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The Broadcom Inc (AVGO) Stock Bull Thesis Has Completely Changed

Broadcom Inc (Nasdaq: AVGO ) stock plummeted more than 13 percent on Thursday after the company blindsided the market by announcing a massive $18.9 billion buyout of CA ( CA ). The mega-deal will expand Broadcom's addressable market well beyond that of its core business, but investors and analysts are concerned that Broadcom may be biting off more than it can chew.

Analysts say the potential pivot from hardware to software, which proved difficult for Intel Corp. ( INTC ), will be a challenging transition for Broadcom . In addition, since there is almost no overlap between CA and Broadcom's businesses, the deal will provide no clear cost synergies.

[See: 10 of the Best Tech ETFs to Own .]

To make matters worse, a large, aggressive buyout of a software company seems to contradict the message Broadcom management has been emphasizing and shift the potential investment thesis for the stock.

"Management has stressed that Broadcom is focused on delivering shareholder value through organic growth, capital return and tuck-in acquisitions," Nomura Instinet analyst Romit Shah says. "This deal hurts management's credibility, in our opinion."

Evercore ISI analyst C.J. Muse says the motivation for the deal may simply be to beef up Broadcom's earnings numbers in the near term.

"We think investors will likely be disappointed at this deal, which seems more financial engineering [and] P/E-driven than due to any strategic rationale," Muse says.

While Broadcom says the deal expands the company's long-term total addressable market from $65 billion to more than $200 billion, Muse says investors will likely be worried that management is losing its focus on what it important for the company. For example, the addition of CA will lower Broadcom's long-term annual revenue growth rate from 5 to 3 percent, Muse says.

"We continue to like AVGO and the world-class management team and CEO, but the current deal makes no sense to us," Muse says.

Broadcom pays a generous 3.4 percent dividend yield and recently committed to a $12 billion share repurchase program. However, the steep price of the CA deal could prohibit additional capital returns, Muse says.

[See: The 10 Most Valuable Tech Companies in the World .]

Broadcom says it expects the deal to help create shareholder value and that it will close in the fourth quarter of 2018.

Nomura has a "neutral" rating and $225 price target for Broadcom. Evercore has an "in-line" rating and $275 target for AVGO stock.

Wayne Duggan is a freelance investment strategy reporter with a focus on energy and emerging market stocks. He has a degree in brain and cognitive sciences from the Massachusetts Institute of Technology and specializes in the psychological challenges of investing. He is a senior financial market reporter for Benzinga and has contributed financial market analysis to Motley Fool, Seeking Alpha and InvestorPlace. He is also the author of the book " Beating Wall Street With Common Sense ," which focuses on the practical strategies he has used to outperform the stock market. You can follow him on Twitter @DugganSense , check out his latest content at tradingcommonsense.com or email him at [email protected] .

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Broadcom's AI Powerhouse: A Quiet Giant Emerges

The semiconductor and data center sectors are fast-paced and volatile, with companies like NVIDIA  NVDA   and Advanced Micro Devices AMD leading the way. However, a giant is quietly revolutionizing the sector and becoming a force to be reckoned with in the artificial intelligence (AI) revolution. While many may overlook this diversified technology company, Broadcom Inc. AVGO is growing its AI capabilities and making strategic investments that generate positive investor sentiment.

A Multifaceted Technological Powerhouse

Broadcom is a technology company with a vast portfolio spanning 26 divisions, offering a diverse range of semiconductor and infrastructure software solutions. Its offerings include network connectivity chips for data centers, server storage, broadband and wireless products, cybersecurity, and cloud computing solutions. This broad reach gives Broadcom a distinct advantage, enabling it to capitalize on emerging trends across multiple technology sub-sectors.

The semiconductor industry is experiencing rapid growth, driven by the rise of AI. Companies like NVIDIA and AMD have emerged as industry leaders, attracting significant investment and attention. However, Broadcom offers a more stable and less volatile approach with its diversified portfolio. It provides a more balanced investment opportunity that is less dependent on the volatile swings of a single market.

