This post was written by Minyanville contributor Sean Udall.
Broadcom (NASDAQ: BRCM) reports tonight and it is getting hit due to the poor report from Qualcomm (NASDAQ: QCOM). QCOM lowered guidance quite a bit -- in fact, enough that I likely may not have to worry much about QCOM for the next couple quarters. Low $30's would present solid value.
Getting back to BRCM, I still feel it is one of the few must own chip names. I think it has enough innovation and diversification to avoid the 35-40% sequential reductions I am seeing from many in the chip space. However, I also think a lowering of the bar is priced into BRCM's shares and anything less than a disaster should keep the stock above $16.50 (assuming we avoid another shock down to the whole market). Anything around that level ($16.50) and lower would have me adding the shares. I've taken gains recently in trading shares and am hoping to add BRCM back on just a bit more weakness.
Some other reports of interest were Cavium Networks (NASDAQ: CAVM) and Mellanox Tech (NASDAQ: MLNX). Both are small cap chip names that are performing quite well. CAVM looks to have put in a firm bottom within the last couple of weeks and pullbacks can be attacked.
Sunpower (NASDAQ: SPWRA) reports after the close and I would love to see another gap lower after the report. This name and the rest of the solars will be a huge benefactor of any credit improvement. The most recent results will just be noise and the charts will dictate what I do on this name. I see the trading ranges getting tighter and a new trend should emerge over the next weeks/months.
Lastly, Citrix Systems (Nasdaq: CTXS) reported and gapped lower on the opening. I'm not seeing anything that dire and the stock is already ramping off what looks to be an over-reaction. Had I seen the stock under $21 I would have bought it. You can't catch them all. However, if you compare CTXS to it's competitors (F5 Networks (NASDAQ: FFIV) and VMWare (NYSE: VMW)), CTXS doesn't look to be performing quite as well as either. So I would first gravitate to those leaders and add CTXS if you can catch a preferred price point, like I saw this morning.
Bottom line, what may trip up market action more than anything (even in tech), is if Congress muddles through the stimulus issue for too long and the market sense the greasing of the wheels is again going to be limited. I still contend that the original TARP plan of buying bad assets was the best plan. Whereas injecting bank capital doesn't work at all as long as you're fighting mark to market write downs every quarter. Buying the bad assets would have added liquidity to the banks and limited write downs. Further, as I've said for now since the fall of 2007, you still need to address "The Problems" which I've highlighted many times now.
Again, I find it amazing that we are so willing to throw hundreds of billions at this issue with a solution that that may or may not work. While at the same time, not fix key rules that would contribute to significant improvement in bank capital, economic activity and trading dynamics. Two of these could literally be changed overnight with a couple pen strokes (or key strokes).
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