It was a positive week for U.S. stock markets, with the Dow Jones up 0.65%, the S&P 500 rising 0.76% and the NASDAQ up 1.30%. The MCSI Emerging Markets Index fell 0.45%.
Big gainers in your Bull Market Alert portfolio included Qualys, Inc. (QLYS), which jumped 13.94%, and the ProShares Ultra Nasdaq Biotechnology ETF (BIB), which spiked 7.50%. Both the ProShares Ultra Nasdaq Biotechnology ETF (BIB) and Silicon Motion Technology (SIMO) hit new 52-week highs, as well.
This week’s Bull Market Alert recommendation, Singapore-based Avago Technologies Limited (AVGO), keeps in the realm of the red-hot technology sector.
Avago develops and supplies analog semiconductor devices for over 40,000 customers in wireless communications and wired infrastructure. Most notably, Avago makes radio frequency chips that are used in the Apple (AAPL) iPhone, as well as smartphones from Samsung and other mobile-device companies. Other Avago customers include Cisco Systems (CSCO), Hewlett-Packard (HPQ), China-based Huawei and Germany-based Siemens.
Avago was actually a part of Hewlett-Packard for three decades before it was spun off, with the whole HP semiconductor business, as part of Agilent Technologies. Today, Avago operates design centers in Asia, Europe and the United States, while its manufacturing facilities are primarily in Asia. About 85% of its sales come from outside of the United States.
Up over 42% in 2015, here’s why I think Avago is set to continue its market-trouncing bull run.
First, spin-offs like Avago have a strong record of outshining the market. An index of just such companies has outperformed the broader S&P 500 by over 50% in the past five years.
Second, Avago recently announced a $37 billion acquisition of Broadcom (BRCM), another Apple supplier. The combined company will have annual revenue of $51 million, behind only Qualcomm (QCOM) and Intel (INTC). After the deal closes in Q1 of 2016, the combined company will keep the Broadcom name.
Third, Avago also recently announced better-than-expected quarterly results. Earnings per share (EPS) rose 151% from a year earlier, keeping intact a long streak of accelerating earnings growth. Analysts forecast a 70% EPS increase in the next report. They also see a 77% increase in earnings this fiscal year.
Technically, the stock is in a solid uptrend and, ideally, is slightly oversold in the short term. The stock boasts very high relative strength versus the broader U.S. market and is ranked #1 in its group by Investors’ Business Daily in a sector ranked #3 out of 197.
So buy Avago Technologies Limited (AVGO) at market today and place your initial stop at $125.00.
If you want to play the options, I recommend that you buy the October $145 calls (AVGO151016C00145000), which last traded at $9.36 and expire on Oct. 16.
Portfolio Update
Halyard Health Inc. (HYH) added 0.37%. HYH continued to trade sideways for a fourth week, strengthening its base support level. JMP Securities currently rates Halyard at “Market Outperform” and recently raised its price target to $53 per share. This represents a potential gain of 23.40% from last Friday’s close. HYH is a HOLD.
ProShares Ultra Nasdaq Biotechnology ETF (BIB) spiked 7.50% last week. This move pushed BIB to a new 52-week high, surpassing its old 52-week high by just more than $0.50. This represents a significant move above a high resistance level and clears the way for a potential run higher. BIB is a BUY.
Silicon Motion Technology (SIMO) gained 1.30% over the past five trading days. SIMO also hit a new 52-week and lifetime high last Thursday. This bet on high tech currently enjoys a “Buy” rating from nine analysts. One analyst’s firm has a “Hold” rating and none rate this stock as a “Sell.” SIMO also pays out a favorable dividend yield of 1.7% as a little side bonus. SIMO is a BUY.
Qualys, Inc. (QLYS) jumped 13.94% for its first week in your portfolio, giving any of my subscribers out there who are dads an excellent Father’s Day present. (And I’m proudly joining in the celebration for the first time this year as my son just celebrated his first birthday.) In addition, you also closed half of your options position late last week for a quick 43.33% gain. QLYS is above its 50-day moving average and is a BUY.
Latest Special Reports
As a courtesy, I invite you to view my newly created special report, The Biotech Millionaire Map. In addition, be sure to read The Top 15 Stocks for 2015, a report which features three of my top investment recommendations, as well as bonus picks from each of my fellow investment newsletter editors at Eagle. These reports and others are available FREE on my website to you.
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