Broadcom's AI Strategy: A Quiet Revolution

Broadcom's strategy has been to invest steadily in AI chips and data center infrastructure. This includes developing high-performance networking chips and storage solutions specifically designed to support the demands of AI workloads. This strategic focus is crucial for the company's future growth as the need for advanced chips and infrastructure to power AI applications continues to increase.

A key milestone in Broadcom's AI strategy was its November 2023 acquisition of VMware, a leading cloud architecture software company. This acquisition significantly bolstered Broadcom's AI software and cloud infrastructure position, giving it a more comprehensive and integrated offering.

VMware's expertise in system virtualization and cloud management perfectly complements Broadcom's hardware capabilities, enabling the company to offer end-to-end solutions for data centers, cloud computing, virtual systems, servers, and AI deployments.

The integration of VMware into Broadcom's operations has been a complex process that has presented challenges and opportunities. However, the company has shown confidence that the acquisition will drive significant growth and enhance its competitiveness in the AI market.

The Latest Earnings Report: A Glimpse Into Growth

Broadcom's earnings report for the third quarter of fiscal year 2024 provided valuable insights into the company's performance and effectiveness in its AI strategy. The company reported impressive revenue growth of 47% year over year, reaching $13.1 billion.

While this growth is impressive, it's important to note that a significant portion is attributed to VMware's acquisition, strengthening the infrastructure software segment. Excluding VMware, Broadcom's organic revenue growth was only 4% year-over-year. This suggests that the company's core business, specifically its semiconductor solutions segment, is not yet seeing the same level of growth as its AI-focused peers.

However, it is crucial to remember that Broadcom's semiconductor solutions segment, primarily focused on non-AI applications, is starting to show signs of stabilization. Broadcom's CEO, Hock Tan, has stated that "non-AI semiconductor revenue has stabilized" and that the company is "expecting a recovery" in the coming quarters. The executive's comments suggest Broadcom's non-AI businesses are at a turning point and potentially ready to drive future growth.

In addition to revenue, Broadcom reported adjusted EBITDA of $8.223 billion for the quarter, representing 63% of revenue, a notable increase of 42% year-over-year. This demonstrates the company's continued focus on profitability and its ability to generate cash flow. The company also highlighted that adjusted EBITDA for the upcoming quarter is expected to reach approximately 64% of projected revenue.

The strong adjusted EBITDA performance is another positive sign for investors. It suggests that Broadcom is managing its costs effectively and generating significant cash flow despite the ongoing transition in its core business and the integration of VMware.

Broadcom's financial performance and its AI strategy are closely intertwined. During the earnings call, Tan also said that revenue from AI products will drive $12 billion in annual sales this year, up from the prior company estimate of $11 billion. The company's commitment to AI is evident in its focus on developing and deploying advanced chips and solutions for data centers and other critical applications.

Analyst Recommendations and the Investment Outlook

Broadcom's analyst community is generally optimistic about the company's future. The average price target for Broadcom stock is $189.23, representing a potential upside of 29.37% from the current price. Of 25 analysts covering the stock, 24 recommend buying it, while one recommends holding it. This "Moderate Buy" consensus rating indicates a generally positive market sentiment toward Broadcom.

A Final Thought: Broadcom's AI Powerhouse Emerges

Broadcom's AI revolution is quietly unfolding. While its current growth relies heavily on VMware, the company is strategically positioning itself as a dominant player in the AI space. Its non-AI businesses show signs of recovery, and AI drives strong revenue growth. The company's valuation relative to its peers, its commitment to AI, and the positive outlook from analysts make Broadcom an intriguing investment opportunity for investors with a long-term time horizon.

As Broadcom continues developing its AI capabilities and integrating VMware into its operations, investors might benefit from its quiet transformation into an AI powerhouse. Broadcom's journey to becoming a leader in AI is far from over, and the company's potential for future growth is significant. The market's current underestimation of Broadcom's AI strategy may present a window of opportunity for investors willing to look beyond the short term and embrace the potential of this quietly growing technology leader.

