As the Year Comes to a Close, Consider Selling These 5 Stocks
With the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all posting significant gains this year, it’s essential to take a step back and reassess your portfolio. As we head into a new year, it’s crucial to identify stocks that may be due for a correction.
Palantir Technologies: A Data-Mining Giant with Limited Growth Potential
Palantir Technologies has seen its shares skyrocket 380% year-to-date, but its parabolic climb may soon come to an end. While its Gotham and Foundry platforms have limited competition, the addressable market for its profit-driving Gotham platform is capped. Additionally, a significant portion of its net income comes from interest income earned from its cash, which is unsustainable. With a valuation of 75 times trailing-12-month sales, it’s time to consider selling.
Nvidia: The AI Kingpin Faces Increasing Competition
Nvidia has added close to $3.1 trillion in market value since the start of 2023, but its dominance in the AI-accelerated data center space is being challenged. History has shown that market leaders in next-big-thing innovations often experience a bubble-bursting event, and AI may be no exception. With competition from Advanced Micro Devices and customers developing their own AI chips, Nvidia’s pricing power may be at risk.
Tesla: An Electric Vehicle Manufacturer with Profitability Concerns
Tesla’s shares have surged 86% year-to-date, but its core profit segment, EV production, has seen margins decline. The company’s income quality is also suspect, with over 50% of its pre-tax income coming from unsustainable sources. Additionally, CEO Elon Musk’s tendency to overpromise and underdeliver may lead to a valuation correction.
Apple: A Growth Stock No More
Apple is on the cusp of reaching a $4 trillion valuation mark, but its growth engine has stalled. While Services revenue has been growing, it only accounts for a quarter of Apple’s net sales. The company’s physical device revenue has been flat or trending lower, making its price-to-earnings ratio of over 42 seem unjustified.
MicroStrategy: A Bitcoin Proxy with a Questionable Valuation
MicroStrategy’s shares have skyrocketed 468% year-to-date, but its valuation premium is hard to justify. The company’s Bitcoin portfolio is worth $43.75 billion, yet its market cap is $87.7 billion, implying a 100% premium. With a history of leveraging convertible debt to purchase Bitcoin and a prospectus seeking to increase its share count, MicroStrategy’s shareholders may be in for a rude awakening.
Remember, it’s essential to stay vigilant and adapt to changing market conditions. Consider reassessing your portfolio and taking profits on these seemingly unstoppable stocks before it’s too late.
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