The stock market has been on a red-hot run over the past year. The S&P 500 has rallied more than 20% and was recently at an all-time high. Meanwhile, the tech-heavy Nasdaq Composite has surged over 35%.
The current bull market rally could have a long way to go. However, bull runs typically take a breather every now and again. Because of that, I’ve been strategically stockpiling cash to go shopping when the next sell-off occurs. Broadcom (AVGO -2.04%), Blackstone (BX 0.88%), and Palo Alto Networks (PANW 0.66%) are three top stocks that I’d love to buy at a lower price the next time the bull market takes a breather.
A transformational year ahead for this semiconductor and software giant
Broadcom has gone on a blistering run over the past year, rallying more than 110%. Two catalysts have powered that surge: Artificial Intelligence (AI) and its acquisition of VMware.
The semiconductor and software company’s revenue rose 8% last year to a record $35.8 billion on the back of “investments in accelerators and network connectivity for AI by hyperscalers (i.e., data centers),” said CEO Hock Tan in the fourth-quarter earnings report. Meanwhile, earnings grew even faster (13%) while its free cash flow increased by over $1.3 billion to more than $17.6 billion. That enabled Broadcom to increase its dividend by 14%, its 13th straight year of dividend growth.
Growth this year will be even stronger. The company expects its transformational VMware deal to boost its revenue by 40% while also helping drive strong earnings and free-cash-flow growth. Meanwhile, the company anticipates solid semiconductor growth powered by AI.
I’d love to add more of this supercharged growth stock to my portfolio. However, I’d rather wait to see if it cools off following last year’s blistering surge before boosting my position.
A fast-growing cybersecurity leader
Palo Alto Networks has also been on fire over the past year. Shares of the cybersecurity company have skyrocketed 120%. The catalyst: “An unprecedented level of attacks is fueling strong demand in the cybersecurity market,” said CEO Nikesh Arora in the company’s fiscal first-quarter earnings report in mid-November. That’s driving robust growth for Palo Alto.
The cybersecurity company’s revenue surged 20% in its fiscal first quarter. Meanwhile, improving margins helped drive a more than 60% increase in its earnings. The company also produced record cash flow, including growing its adjusted free cash flow by 20% to nearly $1.5 billion.
Palo Alto’s strong showing gave it the confidence to boost its full-year guidance for several key metrics. Meanwhile, the company is using its growing cash flow to make acquisitions (Talon Cyber Security and Dig Security) to enhance its ability to capitalize on the evolving needs of the cybersecurity market. For example, the Dig deal will enable the company to provide customers with a comprehensive cloud data security solution for generative AI.
While I’d love to increase my Palo Alto position, I’m waiting for shares to decline a bit after their red-hot run.
The leading alternative asset manager is starting to turn things around
Shares of Blackstone have surged about 40% over the past year. The leading alternative asset manager has risen on growing optimism that market conditions are improving.
The company showed evidence of that in its recent fourth-quarter results. Blackstone’s net realizations were up 16% in the period, a notable improvement considering they were down 58% for the full year. That helped drive a 4% increase in the quarter in its distributable earnings, which ended the year down 24%.
Blackstone also saw strong inflows of $52.7 billion for the quarter, pushing its 2023 total to $148.5 billion. It only deployed about half that amount on new investments, ending the year with over $200 billion in dry powder. That puts the company in a very strong position to capitalize on investment opportunities this year.
Like Blackstone, I have a lot of dry powder that I’m waiting to deploy on the right opportunity. One I’d love to see emerge is another chance to buy more shares of Blackstone during a market-driven sell-off that pushes its share price down.
Waiting for the bull to pull back a bit
The bull market in stocks has sent shares of many companies soaring, including Broadcom, Palo Alto Networks, and Blackstone. Those stocks have run up past the point where I’d buy more. However, I would love to add to my positions in these top stocks if they come down a bit.
Matthew DiLallo has positions in Blackstone, Broadcom, and Palo Alto Networks. The Motley Fool has positions in and recommends Blackstone and Palo Alto Networks. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
