On Sale: Buy Avago (AVGO) Cheaper Than This Outperforming Hedge Fund

Viking Global is a veteran $30 billion hedge fund founded in 1999 by former Tiger cub Andreas Halvorsen. While the firm was down 2.1% in August, it remains up 7.4% year-to-date, outperforming most of its hedge fund peers. The fund has produced gains of 17.5% annually since its inception. The hedge fund recently loaded up a new position in a high growth tech company. Given the recent market sell-off you can now buy the stock at a discount to prices the fund paid.

The stock is question in Avago (NASDAQ: AVGO).

In its recent 13F, Viking Global disclosed a new 4.8 million share stake in the mobile chip maker that it owned at the end of the June quarter. Shares of Avago started the June quarter at $116.55 and ended it at $132.93. Shares traded at high as $150.50 and was north of $130 a good chuck of the quarter. The current price of Avago is $127. While it is unclear the exact price Viking Global paid, logic and trading data would suggest it has a cost basis of around $130.

While Avago obviously got hit in the market malaise the company's operating results are very impressive. In its third quarter, Avago reported that revenue rose 36% from last year to $1.74 billion and diluted EPS from continuing operations rose 78% to $2.24 per diluted share.

The company has been on a major acquisition spree of late, consolidating the industry in which it operates. In 2014, the company completed the acquisitions of LSI Corp and PLX Tech. So fart this year, the company has completed the acquisition of Emulex and has a pending deal to acquire Broadcom (NASDAQ: BRCM).

Despite the recent stock market hiccup, analysts remain overly bullish on the stock. Following a recent meeting with Ashish Saran, Head of IR at Avago offices, RBC Capital analyst Amit Daryanani said they remain bullish and expect the stock to sustain its outperformance driven by multiple self-help levers, which could result in $15 in EPS by CY18 (25% growth, 70% self-help levers).

The analyst cited: 1) Wireless growth is constrained by 100% capacity utilization as current/future customers want more allocation of FBAR; 2) While content is stable with large OEMs, it's expected we see double digit (we think 20-30%+ conservatively) growth in next gen product (Fall-2016), 3) BRCM on schedule to close early 2016, keep an eye on MOFCOM deadlines in late-September; and 4) Positive HDD comments on conference call were reflective of PCs & enterprise. The firm has an Outperform rating and $150 price target on the stock.

Given its impressive growth and merger track record, before too long, Avago will likely be retesting the $150 levels and beyond. It might be time step on board with Viking Global and enjoy the ride.

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