This post is part of a report entitled "Six-pack of technology favorites." You can read about the other top tech stock picks here.
"It's time to watch for buying opportunities -- and one of the companies on my personal list is Broadcom Corp. (NASDAQ: BRCM), whose shares are in buying range right now," says analyst Glenn Rogers.
The contributing editor to Gordon Pape's Internet Wealth Builder explains, "This semiconductor maker is a good choice for investors who would like to add to their information technology position with shares of a first-class company."
"Broadcom, located in Irvine, California, designs semiconductors for the wired and wireless communications industry. It is a major supplier to Apple's iPhone, which has taken the world by storm this past year.
"Specifically, it powers the brilliant display screen that has captivated users since the launch of the iPhone last year. (Full disclosure: I've just picked up my new 3G iPhone.)
"It also provides the chip that delivers the GPS navigation in the new iPhone. The company holds over 2,000 U.S. and foreign patents and has more than 7,400 pending patent applications.
"But Broadcom is not just an iPhone supplier. It also powers the Motorola TV set top boxes, Netgear wireless routers, Bluetooth and Blu-ray applications, digital television, VOIP, etc. There are lots of chipmakers out there but Broadcom operates in the areas that offer the highest growth potential and the least commoditization in this sector.
With concerns over recession, turmoil in the financial sector, fear of rising rates, high market volatility and a rising aversion to risk, many investors have been avoiding technology stocks.
Investors have feared that these economic headwinds will dampen both consumer spending for technology products and reduced capital expenditures for technology in the corporate sector.
Despite these concerns, some of the newsletter industry's leading advisors are looking beyond the current malaise and seeing longer-term value in some of the tech sector's leading players. They believe that much of the "bad news" is already reflected in the price of the shares, with little recognition being given to their longer-term potential.
For those willing to go against the crowd and buy, as they say, "while blood is running in the street," we offer a six-pack of technology stocks that the some top advisors considers to be among their favorite ideas.
BRCM opened this morning at $28.23. So far today the stock has hit a low of $27.76 and a high of $28.39. As of 12:20, BRCM is trading at $27.86, up 40 cents(1.5%). The chart for BRCM looks bullish and S&P gives BRCM a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $20 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in just three months as long as BRCM is above $20 at November expiration. Broadcom would have to fall by more than 27% before we would start to lose money. Learn more about this type of trade here.
BRCM hasn't been below $20 since April and has shown support around $23 recently.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in BRCM.
Minyanville Professor Sean Udall dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.
Broadcom (NASDAQ: BRCM) crushes and I still think it's the best chip name on the planet. But as stated yesterday, I was worried about muted guidance and BRCM talked margins down, while guiding rev's higher.
This morning the stock surged off its after-hours low last night and I'm not sure how it pushed down into the $24's. Frankly I wish I had been in front of my trading station at that time, even though it has drifted lower as the day has progressed.
Bottom line, post earnings I'm back to being a buyer on weakness and feel anything in the $25's is an excellent entry, long term and/or even shorter term.
MOST NOTEWORTHY: European banks, the Paper and Forest Products sector, Kindred Healthcare and Convergys were today's noteworthy upgrades:
Keefe Bruyette upgraded the European Banks sector to Neutral from Underweight on valuation as they see limited downside from current levels. Included in the firm's top picks are HSBC Holdings Plc (NYSE: HBC) and Banco Santander SA (NYSE: STD).
Credit Suisse upgraded the Paper and Forest Products sector to Overweight from Underweight citing valuations and expectations that fundamentals will bottom this fall. The firm raised shares of Temple-Inland Inc (NYSE: TIN) and Smurfit-Stone Container Corporation (NASDAQ: SSCC) to Outperform from Neutral.
Friedman Billings upgraded shares of Kindred Healthcare Inc (NYSE: KND) to Outperform from Market Perform on valuation following the recent pullback and believes the company is well-positioned to beat modest expectations over the remainder of the year. The firm raised their target to $36 from $29.