The article " Broadcom's AI Powerhouse: A Quiet Giant Emerges " first appeared on MarketBeat.

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Billionaire Daniel Loeb Has 23% of His Portfolio Invested in 3 AI Stocks (Hint: Not Nvidia)

• As the largest public cloud, Amazon is uniquely positioned to benefit from demand for AI infrastructure.
• Microsoft is monetizing generative AI with software copilots and cloud computing services.
• As the largest foundry, Taiwan Semiconductor is well positioned to benefit from demand for AI chips.
• Motley Fool Issues Rare “All In” Buy Alert

NASDAQ: AMZN

Third Point is heavily invested in Amazon, Microsoft, and Taiwan Semiconductor.

Dan Loeb is the founder and CEO of Third Point, an institutional asset manager whose flagship Offshore Fund has returned 13.1% annually since its inception in 1996. Meanwhile, the S&P 500 ( ^GSPC 0.03% ) has returned 9.4% annually during the same period.

Loeb is "one of the most successful hedge fund managers of his generation," according to The Wall Street Journal . And while Third Point underperformed in 2022 and 2023, its long-term outperformance makes Loeb a good case study for investors.

Loeb has compared artificial intelligence (AI) to disruptive technologies like the internet and smartphones, and AI a prevalent theme in his investments. Somewhat surprisingly, Third Point does not have a position in Nvidia , but it did have 23.1% of $8.7 billion portfolio invested in three AI stocks as of June:

• Amazon ( AMZN 1.08% ) : 11%
• Microsoft ( MSFT 0.88% ) : 8.1%
• Taiwan Semiconductor ( TSM -1.02% ) : 4%.

Here's what investors should know.

Amazon: 11% of Dan Loeb's portfolio

Amazon operates the largest e-commerce marketplace in North America and Western Europe. The company has used the scope of its retail business to secure a strong presence in digital advertising. But its greatest opportunity to make money on artificial intelligence (AI) lies in its cloud computing business, Amazon Web Services (AWS).

AWS is the leader in cloud infrastructure and platform services, and its market share increased one percentage point between the first and second quarters of 2024. That scale means AWS is uniquely positioned to benefit from AI simply because it already has such a large customer base, and they are more likely to lean on AWS for AI services when/if the need arises as opposed to working with a new cloud provider.

AWS has also extended its ability to monetize AI with new products like coding assistant Amazon Q and generative AI development platform Amazon Bedrock . CEO Andy Jassy recently told analysts, "Our AI business continues to grow dramatically with a multibillion-dollar revenue run rate despite it being such early days."

Looking ahead, Wall Street expects Amazon's earnings to increase at 25% annually through 2025. That makes the current valuation of 44 times earnings look tolerable. I think that's a reasonable entry point for patient investors, and I would feel comfortable buying a small position in this stock today.

Microsoft: 8.4% of Dan Loeb's portfolio

Microsoft is monetizing AI across its software and cloud businesses. New generative AI copilots for its business productivity and enterprise resource planning platforms are gaining traction. The number of workers that use Copilot for Microsoft 365 daily nearly doubled in the most recent quarter, and the total number of customers increased more than 60%.

Microsoft Azure is steadily gaining share in cloud services because of strength in cybersecurity, analytics, and artificial intelligence. Its partnership with OpenAI has been instrumental in attracting new customers. Azure is the only public cloud that allows developers to build generative AI applications with the large language models that power ChatGPT .

Loeb wrote in a recent investor letter, "This new technology favors incumbents who are deploying their financial and intellectual war chests to win the AI arms race. Right now, what we see as the best-run 'legacy' companies like Microsoft and Amazon (both of which we own) have built enormous competitive advantages and seen their growth vectors accelerate."

