Is Broadcom Inc (AVGO) Going to Burn These Hedge Funds?

·5 min read

Is Broadcom Inc (NASDAQ:AVGO) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Broadcom Inc (NASDAQ:AVGO) a buy right now? Prominent investors were in an optimistic mood. The number of bullish hedge fund positions moved up by 3 in recent months. Broadcom Inc (NASDAQ:AVGO) was in 50 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 83. Our calculations also showed that AVGO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 47 hedge funds in our database with AVGO positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we're going to take a look at the latest hedge fund action regarding Broadcom Inc (NASDAQ:AVGO).

William Von Mueffling - Cantillon Capital Management
William Von Mueffling - Cantillon Capital Management

William Von Mueffling of Cantillon Capital Management

Do Hedge Funds Think AVGO Is A Good Stock To Buy Now?

At Q3's end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AVGO over the last 25 quarters. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Among these funds, Cantillon Capital Management held the most valuable stake in Broadcom Inc (NASDAQ:AVGO), which was worth $525 million at the end of the third quarter. On the second spot was First Pacific Advisors LLC which amassed $411.5 million worth of shares. Citadel Investment Group, Lyrical Asset Management, and Farallon Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position First Pacific Advisors LLC allocated the biggest weight to Broadcom Inc (NASDAQ:AVGO), around 5.34% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, dishing out 4.43 percent of its 13F equity portfolio to AVGO.

As one would reasonably expect, specific money managers have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, assembled the most outsized position in Broadcom Inc (NASDAQ:AVGO). Holocene Advisors had $42.8 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $31.8 million position during the quarter. The other funds with brand new AVGO positions are Dmitry Balyasny's Balyasny Asset Management, Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, and Renaissance Technologies.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Broadcom Inc (NASDAQ:AVGO) but similarly valued. These stocks are Costco Wholesale Corporation (NASDAQ:COST), Chevron Corporation (NYSE:CVX), AT&T Inc. (NYSE:T), AbbVie Inc (NYSE:ABBV), Wells Fargo & Company (NYSE:WFC), Merck & Co., Inc. (NYSE:MRK), and AstraZeneca plc (NASDAQ:AZN). All of these stocks' market caps are similar to AVGO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COST,55,4393346,1 CVX,51,4442202,1 T,66,3212098,-2 ABBV,81,4140050,-1 WFC,88,6188279,-6 MRK,77,4550626,-2 AZN,41,3757394,4 Average,65.6,4383428,-0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 65.6 hedge funds with bullish positions and the average amount invested in these stocks was $4383 million. That figure was $2706 million in AVGO's case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand AstraZeneca plc (NASDAQ:AZN) is the least popular one with only 41 bullish hedge fund positions. Broadcom Inc (NASDAQ:AVGO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AVGO is 35.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. A small number of hedge funds were also right about betting on AVGO as the stock returned 14.2% since the end of the third quarter (through 11/30) and outperformed the market by an even larger margin.

Get real-time email alerts: Follow Broadcom Inc. (NASDAQ:AVGO)

Suggested Articles:

Disclosure: None. This article was originally published at Insider Monkey.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting