Some readers may have noticed my tendency to select stocks that have either been beaten-up, or oversold. This is not a coincidence; it's a core component of my investment and trading strategy.
Often times stocks suffer losses that overexaggerate the extent of their flaws. In addition, focusing on beaten-down, oversold stocks, keeps us from chasing risky, momentum-fueled moves. Although momentum may lead to quick upside moves, it also has the scary potential to collapse completely. Please remember why we are in this game: To make as much money as possible, with the least amount of risk. Period.
Today, I am going to focus on a marked-down value play in the semiconductor space:
, which closed Friday at $30.74. Using my deep-in-the-money call strategy, we made a $1,000 gain on another overly downtrodden semiconductor stock in
. (Check out how my recent picks have fared
It's time to revisit the sector. Broadcom supplies semiconductors to the broadband communications markets. Their chips go in cable modems, cable set-top boxes, office networks, home-networking supplies and more. When it comes to DSL and DSL modems, Broadcom's products touch homes and offices across the country.
Broadcom aims to make highly integrated, comprehensive systems on single chips or chipsets, reducing board space, simplifying the customer's manufacturing process, lowering the customer's system costs and boosting performance. Its customers are a who's who of tech firms:
Broadcom also develops and supplies a diverse portfolio of products targeted to a variety of wired and wireless communications markets, wireless-enabled laptop and desktop computers, and advanced PDAs and cellular phones, among wired and wireless equipment.
These areas are big-growth areas. In addition, there are reports claiming that Broadcom will help produce some of the technology behind Apple's iPhone initiative. With the iPhone's expected release sometime in late-June, it has the potential to change the landscape of the cellular-phone industry, and Broadcom stands to gain significantly. (Other company's also in the game with the iPhone can be seen
in this Stockpickr portfolio.)
Although the price of silicon has led to strong downside pressure in silicon-based chip producers throughout the past year, the demand for silicon-based chips as well as the inevitability of a reversal in the silicon market will ultimately lead to great reward for a company like Broadcom.
The fundamentals and technicals of this company are strong, and at $30.74 (off from its 52-week high of $37.58), Broadcom presents an excellent buying opportunity. Although the stock trades at a P/E ratio of 55, the forward P/E is a much more modest 32. This is indicative of the extraordinary growth enjoyed in Broadcom's core businesses. In order to capitalize, I will place a limit order for 10 contracts of the November $22.50 DITM calls (RCQKX) for $9.20, or better.
Game of Life
Interleague play commenced last week in baseball, with some bemoaning the inequity of the unbalanced schedules. Furthermore, there is sentiment that it taints the World Series. Nonetheless, the fans seem to enjoy the opportunity to see teams from the other leagues, particularly with the cross-town rivalries, such as in New York, Chicago and Los Angeles.
Speaking of rivalries, perhaps the most ballyhooed of all, the Yankees and the Red Sox, resumes tonight in Yankee Stadium. Presently, the Red Sox own the best record in baseball, and enjoy a double digit lead in the AL East over their closest pursuers, all of whom are playing sub-.500 ball. On the other hand, the Bronx Bombers are bombing in an uncharacteristic fashion, as they struggle to gain respectability. While there was a test launch of The Rocket in single A last week, even his eventual presence may not be enough to boost the Yankees into contention.
Meanwhile, in the remainder of the divisional races, the Indians and Tigers are neck and neck in the AL Central, and the Los Angeles entries -- the Angels and the Dodgers -- continue to lead the AL West and NL West, respectively, albeit by small margins. The Brewers have come back to the pack, but still lead the NL Central by a modest margin. In the NL East, the Mets have opened a small lead on the Braves.
On the frozen pond, the Ottawa Senators dispatched the Buffalo Sabres in five games, and await the winner in their quest for the Stanley Cup. The NBA Conference Finals began yesterday with the San Antonio Spurs facing the Utah Jazz in the West, and the Detroit Pistons square off against the Cleveland Cavaliers in the East.
At Pimlico Race Course, the 132nd Preakness Stakes turned out to be a real gem as Curlin nosed out Kentucky Derby winner, Street Sense, at the wire. Hence, there will be no Triple Crown winner for the past 29 years.
Despite that disappointment, the race saw Curlin run down Street Sense in the stretch, a remarkable feat given Street Sense's incredible come-from-behind victory in the Derby. Calvin Borel, Street Sense's jockey, thought he had the race won when he passed Derby runner-up, Hard Spun. However, he was gracious in defeat, and if possible, genuinely happy for Curlin's jockey, Robby Albarado, a fellow Cajun. Borel and Albarado were raised within miles of each other in Southern Louisiana. Rivals on the track, but friends for life.
In preparation for the red clay of Roland Garros next weekend in France, another rivalry played out in the Hamburg Masters Championship in Germany yesterday. Rafael Nadal had his marvelous winning streak end at 81 consecutive matches with his loss to Roger Federer. The coachless Federer, who had not won in the last four tournaments he entered, solidified his hold as the No. 1 ranked tennis player in the world. Hopefully the rivalry between these two phenomenal tennis players will continue over the ensuing years.
The Players Club recognizes that rivalries often dictate and define sports. Moreover, those fierce rivalries on the playing field can sometimes translate into wonderful long-lasting friendships when the games cease. By guaranteeing recurring cash flow, through our strategic partner, The Players Club endeavors to ensure that the athlete's financial future does not involve a rivalry, but rather, a warm and secure friendship moving forward.
Always remember: Life is a journey, enjoy the ride!
At the time of publication, Dykstra had no positions in stocks mentioned.
Nicknamed "Nails" for his tough style of play during his Major League Baseball career, Lenny Dykstra was an integral member of the powerful Mets of the mid-1980s, including the world champion 1986 squad, and the Phillies in the early 1990s.
Today, Dykstra manages his own stock portfolio and serves as president of several of his privately held companies, including car washes; a partnership with Castrol in "Team Dykstra" Quick Lube Centers; a state-of-the-art ConocoPhillips fueling facility; a real estate development company; and a new venture to develop several "I Sold It on eBay" stores throughout high-demographic areas of Southern California.