of an official bear market (down 20% from the high on a closing basis) before bouncing back. Stocks are unlikely to gain lasting upside traction until there is much more clarity on the tariff situation. And that doesn’t seem likely for weeks at least, and perhaps months.
Broadcom Inc. (AVGO)
Because of the extreme uncertainty and headline risk that remains, I am not aggressively buying stocks yet. In fact, several portfolio stocks have been reduced to a “hold” rating. That said, there will be buying opportunities.
Consider the recent pandemic bear market. The S&P 500 crashed more than 30% in just five weeks. Let’s say you invested back then with the worst timing possible, and you bought the S&P index at the closing high before the trouble started. That investment would have provided a total return of 79% through the end of this past March. And that’s with the worst possible market timing over the last decade.
As for AVGO, technology has been in the crosshairs of investors lately and AVGO is now down 40% from its high. But Broadcom soundly beat expectations with 25% revenue growth and 45% earnings growth...and it raised guidance for the current quarter.
AI revenue grew 77% over last year’s equivalent quarter and it reported that it has scored two more large, AI-chip customers. The stock price was high for good reason – skyrocketing revenues. And it will get back there at some point.
Recommended Action: Buy AVGO.
