Bill Gunderson

About the Author Bill Gunderson

Bill Gunderson is the CEO and Chief Market Strategist of Gunderson Capital Managment in San Diego, CA. He is also a professional money manager, former research analyst, author of Best Stocks Now, and developer of the Best Stocks Now smartphone app. He offers four free weeks to his weekly Best Stocks Now to Seeking Alpha readers. He also hosts a daily stock market radio show on AM1000 KCEO from 7am-8am. Bill has appeared on the Fox Business Channel and on Bloomberg radio numerous times. He has been published in Barron's, Forbes, and numerous other publications i.e. Los Angeles Business Journal, San Diego Union Tribune, Phoenix Business Journal, Salem News, Rochester Business Journal, and many others.

Go, Go, Avago

Avago Technologies Ltd. (NASDAQ:AVGO) is a semiconductor company, which operates in four segments: Wireless Communications, Wired Infrastructure, Enterprise Storage, and Industrial segments. The company is headquartered in San Jose, California and Singapore. Its corporate roots date back to the 1960s AT&T Bell Labs era and the early Hewlett Packard. Excluding memory companies, it is the 9th largest semiconductor company in the world.

Avago is an amazing growth story. In its wireless segment, the primary growth driver is 4G/LTE deployment and infrastructure fueled by the need for more bandwidth. In the wired semi segment, there is the Internet of Things as more and more devices become smart devices. Enterprise storage is benefiting from the Cloud, Social Media, Video Streaming, and Big Data, all of which are experiencing exponential growth and requiring more and more storage capability. Finally, increased factory automation, energy efficiency, and high-speed transport in China are driving strong growth in the Industrial segment.

I have been a strong believer in Apple (NASDAQ:AAPL) and have owned the stock for some time. Avago, along with another name I own Skyworks Solutions (NASDAQ:SWKS) are derivative supply chain plays on the Apple success story. Both companies stand to benefit from increased RF chip complexity in handset and tablet devices. But Apple isn’t Avago’s only key customer. In the wireless segment, there is also HTC, LG, and Samsung (OTC:SSNLF). And in its other segments, there are big customers such as Cisco (NASDAQ:CSCO), IBM (NYSE:IBM), HP (NYSE:HPQ), and Oracle (NYSE:ORCL).

Looking at Avago’s revenue mix, it is most leveraged to wireless, but is well diversified across all its business segments.

So let’s take a closer look at this “go-go” growth stock.

Data from Best Stocks Now app

Avago Technologies is a Large Cap stock with a market capitalization of $28 billion. Its risk profile is Moderate given that it is in the sometimes volatile semiconductor industry within the Technology sector.

Data from Best Stocks Now app

Avago does not look particularly cheap on a trailing P/E basis with a ratio of 107, but on a forward basis, its P/E is only around 14. That is not bad given the company’s estimated 5 year annual growth rate of 31%, and its total return potential of 88%. Avago receives a Value Grade of B+.

Data from Best Stocks Now app

Avago has outperformed the market this year, up 9%. Last year, the stock was up a whopping 92% and was up 71% the year before. The stock receives a Momentum Grade of A given its solid record of performance.

Data from Best Stocks Now app

Avago is rated a Strong Buy with a Stock Grade of A. It is currently ranked #9 in the Gunderson stock universe of 3900+ names. I am long Avago in my Conservative Growth accounts. Avago Technologies is a great way to play the revolution occurring in the specialized semiconductor cycle. Go, go Avago.

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