We recently published a list of 10 Best Fundamental Stocks to Buy According to Billionaires. In this article, we are going to take a look at where Broadcom Inc. (NASDAQ:AVGO) stands against other best fundamental stocks to buy according to billionaires.
As per Fitch Ratings, the US tariffs are now at levels that continue to transform the global economic outlook, meaningfully increasing the US recession risks as well as constraining the US Fed’s ability to reduce the interest rates further. The ratings agency believes that tariff hikes are expected to result in increased consumer prices and reduced corporate profits in the US. The increased prices can squeeze real wages, impacting consumer spending, with reduced profits and policy uncertainty weighing over business investments. Notably, upward pressure on goods prices due to tariffs would mean that the US Fed is likely to become more cautious when it comes to further rate cuts.
Tariffs Can Be Reduced, Says UBS
In the base case (to which UBS assigns a 50% probability), the firm anticipates tariffs to be reduced from the levels that have been announced. That being said, the process is expected to take some time. UBS anticipates that there can be a tariff-related slowdown in growth in Q2 and Q3. Even if tariffs get reduced by the end of the year, the shock and related uncertainty can result in a near-term slowdown in the broader US economy, impacting FY 2025 growth.
UBS believes that market uncertainty is expected to remain elevated, with investors focusing on potential downgrades to consensus US economic and earnings growth projections, the risk related to the tit-for-tat escalation, among others. Therefore, there can be an extended period of volatility for the broader US equities.
Despite the uncertainties, UBS expects that the market will end the year higher. Apart from themes of AI and Power and resources, the firm has identified longevity and companies benefiting from the megatrend as the third Transformational Innovation Opportunity. The investors can also consider using yield-generating strategies so that they can benefit from current increased levels of volatility. UBS says that since the tariffs have been announced, negotiations to soften can now start.
Furthermore, the tariff revenue can be utilised to offset the cost of extending tax cuts. Additionally, the Fed may respond to weakening growth by cutting interest rates. Morningstar believes that some of the leading mega-cap stocks rated as “wide moat” have experienced a decline this year. The firm believes that wide-moat stocks are the most attractively valued, and it sees value throughout the entire range of such stocks.
Our Methodology
To list the 10 Best Fundamental Stocks to Buy According to Billionaires, we sifted through Vanguard S&P 500 ETF and Insider Monkey’s exclusive database of billionaire stock holdings to shortlist the companies that have at least ~8% revenue and net income growth over the past 5 years. For the stocks with the same number of billionaire holdings, we have used the number of hedge fund investors as a secondary metric to rank the stocks, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Broadcom Inc. (AVGO) the Best Fundamental Stock to Buy According to Billionaires?
A technician working at a magnified microscope, developing a new integrated circuit.
Broadcom Inc. (NASDAQ:AVGO) is engaged in designing, developing, and supplying semiconductor and infrastructure software solutions. Daiwa upped the company’s stock to “Buy” from “Outperform.” Notably, the firm expects 4 strong drivers for the company going forward. These include Broadcom Inc. (NASDAQ:AVGO)’s application-specific integrated circuit processors, networking, and the acquisition of VMware offering growth as well as core semiconductor business. Elsewhere, TD Cowen maintained a positive stance on the company’s stock.
TD Cowen’s analyst, Joshua Buchalter, mentioned Broadcom Inc. (NASDAQ: AVGO)’s performance in AI revenue as a critical factor for the optimistic outlook. The analyst also highlighted that the demand for AI infrastructure remains strong over the near term, aiding its growth prospects. Furthermore, Broadcom Inc. (NASDAQ:AVGO)’s ability to get new projects as well as fuel revenue in critical areas such as AI demonstrates a strong business strategy. Overall, the analyst’s views strengthen the importance of AI revenue to the company’s overall financial health and the confidence of the broader market in Broadcom Inc. (NASDAQ:AVGO)’s capability to scale operations through new customers.
Renaissance Investment Management, an investment management company, published the Q4 2024 investor letter. Here is what the fund said:
“Broadcom Inc. (NASDAQ:AVGO) was another large contributor in the quarter after reporting solid operating results. The company presented an optimistic outlook, driven by its dominant position in artificial intelligence application-specific chipsets. In addition, the company should continue to benefit from its leading position in several end markets including data centers and cloud infrastructure, which have favorable secular growth trends. Broadcom is also seeing margin expansion and improved visibility, as the mix of software revenues increases, following the acquisition of VMWare.”
Overall, AVGO ranks 6th on our list of best fundamental stocks to buy according to billionaires. While we acknowledge the potential of AVGO as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than AVGO but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
