Broadcom Corporation (NASDAQ:BRCM) will see a boom because of the “Internet of Things,” Tigress Asset Management CIO Ivan Feinseth said in a discussion on CNBC. Broadcom Corporation (NASDAQ:BRCM) was named as one of Feinseth’s firm’s recommended stocks with a “Buy” rating in the discussion which also featured Google Inc (NASDAQ:GOOGL).
According to Feinseth, increasing connectivity in today’s communities will be a key driver for Broadcom Corporation (NASDAQ:BRCM).
“They make chips for wireless connectivity both Wi-Fi and Bluetooth and these are key growth areas as we connect everything wirelessly and increase the use of mobile platforms. It’s these types of chips that provide the connectivity,” he said.
Furthermore, Feinseth discussed what his firm identified as the key metric for Broadcom Corporation (NASDAQ:BRCM) which is is net operating profit after taxes (NOPAT).
“[…] Our key focus is looking at economic profit and economic profit is NOPAT divided by invested capital, which is return on capital minus the cost of capital. When economic profit is increasing, shareholder value is increasing. There is no greater driver of increasing shareholder value than increasing return on capital,” Feinseth explained.
Broadcom Corporation (NASDAQ:BRCM)’s excess cash is $4.6 billion, the discussion revealed, and the Tigress Asset Management executive agreed that a significant portion of this trove will be going back to investors as the company increases its stock buybacks and dividends. This is the same development that is happening at Google Inc (NASDAQ:GOOGL), he noted.
According to Feinseth, his firm chooses to recommend Broadcom Corporation (NASDAQ:BRCM) over other wireless connectivity chip makers because the company has key connectivity chips used in a broad range of products. Furthermore, he told CNBC that the company may be an attractive acquisition target for firms like Texas Instruments Incorporated (NASDAQ:TXN) or Intel Corporation (NASDAQ:INTC).