Investors have had a challenging year, and face the prospect of continued challenges as inflation stays higher than expected. Growth stocks tend to fare poorly in a slow economy gripped with high inflation. Yet today’s problems will get fixed in time.
Those who find opportunities can find plenty right now. Many companies still have big growth potential in the years ahead. And returns will be better for companies that can improve their profit margins in today’s uncertain times.
One space riddled with uncertainty are the chipmakers. After a burst of popularity, they’ve been out of favor with the markets. Yet many of the tech trends playing out in the years ahead will require an increased number of semiconductor chips to power that world.
That’s why companies like
Broadcom (AVGO) are well positioned to improve their profit margins, and even grow now. And it’s why shares can likely move higher, and continue to outperform the chip space as a whole.
Broadcom sports a hefty 35 percent profit margin, and has managed to grow earnings 21 percent in a slowing year for the sector – with earnings jumping by nearly 70 percent. While those trends may slow, they’re still likely to keep trending up.
Action to take: Investors may like shares here. Shares are reasonably valued at about 16 times forward earnings. Plus, Broadcom pays a 3.1 percent dividend.
For traders, the September $660 calls, last going for about $27.50, offer mid-double-digit returns on a continued uptrend for shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.