Wall Street expects Microsoft's earnings to grow at 13% annually through fiscal 2026 (ends June 2026). That makes the current valuation of 36 times earnings look rather expensive. I think Microsoft is a well-managed company with compelling growth prospects, but I would avoid the stock at its current price.

Taiwan Semiconductor: 4% of Dan Loeb's portfolio

Taiwan Semiconductor Manufacturing Company, or TSMC, is the leading semiconductor foundry as measured by revenue. That gives the company an important advantage in a capital-intensive industry. TSMC's ability to outspend peers on R&D keeps it on the cutting edge of semiconductor manufacturing technology, sometimes called process technology.

Phelix Lex at Morningstar highlighted that advantage in a recent note. To paraphrase his commentary: Process technology leadership means TSMC is consistently improving chip PPA (power, performance, and area), cost per chip, and time to market, all of which are essential for computing devices to be competitive. It also lets TSMC charge higher prices than its peers.

TSMC's process technology leadership has also won the company high-profile customers like Apple , AMD , Nvidia, Qualcomm , and Broadcom , which itself designs custom semiconductors for Alphabet 's Google and Meta Platforms . All of those companies are spending heavily on artificial intelligence, which benefits TSMC.

Dan Loeb explained his investment thesis in a recent investor letter:

"Google was the first mover to custom accelerators with the TPU almost 10 years ago, and today this is already a multi-billion dollar business for TSMC. Amazon, Microsoft, and Meta have all followed Google's lead and have announced (and in Amazon's case already mass producing) their own chips. As these products scale, we see TSMC's AI revenue growing by multiples in the coming years."

Looking ahead, Wall Street expects TSMC to grow earnings at 29% annually through 2025. That makes the current valuation of 31 times earnings look reasonable. I would feel comfortable buying a small position in this stock today.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .

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Is Broadcom Inc. (AVGO) the Best Automation Stock to Buy Now?

In this article:.

We recently published a list of 10 Best Automation Stocks to Buy Now . In this article, we are going to take a look at where Broadcom Inc. (NASDAQ:AVGO) stands against the other automation stocks.

2023 was the year of generative AI, mainly because of the widespread adoption of ChatGPT and the resulting response that followed. Now, 2024 is the year in which companies have truly started using this ever-evolving technology. McKinsey revealed that AI supported the companies in both aspects: cost decreases and revenue jumps.

Automation Technologies- Key Trends

In 2024, the integration of automation technologies continues to revolutionize every aspect of supply chain management. This led to unprecedented levels of efficiency and agility. The global integrated automated supply chain is expected to reach US$25.6 billion by 2033, from US$13.4 billion in 2023, according to industry data by Market.us.

From removing warehousing bottlenecks to inventory management and demand forecasting, supply chain automation reshaped traditional practices and redefined the dynamics of the logistics industry.  In inventory tracking, advanced warehouse management systems, which are powered by AI and ML algorithms, focus on optimizing inventory placement, route planning, resource allocation, etc.

Inventory tracking and management are being revolutionized through the usage of automation solutions, such as RFID tagging, barcode scanning, and computer vision. Real-time tracking technologies are offering granular visibility in inventory movements. This allows businesses to monitor stock levels, spot discrepancies, and manage understocking/overstocking. Manufacturers are now getting inclined towards smart factories.

Smart factories reflect and demonstrate Industry 4.0 principles. They tend to leverage 5G, IoT, AI, and other advanced technologies. Experts believe that smart factories allow predictive maintenance and decision-making.

Adoption of Advanced Automation

A new theme is emerging in the field of automation, which is automated decision-making. Its adoption rapidly expanded beyond traditional sectors such as manufacturing and logistics. Demand for decision intelligence stems from data-driven and well-informed decision-making requirements which enhances corporate competitiveness and efficiency.

Automated decision-making is now being accepted by critical domains including healthcare and finance. In healthcare, automation supplements the clinical decision-making processes, improves patient-care delivery, and manages resource allocation. It involves leveraging AI and ML algorithms to assess patient data, medical images, and genomic sequences, and customize patient care.