Oppenheimer raised Convergys Corporation (NYSE: CVG) to Outperform from Perform on valuation, as they believe investors should look at the company's business lines separately. Their sum of parts valuation yields an $18 target.
OTHER UPGRADES:
Suncor Energy Inc (NYSE: SU) was upgraded to Overweight from Neutral at JP Morgan and to Outperform from Market Perform at Friedman Billings.
UBS upgraded BT Group Plc (NYSE: BT) to Neutral from Sell.
Editor's Note: This post comes courtesy of Sean Udall, a wise player in the tech field. For more, visit www.minyanville.com.
Interesting article on Apple's (NASDAQ: AAPL) iPhone "potential" teardown. Implications are that the 3G iPhone will carry higher margins than previous model. We will see shortly and I still expect Broadcom (NASDAQ: BRCM) to benefit from the actual teardown.
Speaking of Broadcom, the company got the all clear on a patent infringement deal with SiRF Technology Holdings (NASDAQ: SIRF) and I like the emerging technical setup on BRCM.
Elsewhere, Adobe (NASDAQ: ADBE) reports today and has been a solid tech name this year, really many years for that matter. I don't expect any big surprises.
Electronic Arts (NASDAQ: ERTS) is at the William Blair growth conference. Gaming sales were reported strong again last week. This is probably a cheap solid grower but I prefer the growing online gaming model, I've discussed on the Buzz in the past.
SunPower (NASDAQ: SPWR) was upgraded this morning and presenting at an Alternative Energy conference on Wednesday. I was going to trade this again but the analyst action is spiking the stock today.
Evergreen Solar's (NASDAQ: ESLR) shareholder and analyst meetings is scheduled this week and I'm thinking this could fuel bullish action.
Regarding Comverge (NASDAQ: COMV) and EnerNOC(NASDAQ: ENOC), I overheard some bullish comments on these stocks on CNBC this morning. I've discussed COMV on the buzz previously and ENOC is their sister company. Both companies offer technology solutions for managing the power grid more efficiently and I think both stocks are cheap emerging growth stocks.
Shares were higher today after the weekly jobless claims were reported as 357,000, down 18,000 from last week. While new claims are down, the four week average of those filing for benefits was up to 3.086 million, the highest level since March 2004. The good news is that the markets largely ignored that S&P downgrade of bond insurers today. The stock market even ignored a $5.00 rise per barrel in oil today. Here are the unofficial closing levels today:
Broadcom Corp. (NASDAQ: BRCM) was an example of just how strong today was by being up almost 3% at $28.90 late in the day. If you read trough the co-founder and former CEO's indictment charges you might think shareholders would have gone the other way.
I just checked out Qualcomm's (NASDAQ: QCOM) earnings report that was released after the bell on Wednesday -- there's nothing in there that screams "buy me!"
For the company's fiscal Q2, revenues increased 17% to about $2.6 billion. Not too bad on the top line, I suppose. The bottom line, however, didn't see fit to reach for the double-digit growth crown -- diluted earnings per share, with adjustments, rose 8% to $0.54. Furthermore, free cash flow declined by 29% on a year-over-year basis. Now, let's focus our gaze at the pro forma forecast -- Qualcomm is looking for a potential decrease in Q3 earnings per share, perhaps on the order of between 5% and 9%. Okay, that's just the next quarter -- surely the fiscal year will be better, right? Not really. At best, the full-year earnings per share number will increase 4%, and at worst, you can look for a tiny little increase of 1% (that was an improvement over previous guidance, I'll give management that).
I'll pass on Qualcomm. Not only do these growth rates fail to intrigue me, but the company has been involved in litigation with Broadcom (NASDAQ: BRCM) and Nokia (NYSE: NOK), as Douglas McIntyre discussed last month. I like to avoid companies with litigation issues that can possibly exert a negative influence on a stock's potential to rise. Perhaps when Qualcomm has its legal house in order, I'll take another look.
Disclosure: I don't own shares in any of the companies mentioned here; positions can change at any time.
