We’re taking some more big profits in a tech stock that just won’t quit rallying
Shortly after the opening bell, we will be selling 25 shares of Broadcom at roughly $388 each. Following Wednesday’s trade, Jim Cramer’s Charitable Trust will own 390 shares of AVGO, decreasing its weight in the portfolio to about 4% from 4.3%. Broadcom shares were moving higher on Wednesday after the company announced a multi-year, multi-generation strategic partnership with Meta Platforms to support that company’s Meta Training and Inference Accelerator (MTIA) chips through 2029. Broadcom stated that the initial commitment exceeds 1 gigwatt of compute and represents the first phase of a sustained, multi-year rollout. In other words, this partnership is going to get even bigger over the next few years, supporting Broadcom’s roughly $15 billion of artificial intelligence revenue annually from just this one customer. This is Broadcom’s second such supply commitment to a major hyperscaler announced this month. Last week, the chipmaker inked a long-term supply agreement to supply custom TPUs and networking equipment to Alphabet through 2031. Broadcom also announced it expanded its supply agreement with Anthropic. AVGO YTD mountain Broadcom YTD Based on Wednesday’s premarket prices, the Broadcom rally would extend to about 25% this month, making for a parabolic move that we are taking big profits into. From this sale, we will realize a strong gain of about 336% on stock purchased in September 2023. It’s our second Broadcom trim this week. We right-sized the position Monday. We also want to acknowledge that the latest S & P Short Range Oscillator reading of 8.39% indicates a market that has become significantly overbought. However, this one-month swing from minus-7% on March 12, signaling severely oversold, to above 8% as of Tuesday’s close isn’t a bad thing. MarketEdge, the keeper of the Oscillator, points out that swings this fast and hard don’t suggest a market that is about to collapse, but rather that the pace of gains may slow from here. The data shows that over the last 20 years, the S & P 500 has averaged a return of 1.8% over the 30 days after the Oscillator exceeds 8%. To us, that means we should expect some chop and market grind behavior over the next few weeks. Keep in mind the S & P 500 has just rallied nearly 10% since the end of March. With this historical context in mind, we are electing to raise some cash in a stock in Broadcom that has quickly swung from a double-digit percentage loser this year to a double-digit winner. Pullbacks in the market are to be expected, and we know the market is still heavily influenced by geopolitical events. We don’t want to give back these gains after such a strong rally in the market. (Jim Cramer’s Charitable Trust is long AVGO, GOOGL, META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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