Thank you
A nice problem to have in long-term investing is huge winners that keep getting larger as a percentage of the total portfolio, making the portfolio more concentrated. AVGO is a decent capital-light compounder in the semiconductor industry, and the company has consistently grown over the years through organic growth and occasional large M&A. AVGO generates tons of cash flow which was mostly returned to shareholders through a balanced buyback and dividend growth. AVGO is now trading at 27.5x Forward P/E, a premium valuation relative to historical averages ranging from 13x to 28x, largely due to the AI theme. Based on consensus estimate AVGO expects to grow its topline by 39% in FY2024 (due to the large acquisition of VMware), and then continue to grow by around 10%. With its decent run recently, trimming it slightly could be okay if case investors are not comfortable with position sizing, but we still like AVGO’s business model and would be comfortable holding the majority of it for the long term. As much as we like it, when considering weightings we would see it as a lower weighting than NVDA and CSU.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in NVDA.