Broadcom Corp. (NASDAQ: BRCM) stock is falling after fellow chip manufacturer Marvell (NASDAQ: MRVL) indicated an outlook for the first quarter of this year that investors did not like the looks of. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on BRCM.
After hitting a one-year high of $43.07 in October, the stock has hit a new one-year low today. This morning, BRCM opened at $17.75. So far today the stock has hit a low of $17.35 and a high of $18.73. As of 12:30, BRCM is trading at $17.66, down 93 cents (-5.0%). The chart for BRCM looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider a May bear-call credit spread above the $22.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in two and a half months as long as BRCM is below $22.50 at May expiration. Broadcom would have to rise by more than 27% before we would start to lose money.
BRCM hasn't been above $22.50 since January and has shown resistance around $20 recently. This trade could be risky if the economic situation turns around, but even if that happens, this position could be protected by resistance BRCM might find at its 50 day moving average, which is currently around $23 and falling.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in BRCM.
Technology shares have been battered over the last three months, but I expect the group will lead the broader market to new highs later in the year. While everyone is worried about the economy, the earnings numbers and forecasts that tech companies are providing should make investors very bullish for '08.
The likes of Microsoft (NASDAQ: MSFT), Juniper Networks (NASDAQ: JNPR) and Broadcom (NASDAQ: BRCM) all beat the Street's estimates and raised guidance. What makes this even more interesting is that each company operates in different technology sectors, so it appears that corporate spending is still strong, and that should have a big impact on earnings going forward.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no positions in any stock mentioned as of 1/25/08
QUALCOMM Inc. (NASDAQ: QCOM) stock opened lower this morning after a federal judge in California ruled on Monday that the company must immediately halt selling third-generation (3G) WCDMA cellular chips, as they seem to infringe on patents held by rival Broadcom (NASDAQ: BRCM). According to analysts, QCOM may eventually have to pay royalties to BRCM due to the ruling, which would negatively affect its guidance, though the ruling allows QCOM time to implement a workaround solutions before any royalties can be imposed. Shortly after the open, QCOM announced the launch of new chips it says will comply with the ruling. If you think this stock won't be rising too far in the coming months, then now could be a good time to look at a bearish hedged play on QCOM, since options prices could be high at this time.
After hitting a one-year high of $47.72 in May, the stock hit a one-year low of $35.23 in August. This morning, QCOM opened at $38.23. So far today the stock has hit a low of $38.12 and a high of $39.80. As of 11:15, QCOM is trading at $38.92, down $0.42 (-1.1%). The chart for QCOM looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
A federal judge has told Qualcomm (NASDAQ: QCOM) that it can no longer make chips based on three patents held by rival Broadcom (NASDAQ: BRCM). The company can make use of the intellectual property for another year, giving its some time to reach resolution with its rival.
Qualcomm will almost certainly have to pay royalties if it wants to keep marketing chips based on the Broadcom patents.
According toThe Wall Street Journal, "The chips are used in two kinds of third-generation cellular networks -- one called EV-DO, which Qualcomm developed, and another called WCDMA that is supported by a broader array of chip makers."
Reuters quotes Broadcom's general counsel as saying, "Broadcom should not have to compete against companies that use Broadcom's own patented technology against us, and this injunction puts a stop to Qualcomm doing just that."
It now appears that Qualcomm's strategy of leaning on customers and rivals has come to an end.
Douglas A. McIntyre is an editor at 247wallst.com.
With concerns over recession, turmoil in the financial sector, fear of rising rates, high market volatility and a rising aversion to risk, many investors have been avoiding technology stocks. 
Here are some highlights from this past week's 
Minyanville Professor Sean Udall dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit .gif){kind=logo}
Editor's Note: This post comes courtesy of Sean Udall, a wise player in the tech field. For more, visit 
Here are some highlights from this past week's 
Qualcomm
Does GM deserve a taxpayer bailout?
Boeing could lose $3.5 billion per month if machinists strike
Cramer on BloggingStocks: Dell loses its Street cred once again 
