Dykstra: Broadcom Options May Pay Off

What a difference a day makes.

Tuesday the bulls were in complete charge again, pushing the market higher, and tech stocks, led by Apple(AAPL), continue to climb higher. Meanwhile, oil continues its march toward $100. Complicating matters, it's difficult to discern which way stocks will move in light of the weakness in the financial sector.

If Tuesdaywas any indication, there will be some opportunities to make money off of deep-in-the-money calls. We need to capture just one small move up to lock in a $1,000 win. Investors need to find solid, value companies and allow ample time for deep-in-the-money calls to capture a gain.

Often times the best picks are the ones that have been overly beaten down. Once these stocks find their support, they tend to benefit from a quick jump.

Today I want to focus on Broadcom(BRCM). With earnings behind it, we are in for no more surprises with this stock. The company reported disappointing earnings in late October, held down by one-time items and higher expenses. Although this certainly is a short-term setback for the stock, this company is in great position to benefit from the recent resurgence in technology.

I wrote about Broadcom last May and scored a fairly quick deep-in-the-money win. Broadcom produces chips for set-top boxes, office networks, home networking supplies, and recently it has been moving nicely into the wireless-based chip industry, with cell phone and Bluetooth device chips. While profits shrunk in its most recent quarter, revenue growth was strong.

Broadcom invests heavily into research and development. I have emphasized the value of R&D in the pharmaceutical industry at length, and technology is no different. Broadcom's customers could be mistaken for the "who's who" of the tech world, and they include Apple, Cisco, Dell, EchoStar, Hewlett-Packard, IBM, Motorola, Nortel and 3Com. It's fair to say that Broadcom is playing in the Major Leagues.