It crashed today because of the announcement to buy CA (Computer Associates not the state). I myself was confused as CA has nothing in common with the AVGO business. But I like the way Hock operates and am pretty sure he knows something I don’t. So just bought some before the market closed (had not been checking the market all morning so I didn’t see they crashed)
Only thing I know about Hock is he is a Singaporean
Naturalized Singaporean, then Naturalized American. He’s Malaysian by birth right (ethnically Chinese)?
Bought some AVGO this morning, but only because I thought it bought California.
Hock looks like a crook. Avoid.
Yeah, to some degree, the current broadcom reminds me the MCI worldcom back in the days, when it tried to stay relevant through acquisitions. But all the businesses AVGO bought are in better quality. I started a relatively small position and will see how it goes. I sold some stocks a week ago just before the trade war broke out. AVGO gave me an opportunity to throw some money back in.
Difference I think (I could very well be wrong as I was not as in touch or knew what to look back then being a young kid), MCI Worldcom was poorly run / managed. Hock is shrewd and a pure numbers guy and has no religion when it comes to a business. He buys a company, chops it up, runs the profitable pieces and discards them when it doesn’t make his numbers anymore. He is literally running AVGO as a PE shop.
Why take risk with a complicated business? Better choices are abundant
@harriet to note : This is a clear example of Margin of Safety
This is not complicated business, but very simple math.
This is like FB dropping to $150 range or AAPL at $95 drop ! When stock is down, it is an opportunity like year 2008 real estate.
One good earning company, $120B worth (now 105B), is taking over another good company for $19B (Previously 13B). Both are profitable and dividend providers. The entire stock value drowned to $19B (Only 6B is excess pay) without even accounting a value of taken over company.
That too, the AVGO is trying to acquire more companies in USA (previously QCOM and now CA) after US reduced corporate tax.
See how he is.
The value of both companies bound to come back or reflect in price later in a month or a quarter and will not stay in this price forever.
Market cap doesn’t equal intrinsic value.
Yes, I understand it is not, but there are various ways to arrive intrinsic and each one is complex and beyond the scope (as no one will make out anything out of it).
The simple assumption I made here is market cap reflects its value.
The total market cap of both companies after the announcement is 12B less than total market cap of both companies pre-announcement.
If both equities are valued correct as of pre - announcement, the 12B drop will be back as companies will merge functions, reduce cost, merge infrastructure…etc results in internal efficiencies/productivity.
For True valuation, we need to read one of thess (yes, not easy one)
That doesn’t prove anything. Your definition of ‘margin of safety’ to me is just common sense, i.e. you buy what you perceive to be undervalued. Simple as that.
The majority of mergers and acquisitions fail to achieve their pre-merger targets. For every Instagram acquisition, there are 8 that sucked. Also, if the market always reflected intrinsic value, then Buffet’s method wouldn’t work. He’d never find anything that’s a good enough deal to buy. I had a whole class on company valuations.
The point is to buy banks during the financial crisis. The market discounted them way below book value. You could literally shutdown the bank, sell the assets, pay the liabilities, and have more cash than the stock was worth. In a raging bull market, very few things will meet the criteria to buy.
If a stock is down big in this market, there’s a reason why. Odds are the business fundamentals are deteriorating. A big sign of that is declining revenue. The economy is booming and GDP growth is accelerating. If revenue is declining now, it’ll be brutal in the next recession.
All true but I’d like to give businesses extra faith. Case in point: Twtr. Down big in up market but was able to climb back up from a hole.
Ahhh, a lot arguments in this forum.
I do not know whether it is good or bad or worth for me to further explain.
I do not prefer to explain or counter any more. If you feel that I am wrong or buffet is wrong or everything looks to be common sense, let it be, no issue.
BTW @wuqijun : This is where I appreciate WQJ (WQJ vs others I used show) as you have tenacious behavior to withstand your point of view while I show withdrawal attitude. Unfortunately, you took it negative that I am mocking at you.
@jil, I have a very forgiven attitude and can definitely let the bygone be bygone. Not that I’m saying you did anything wrong or insisting that you did mock me out of spite. But I’m open to get back to good terms with you if our interactions from here on can be cordial and respectful.
No one is arguing right now. You have to accept the fact that other people have their own view points and that they firmly believe theirs just like you do with yours. You may treat this Margin of Safety book as the Bible but others may not.
I think market is over reacting and there is a quick buck to be made by buying avgo.
Classic Hock Tan - buy unloved companies at fair/dsicounted value that have a cash cow business(main frame software), trim the fat ( cloud software etc) and milk the profits. I was surprised that he chose something outside hardware - but the more you think of it, he’s a businessman ---- he looks at technology companies with a profit/loss mindset. Maybe his next play will be johnson & johson
Rocketing up after hours. Anyone joined me in buying this back in July
No. Isn’t this a semi ? Thought semi is dead for now.