Dj Broadcom Inc. Stock Rises Friday, Still Underperforms Market

Broadcom Inc stock fell 1.7% to $162.87 this week, as investors assessed the ripple effects of NVIDIA's third-quarter earnings report on the broader semiconductor sector.

Nvidia, a key player in AI and data center markets where Broadcom also operates, posted strong results but provided a cautious fourth quarter outlook. The mixed market reaction to Nvidia’s report appeared to keep Broadcom shares in a holding pattern, reflecting broader uncertainties about growth prospects in the chip industry.

What To Know: Nvidia's robust performance underscored the ongoing demand for AI-related infrastructure, including advanced GPUs and complementary hardware, areas where Broadcom's networking and connectivity solutions play a critical role.

Analysts highlighted Nvidia's next-generation Blackwell architecture as a significant driver of demand through 2025. However, Nvidia's guidance falling short of lofty expectations caused some profit-taking, illustrating the market’s sensitivity to growth narratives in the AI space.

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Broadcom, a major supplier of chips for data centers and AI workloads, is often viewed as a complementary player to Nvidia, benefiting from the surge in demand for high-performance computing infrastructure.

Investors have also been closely watching Broadcom's strategic moves in recent memory, particularly its ongoing diversification efforts, including its $61 billion acquisition of VMware.

This deal could further strengthen Broadcom's position in software-defined infrastructure, enhancing its ability to serve hyperscale data centers.

While Nvidia’s earnings highlighted sector strength, it also raised questions about near-term growth pacing. For Broadcom, the focus remains on its ability to capture a share of this evolving demand while leveraging its diverse portfolio.

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How To Buy AVGO Stock?

By now you're likely curious about how to participate in the market for Broadcom – be it to purchase shares, or even attempt to bet against the company.

Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy ‘fractional shares,' which allows you to own portions of stock without buying an entire share. For example, some stock, like Berkshire Hathaway, can cost thousands of dollars to own just one share. However, if you only want to invest a fraction of that, brokerages will allow you to do so.

If you're looking to bet against a company, the process is more complex. You'll need access to an options trading platform, or a broker who will allow you to ‘go short' a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option, or sell a call option at a strike price above where shares are currently trading – either way it allows you to profit off of the share price decline.

According to data from Benzinga Pro, AVGO has a 52-week high of $186.42 and a 52-week low of $90.31.

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Designed to provide broad exposure to the Technology ETFs category of the market, the SPDR NYSE Technology ETF (XNTK) is a smart beta exchange traded fund launched on 09/25/2000.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

XNTK is managed by State Street Global Advisors, and this fund has amassed over $868.77 million, which makes it one of the larger ETFs in the Technology ETFs. This particular fund, before fees and expenses, seeks to match the performance of the NYSE Technology Index.

The NYSE Technology Index is composed of 35 leading U.S.-listed technology-related companies.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Operating expenses on an annual basis are 0.35% for this ETF, which makes it one of the least expensive products in the space.

XNTK's 12-month trailing dividend yield is 0.40%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector - about 64.70% of the portfolio. Consumer Discretionary and Telecom round out the top three.

Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 6.49% of total assets, followed by Taiwan Semiconductor Sp Adr (TSM) and Broadcom Inc (AVGO).

Its top 10 holdings account for approximately 38.4% of XNTK's total assets under management.

Performance and Risk

The ETF has added about 25.52% so far this year and was up about 35.42% in the last one year (as of 11/22/2024). In the past 52-week period, it has traded between $152.15 and $207.80.

XNTK has a beta of 1.23 and standard deviation of 28.92% for the trailing three-year period. With about 37 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR NYSE Technology ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

Technology Select Sector SPDR ETF (XLK) tracks Technology Select Sector Index and the Vanguard Information Technology ETF (VGT) tracks MSCI US Investable Market Information Technology 25/50 Index. Technology Select Sector SPDR ETF has $73.05 billion in assets, Vanguard Information Technology ETF has $82.21 billion. XLK has an expense ratio of 0.09% and VGT charges 0.10%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research

For Immediate Release

Chicago, IL – November 22, 2024 – Zacks.com announces the list of Stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Broadcom Inc. AVGO, Merck & Co., Inc. MRK, Qualcomm Inc. QCOM and Natural Health Trends Corp. NHTC.

Here are highlights from Thursday’s Analyst Blog:

Top Analyst Reports for Broadcom, Merck and Qualcomm

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Broadcom Inc., Merck & Co., Inc. and Qualcomm Inc., as well as a micro-cap stock, Natural Health Trends Corp. These research reports have been hand-picked from roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Broadcom’s shares have outperformed the Zacks Electronics - Semiconductors industry over the last two years (+208.0% vs. +157.2%). The Zacks analyst believes that strong demand for the company’s networking products are suitable for addressing the needs of an increasing AI workload and the growing need for fast networking in data centers. The acquisition of VMware has also been a plus.

However, a highly competitive market and a relatively low customer base have remained causes for concern. Also, Broadcom’s frequent acquisitions, like that of VMWare, have escalated integration risks.

(You can read the full research report on Broadcom here >>>)

Merck’s shares have underperformed the Zacks Large Cap Pharmaceuticals industry over the past two years (-8.8% vs. +15.2%). The Zacks analyst believes that generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise, will continue to be overhangs for the company. Also, there are concerns about Merck’s ability to grow its non-oncology business ahead of Keytruda’s loss of exclusivity later in the decade.

Yet, with continued label expansion into new indications, particularly earlier-stage launches, Keytruda is expected to see continued growth. Animal health and vaccine products have also been core growth drivers.

(You can read the full research report on Merck here >>>)

Shares of Qualcomm have underperformed the Zacks Wireless Equipment industry over the past year (+21.0% vs. +43.2%). Per the Zacks analyst, a shift in the shares among OEMs at the premium tier has reduced Qualcomm's near-term opportunity to sell integrated chipsets from its Snapdragon platform.

Aggressive competition in the mobile phone chipset market is also likely to hurt Qualcomm's profits in the future. High operating expenses and R&D costs have remained a headwind. Qualcomm is also expected to face softness in demand from China.

However, with the accelerated rollout of 5G technology, it is benefiting from investments toward building a licensing program in the mobile space. The company formed a strategic collaboration with Google to develop Generative AI digital cockpit solutions.

(You can read the full research report on QUALCOMM here >>>)

Shares of Natural Health Trends have underperformed the Zacks Consumer Products - Discretionary industry over the past year (+1.8% vs. +21.4%). Per the Zacks analyst, a declining active member base remains the biggest concern for the company. It faces liquidity challenges and high operating expenses. Dependency on key markets and intense competition pose additional risks.

However, expansion into new markets and improvement in cost management bode well.

(You can read the full research report on Natural Health Trends here >>>)

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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