Likewise, in finance, automated systems continue to reshape top-notch operations like risk assessment, fraud detection, and investment management. AI algorithms assess large datasets of financial transactions and market trends to optimize investment strategies. In 2024, the software development industry is all set to embark on a remarkable transformation with cutting-edge innovations.

Quantum Computing and Robotics

The latest technologies in software that are expected to reshape the landscape include quantum computing, virtual reality (VR), augmented reality (AR),   big data, data analytics, 5G technology, robotics, etc.

Quantum computing continues to rapidly advance, evolve, and reshape scientific and industrial landscapes. Unlike classical computers—which use bits as the smallest information unit—quantum computers make use of qubits. These exploit quantum mechanics principles to perform complex and difficult calculations. For example, at the time of drug discovery, quantum algorithms simulate molecular interactions in a more accurate and refined way as compared to traditional methods. The integration of quantum computing with AI is another critical emerging trend.

The unprecedented advancements in robotics and AI are expected to bring revolutionary positive transformations. More and more sectors continue to understand the benefits of adopting robotics and AI. Globally, the robotics market should achieve healthy revenue growth, with a projected value of US$38.24 billion this year. The strongest segment in the robotics market is expected to be service robotics, which should lead in market volume. Service robotics find its application in sectors, like Healthcare, Medical, Military and Defense, Logistics, etc. while industrial robots are used in Automotive, Electronics, Food & Beverage, etc.

The trends driving the robotics market are supported by developments in emerging technologies. These include 5G, AI, Edge Computing, IIoT, cloud, open-source, etc. Since AI in robotics continues to evolve, more and more industries are exploiting the latest technologies. Therefore, manufacturers are making data-driven decisions. Some industries use self-learning robots to execute work processes.

Smart factories are using AI-enabled robotics to execute smarter, reliable, and efficient processes. They help in production optimization. AI-powered robotic technologies, which include computer vision and tactile sensing, are utilized to help automate certain tasks. For example, reinforcement learning is used for better industrial assembly. The adoption of robotics, smart automation, and high-tech manufacturing will help workers with manual labor and reduce repetitive tasks.

At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points  ( see more details here ) .

A technician working at a magnified microscope, developing a new integrated circuit.

Broadcom Inc. (NASDAQ: AVGO )

Average Upside Potential: 34.90%

Broadcom Inc. (NASDAQ:AVGO) develops connected devices and Internet infrastructure, ranging from physical optic fiber to antennas, semiconductors, and software. The company remains active across the infrastructural, industrial, and enterprise-level connectivity sectors.

Therefore, it has a presence at every level of IoT, from homes or factories to data centers. Ever since the company has acquired VMware, Broadcom Inc. (NASDAQ:AVGO) solidified its position as the market leader in the hybrid cloud management space. VMware is joining SEW-EURODRIVE, who is the a leader in drive automation solutions, to lead the transition to new era of software-defined manufacturing with SEW-EURODRIVE’s DriveOperations concept. This concept focuses on enhancing operational capabilities, reducing costs, and managing complex tasks more effectively.

The company, known for its diverse technological services and acquisition strategy, expects to see an increase in chip demand, courtesy of the ever-evolving field of generative AI. Given its recent acquisition of VMware, it has strengthened its product offerings. This is true mainly for custom and networking chips, which should see healthy growth because of AI advancements.

Wall Street analysts applauded the dominant position of the company in critical chip markets. These analysts are optimistic about the potential of VMware’s subscription-based growth. The stock of Broadcom Inc. (NASDAQ:AVGO) has seen a run-up of over ~70% in 1 year, thanks to a robust AI growth environment and integration of VMware. The stock now trades at ~24.63x its forward earnings, which is still at a discount to the sectoral average of ~32.2x.

