Avago Technologies (AVGO - Analyst Report), maker of RF chips for smartphones, optical components for servomotors, and enterprise-level networking equipment, has consistently been a Zacks #1 Rank (Strong Buy) or #2 Rank (Buy) since I first began buying shares at $70 last July.

And the company keeps knocking the cover off of Wall Street's ball. Whether it's an average 19% positive EPS surprise for the past 4 quarters or the latest key acquisition, analysts seem to find themselves continually scrambling to raise sales and earnings estimates for the next quarter.

Last week, AVGO shares surged 11.5% after the company reported another strong quarter and their intent to acquire Broadcom (BRCM- Analyst Report), maker of broadband semiconductor solutions, for $37B in cash and stock. Oppenheimer analysts noted that this chip-maker "megadeal appears transformative for AVGO and the industry, creating the third-largest semi company by revenue."

That "third-largest" quote may be in question now after yesterday's confirmation that Intel (INTC - Analyst Report) will indeed buy Altera (ALTR - Analyst Report) for $16.7 billion in cash. But I doubt it since Intel probably held the top spot anyway.

Where Did Avago Come From?

The company began as part of Hewlett Packard (HPQ - Analyst Report) over 40 years ago, then was spun off as Agilent Technologies. In 2005, KKR and Silver Lake partners took Agilent’s semiconductor group private as Avago Technologies, which later had its IPO in August 2009.

With such an impressive pedigree, one would think it obvious that the company would be loved by investors and viewed with high expectations. But the fact that shares have more than doubled in the past year means that the "inefficient" market missed this gem.

Who Else Was Paying Attention?

I felt lucky to discover the Avago story last year at $70. What put it on my radar was the big institutional buying by a couple of the Capital Group funds after Avago bought LSI Logic last year and replaced that chip company in the S&P 500.

But some other smart investors were all over the growth story much sooner. Here's what I shared with my Follow The Money subscribers the week of May 18, before the Broadcom deal was announced...

The accessible friend of the thinking investor every week, Barron's also publishes a quarterly journal for the wealthy investor, Penta. They call it "Trusted Advice for Families With Assets of $5 Million or More."

This particular issue brings their annual report on the "Best 100 Hedge Funds." And their cover story profiles #14, the $3.5 billion Lyrical Asset Management. Here's their intro...

"Andrew Wellington's Lyrical hedge fund has returned an impressive 28% annually these past 3 years. He does it by buying just a few names a year and quietly holding his 33 stocks until they payoff."

And here's part of the interview of particular interest to us...

Barron's: Seeing as you buy stocks so infrequently, let’s reach a little further back in time and talk about another favorite.

Wellington: We bought Avago Technologies [AVGO], an analog semiconductor maker, in 2013. It makes radio-frequency (RF) chips, for which the end market is smartphones. At the time, there were concerns about growth in iPhone sales, and Apple’s stock price dipped. We liked Avago because more than half of its profits came from non-smartphone markets. They were making optical components that were used largely in servomotors, which are used in any machinery that requires movement, and that business was very stable. Their products had long-term design lives, which gave us more confidence in the long-term earnings power of the business.

Barron's: Is it still a good long-term deal for investors?

Wellington: Yes, we paid about $38, which was about 12½ times 2014 Street estimates of about $3 a share. That was an attractive multiple for such a high-quality company. We thought earnings were going to double over a five-year period, and that would be close to a 15% annualized earnings growth rate. But they did not earn $3 a share in 2014; they earned $4.90. And this year, they’re expected to earn about $8.50. The company has exceeded even our expectations. In hindsight, we only paid 4.5 times what they’re likely to earn in 2015. It’s an illustration of one of the hidden benefits of owning good companies: Good companies find ways to improve their business over time. We could see it rising 30% more.

A $220 Stock?

On May 28, StreetInsider.com reported on some particularly interesting analyst research...

Avago/Broadcom Deal Synergies Could Drive ~$220 Stock Price, Mizuho Securities Says

Mizuho Securities analyst Vijay Rakesh raised estimates and his price target on Outperform-rated Avago Technologies to $175.00 (from $150.00) following a "solid" quarter and the Broadcom deal.

Rakesh said the Broadcom deal points to a $200+ stock with synergies. "We would note the combined AVGO+BRCM could drive ~$12EPS and $5.75bn of FCF/year," Rakes said. "Or put another way, long-term on a ~$16.6bn of F16E combined consensus topline, 40% OM and a 5% tax rate, we see AVGO+BRCM EPS at ~$14.70, and at a 15x multiple, the stock is worth ~$220 without buybacks."

While the analyst EPS estimate bumps continue to roll in this week, expect Avago to maintain a Zacks #1 or #2 Rank for a good chunk of time until they report again... or announce their next deal, which ever comes first.