Warren Buffet isn’t the only one purchasing millions of dollars’ worth of shares. Another billionaire who has recently caught the attention of investors is Ken Griffin, an American hedge fund manager, entrepreneur, and investor. Since 2022 began, Griffin has heavily invested in two stocks that he’s buying hand over fist.
Should these stocks be on your shortlist of investment candidates?
Bank of America
Logically, this play is based on Bank of America’s interest-rate sensitivity — it is the most interest-sensitive of all the big banks. As interest rates rise to tame inflation, which recently hit a 40-year high, Bank of America should make additional billions of dollars (without doing anything extra). This spike in revenue will result from existing variable-rate outstanding loans.
When the Federal Reserve considered the potential outcome of a recession, BAC passed its annual stress test. Hypothetically, Bank of America could survive a severe economic downturn. Another tailwind in shareholders’ favor is that Bank of America announced its quarterly dividend would increase to $0.22 per share in the third quarter.
Bank of America is also shifting further to digitalization. Active digital users increased from 37 million to 42 million in the past three years. Total sales completed online or through the mobile app grew to 53% in the March-ended quarter. Three years ago, this figure was just 30%. For bank stocks, digital sales are significantly more cost-effective.
Here is a summary of BAC’s most recent annual report:
- BAC earned a record $32 billion on $89.1 billion in revenue.
- Total assets increased to $3.2 trillion as deposits grew to more than $2 trillion.
- During the year, BAC’s stock price increased by 47%, outpacing the S&P 500 — the stock’s 10-year performance was over 700%.
Since semiconductor stocks are cyclical and a potential recession is brewing, this may be a surprising play. However, Broadcom offers several competitive advantages that support Griffin’s increased stake — especially at current prices. For example, the 5G wireless revolution will likely be a game-changer for Broadcom.
As telecom companies continue to invest in their wireless infrastructure, pouring billions of dollars into this transition toward 5G speeds, Broadcom will provide the 5G wireless chips and related accessories used in the next phase of smartphones.
And as businesses and everyday consumers replace devices, Broadcom could experience a spike in sales for years to come. Broadcom also supplies chips for data centers and next-generation cars, presenting immense growth opportunities.
Another reason to invest in Broadcom is its impressive financials and operating cash flows. At the end of 2021, Broadcom reported a record backlog of $14.9 billion, booking orders well into 2023. The company is well-positioned for the second half of 2022, whether there’s a recession or not. It will also be set when economic expansion begins once again.
And then there’s Broadcom’s dividend. Since 2010, Broadcom’s quarterly dividend has increased by more than 5,700%. Considering all of the factors above, shares of AVGO are attractive to value, growth, and income investors.
Here is a summary of AVGO’s 2021 annual report:
- In fiscal 2021, AVGO achieved a record adjusted EBITDA margin of 60%, generating $13.3 billion in free cash flow, or 49% of revenue.
- Total net revenue for the year was $27.45 billion, representing a nearly 15% increase from 2020.
- The company also announced a new $10 billion share repurchase program.
Is Now the Time To Buy Shares of BAC and AVGO?
These stocks have seen gains over the past five years, with BAC rising by 30% and AVGO increasing by 93%. So, the future looks bright. If you’re a long-term investor with some cash to invest, BAC and AVGO are both attractive bets.