The company released its 2Q 2024 results, where revenues came at $12,487 million, showcasing an increase of ~43% YoY. Its GAAP net income came in at $2,121 million and its non-GAAP net income was $5,394 million. Much of this improvement was driven by AI demand and VMware. The revenue from its AI products was $3.1 billion in 2Q 2024, a record for Broadcom Inc. (NASDAQ:AVGO). The infrastructure software revenue picked up pace as more enterprises adopted the VMware software stack so that they could build their private clouds.

Wells Fargo & Company raised its price objective on the shares of Broadcom Inc. (NASDAQ:AVGO) from $143.00 to $170.00, giving an “Equal-weight” rating on 13 th  June. It was held by 115 hedge funds in Q1 2024, with total stakes worth $14.7 billion.

Aristotle Atlantic Partners, LLC , an investment advisor, released its second quarter 2024 investor letter.  Here  is what the fund said:

“Broadcom Inc. (NASDAQ:AVGO) is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. The company strategically focuses its research and development resources to address niche opportunities in target markets and leverage its extensive portfolio of U.S. and other patents and other intellectual property to integrate multiple technologies and create system-on-chip component and software solutions that target growth opportunities. Broadcom designs products and software that deliver high performance and provide mission-critical functionality. The company has a history of innovation in the semiconductor industry and offers thousands of products that are used in end products such as enterprise and data center networking, home connectivity, “set-top boxes broadband access”, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom differentiates itself through its high-performance design and integration capabilities and focuses on developing products for target markets where it believes it can earn attractive margins.

Overall, AVGO ranks 4th on our list of best automation stocks to buy. While we acknowledge the potential of AVGO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AVGO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock .

READ NEXT:   $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley  and  Jim Cramer Says NVIDIA ‘Has Become A Wasteland’ .

Disclosure: None. This article is originally published at  Insider Monkey .

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Four Signs It's Time to Sell a Stock

There's plenty of advice out there on when to buy a particular stock, but developing a strategy for holding or selling an investment is equally important.

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When it comes to investing, much of the focus is often placed on finding the right stocks to buy. However, knowing when and why to sell a stock is just as critical to achieving long-term financial success.

A well-thought-out strategy for selling investments can help you optimize your portfolio , minimize risks and ensure your financial goals remain on track.

Here are four factors that an investor should consider when determining “when” and “why” it’s time to sell a stock.

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1. Your investment thesis has changed.

As all good investors do, you bought each stock in your portfolio after performing your due diligence, weighing the pros and cons and evaluating the potential upsides. Has that view changed for one or more of them?

Many factors can drive a change in your investment thesis, so keep watch on the company’s fundamentals. Maybe the company has lost its competitive advantage, maybe demand for its products is waning, maybe it is being acquired, etc. The list goes on.

If the upside from your original thesis looks to be slowing or has disappeared altogether, it’s likely that stock is a candidate for selling so you can redeploy that capital into a different investment.

2. Opportunities look brighter elsewhere.

Every time you invest in a stock, you're making a choice that excludes other investment opportunities. This choice represents an opportunity cost, or the potential benefits you miss by choosing one stock over another. As you evaluate your current holding, consider whether its future prospects remain compelling enough to continue forgoing other promising investments.

Given that your investment capital is limited, even a well-performing stock might not be the optimal use of your cash if better opportunities arise elsewhere. If your current investment’s outlook starts to fade in comparison to alternative options, it might be wise to sell and reallocate your capital to where it can work harder for you.

3. You need access to your capital.

The whole point of having an investment portfolio is to build wealth so that in the future it will be available to provide cash when you need it. If that time has come (or will arrive soon), and you need more cash than is available in your checking account and other liquid assets, it could be time to sell.

It’s generally not a good idea to invest in the stock market with money you expect to need in the next year or two. Being forced to sell in a down market to raise cash is not a fun experience. Sell on terms dictated by you, not the market.

4. Market conditions are causing you to lose sleep.

For the long-term investor, I don’t consider market volatility a good reason to sell stocks. I do believe, however, that volatility combined with your temperament needs to be considered in your dynamic financial plan .

