As the broader markets are trading near all-time highs, investors might wait for a pullback rather than gain additional exposure to companies trading at overheated valuations. However, it’s impossible to time the market, which means it makes better sense to consistently build positions in quality companies over time rather than wait for a broader market correction. So, let’s see where you can invest $10,000 in October 2024.
Broadcom (NASDAQ:AVGO) is among the largest companies in the world, valued at US$850 billion by market cap. The semiconductor giant reported sales of US$13.1 billion in fiscal Q3 2024 (ended in July), an increase of 44% year over year. Its top-line growth was attributed to strong AI (artificial intelligence) revenue, the acquisition of VMware, and stabilizing non-AI semiconductor sales.
Broadcom’s infrastructure software segment, which includes VMware, reported revenue of US$5.8 billion, up 200% year over year due to a US$3.8 billion contribution from the latter. Broadcom recently promoted the VMware Cloud Foundation, or VCF, a complete software stack that virtualizes an entire data centre and creates a private cloud environment for enterprises.
In Q3, Broadcom booked 15 million CPU costs of VCF, representing more than 80% of total VMware products booked. This translates to an annualized booking value of US$2.5 billion, up 32% year over year.
Broadcom initially expected to deliver adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $8.5 billion within three years of the VMware acquisition. However, it is on track to achieve or even exceed this goal in fiscal 2025.
Next, Broadcom’s networking business grew sales by 43% to US$4 billion, accounting for 55% of semiconductor revenue. The segment was driven by solid demand from hyperscalers for AI networking and custom AI accelerators.
Broadcom is positioned to benefit from strong AI-related tailwinds. In Q4, AI sales are forecast to grow by 10% sequentially to US$3.5 billion, while total AI sales are forecast at US$12 billion in fiscal 2024.
AVGO stock has already returned more than 3,000% to shareholders in the past decade after adjusting for dividends. Today, it trades at 28 times forward earnings, which is not too expensive given its growth forecasts.
Enghouse stock
A Canadian tech stock, Enghouse (TSX:ENGH) provides enterprise-focused software solutions globally. It offers customer interaction software and services to facilitate remote work, enhance customer service, and manage customer communications across voice, email, web chats, text, and video.
In fiscal Q3 2024 (ended in July), Enghouse reported revenue of $130.5 million, an increase of 17.6% year over year, up from $111 million in the year-ago period. Its recurring revenue, including SaaS (software-as-a-service) and maintenance services, grew 22.8% to $88.8 million, accounting for 68% of total sales.
Enghouse emphasized that its SaaS and on-premise solutions position it uniquely in the marketplace. Further, operational enhancements across its existing businesses and recent acquisitions are driving cash flow and dividends higher.
Enghouse pays shareholders an annual dividend of $1.04 per share, translating to a dividend yield of 3.3%. Moreover, these payouts have risen by 39% annually in the past decade. Priced at 21 times forward earnings, ENGH stock trades at a 22% discount to consensus price target estimates.