Venu Krishna, the head of U.S. equity strategy and global equity-linked strategies at Barclays, recently shared a list of stocks he recommends to offset market concentration in big tech stocks. He emphasized the importance of finding stocks outside of the tech sector that offer value over the long term. Through a methodology focused on fundamental metrics and liquidity filters, Krishna created a well-diversified stock portfolio as a hedge against Big Tech’s dominance.
Broadcom Inc (NASDAQ:AVGO) is among the stocks recommended by Krishna to diversify away from mega-cap tech and AI stocks. Despite being exposed to the AI semiconductor market, some experts believe that Broadcom is well-priced. In the first quarter, the company saw strong revenue growth but limited margin growth. With a high EV/EBITDA ratio and significant debt levels, Broadcom is expected to lag behind industry leaders in the coming years. Analysts estimate a modest upside for the stock, indicating limited growth potential.
Carillon Eagle Growth & Income Fund highlighted Broadcom as a beneficiary of generative AI and emphasized the company’s focus on integrating its VMware acquisition. While Broadcom ranks second on the list of recommended stocks, some believe that under-the-radar AI stocks may offer higher returns in a shorter time frame. For investors looking for AI stocks with more promise at lower earnings multiples, exploring cheaper AI stocks may be a more appealing option.
The rise of big tech stocks has been a healthy trend, according to Krishna, with profits starting to shift into other sectors. Despite lagging behind Big Tech in recent months, Krishna’s stock portfolio has outperformed the equal-weighted S&P 500 and market-cap-weighted S&P 500. By selecting stocks with the largest number of hedge fund investors, investors can potentially outperform the market by following the best stock picks made by top hedge funds. This strategy has shown significant returns over the years, showcasing the value of tracking hedge fund activity in stock selection.
In conclusion, Broadcom Inc offers potential for diversification away from mega-cap tech and AI stocks, but may not be the most promising option for generating high returns in the AI sector. By considering under-the-radar AI stocks with lower earnings multiples, investors may find opportunities for significant growth in a shorter period of time. The market trends and potential opportunities outside of big tech emphasize the importance of diversifying portfolios to navigate the evolving landscape of the stock market.
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