Are you comfortable with your level of stock market exposure? What if the market were to drop 20%? If the decline would create anxiety and keep you up at night, then you likely have too much of your portfolio in stocks. Whether this overallocation is a result of strong stock returns or simply putting too much new money into stocks, you should revisit your overall plan and, if you so choose, rebalance your portfolio by selling some of your stock allocations.

There is some wisdom in the investing adage “sell down to the sleeping point,” especially if you are in or near retirement .

Selling winners or losers?

If after completing your diligence and financial plan review, you determine you need to sell some stocks, but none in particular stands out, how do you choose which ones to ax?

Here’s a shortcut you have likely heard or followed in the past: “I’m not happy with this stock’s performance. It’s a loser, so I’m going to sell it.” It’s an easy decision, but not necessarily the best one.

When we label a stock as either a “winner” or a “loser,” we make that determination based on the investment’s past performance. But as we know from the ubiquitous disclaimer: Past performance is not a guarantee of future results.

It’s helpful to shift your perspective. Rather than evaluating based on past performance, layer on its prospects for delivering results going forward. How we got to today’s stock price is important, but where its value is going is what matters most.

You’ll want to stick with the ones with the most upside potential, regardless of their label as a winner-to-date or loser-to-date. Those with less potential going forward are your candidates for selling.

Keep this in mind

A few words of caution: You should never sell a stock without first considering the tax ramifications of the proposed sale. Never make buy or sell decisions in a vacuum.

Selling a stock is a significant decision that requires careful consideration of various factors, from your need for liquidity to changes in your investment thesis. By approaching the sale of stock with the same diligence and strategic thinking as you use when making a purchase, you can ensure that your actions align with your goals and financial plan.

Remember, the decision to sell should be informed by where the stock is likely headed, not just where it’s been. Ultimately, a well-planned approach to selling stocks can help you maintain a balanced, resilient portfolio that supports your journey to financial independence .

As always, invest often and wisely. Thank you for reading.

This article is for informational purposes only. It is not intended to be, nor should it be construed as, legal, tax, investment, financial or other advice.

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• Goals-Based Retirement Planning Is All About You
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA .

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Cosmo P. DeStefano is a retired CPA and tax partner who spent over three decades with one of the largest professional services firms in the world, PricewaterhouseCoopers. He has consulted with clients big and small, public and private, across a wide variety of industries, helping them solve intricately complex business and financial issues. Cosmo is also an award-winning author. His book “Wealth Your Way: A Simple Path To Financial Freedom” has garnered numerous accolades.

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Broadcom: A 20:1 Stock Split Is Quite Likely

• Broadcom's high stock price (currently $1060.24/share) has surged 90%+ this year. As a result, a 20:1 stock-split is quite likely in the near future.
• Stock splits in-and-of themselves are no panacea. After all, if I give you a $5 bill and you hand me five $1's back, I am no better off.
• However, stock splits do have emotional value and also enable small investors to more easily scale-into full positions.
• In my opinion, Broadcom's strong Q4 earnings report, its excellent free-cash-flow profile, and the VMware acquisition make a stock split even more likely.
• Meantime, Broadcom continues to be one of the best dividend growth stocks in the entire S&P500 with a 14% increase in the quarterly dividend to $5.25/share, or $21 on an annual basis.

Broadcom ( NASDAQ: AVGO ), long one of my favorite technology stocks, has been on a tremendous bull-run this year: +91.6% YTD. The company recently completed its long-awaited takeover of VMware and also released a very solid Q4 earnings report. At pixel-time the stock was

This article was written by

Analyst’s Disclosure: I/we have a beneficial long position in the shares of AVGO, AMZN, GOOG, VOO, QQQ, DIA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I am an electronics engineer, not a CFA. The information and data presented in this article were obtained from company documents and/or sources believed to be reliable, but have not been independently verified. Therefore, the author cannot guarantee their accuracy. Please do your own research and contact a qualified investment advisor. I am not responsible for the investment decisions you make.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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