Motley Fool Hidden Gems Investing - Our Stock Market Naughty and Nice List

Episode Date: December 24, 2025

We’re making a list and checking it twice. There have been nice companies and great CEOs in 2025 but there have also been some duds. We discuss the stocks on each list and end with going shopping for stocks we want to buy in 2026. Travis Hoium, Lou Whiteman, and Rachel Warren discuss: - Stocks on our “Nice List” - Stocks on our “Naughty List” - Discount stocks we’re shopping for after the holidays Companies discussed: Mercado Libre (MELI), Alphabet (GOOG, GOOGL), Rocket Lab (RKLB), NVIDIA (NVDA), TJX Companies (TJX), Klarna (KLAR), Fiserve (FI), Target (TGT), Starbucks (SBUX). Eli Lilly (LLY), Pfizer (PFE), Walmart (WMT), Costco (COST), and Lululemon (LULU). Host: Travis Hoium Guests: Lou Whiteman, Rachel Warren Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

What stocks are on our naughty and nice list in 2025? Motley Fool Money starts now. Welcome to Motley Fool Money. I'm Travis Hoyum, joined by Lou Whiteman and Rachel Warren. Santa is already starting to deliver presents this year, so we thought it'd be fun to talk about some stocks on our nice list and our naughty list. Lou, I want to start on the nice side. What stocks or executives are on your nice list when you look back at 2025? It pains me to do this because I am so bored of just leaning into the mag seven,

but here I go. I am going to be my own worst enemy. Tops on my nice list, it's Alphabet. I can't help myself. Who would have thought that coming into the year? Well, that's it exactly. With the narrative coming into 2025 was they were on the naughty list. A lot of worries about open AI and other AI innovations just destroying that search business. How'd that play out? So much for that narrative, right? They are coming out of this year. I mean, look, stock's up almost 70%. That's the best return among the Mag7. They are the biggest name in autonomous, the biggest name in streaming, no offense, Netflix. And increasingly, Gemini looks the big winner here. I guess all of the search issues aren't completely answered, but there is

at least a compelling answer to what becomes of this business. And it is very, very nice, I think shareholders would say. What else? In the AI space, you got to think, especially if you're looking at Mag7, NVIDIA has still had a really good year after just being on an absolute tear. It's almost a value stock now. Right. So, Santa is not going to criticize someone for just doing what they were supposed to, I don't think. Santa, that is like sometimes just be a good boy, Johnny. That's all you're asked to do. NVIDIA, they didn't surprise anyone. They weren't like the turnaround story, but look, they went out and did exactly what the Bulls would hope. Again, very, very nice. There is some more speculative stuff, too, if you want to get to it.

I don't want to just do the Mag7. Well, what executives are on your nice list? Because we have talked about a couple of stocks, but there are some pretty interesting leaders this year. I'm going to go straight to one of my favorite CEOs, Sir Peter Beck, the CEO of Rocket Lab. Rocket Lab has had a heck of a year. It's a double for 2025. What I love about it, I first bought into this company because I love just the engineer's mindset that almost, not block out the public markets. You're a publicly traded CEO, you have to care. But don't let investor excitement change your timetable. Stick to building the company you want to build. I haven't seen him change his long-term vision in any way. He is tops on my

CEO nice list. And May 2026 and on, may there just be more goodness coming out of this company. All right, Rachel, who's on your nice list this year? I've got a few stocks on my nice list this year. I mean, there's so many, but a few that stand out, MercadoLibre is one. I mean, this is the leading e-commerce and fintech giant in Latin America. I mean, this is a region where both digital commerce and financial services are still really heavily underpenetrated compared to other regions. They have a really expansive and impressive growth runway as adoption increases there. They have an incredible history of consistent and rapid revenue growth, 27 consecutive quarters of 30% or more year-over-year revenue

growth. And MercadoLibre, they're continuing to expand their logistics network. They're leveraging the power of AI to drive efficiency. Just a fantastic and well-run business. Switching to a completely different sector, retail, right? Not the most loved space this year, to be sure. A lot of retail losers this year. There's been a lot of retail losers this year. A few of them are on my naughty list. But TJX Companies is on the nice list, right? The parent company of TJ Maxx and Marshalls. They're an off-price retailer. They've had a really resilient business model. Their smart buying strategies have paid off. And it's interesting because we've seen that that off-price treasure hunt model that they deploy tends to really thrive in various economic

conditions. They've been a really smart buyer of goods. They've been really efficient at sourcing and moving their inventory around. So, that's one in the retail space. Finally, Klarna in the buy-now-pay-later industry, right? The fintech company, they recently went public in the U.S. They're gaining significant market share. They've got newly launched partnerships with major retailers like Walmart and eBay. And beyond being a traditional buy-now-pay-later business, they operate as a digital bank in Europe. So really fascinating company and one that I think investors should watch going into the new year. Do you think buy-now-pay-later is going to be one of the big pieces of the future of retail? Or is this kind of a fad that is popular right now,

but maybe we'll look back and say that buying your groceries from Walmart on buy-now-pay-later or maybe not a great idea? I don't think it's a fad. I don't think it's going anywhere. I think this is going to be one of many tools in the consumer's toolkit. I mean, there's probably a different discussion to be had about how wise that can be from a fiscal perspective, depending on what purchases it's being used for. But I think it's also proven to be a meaningful tool for a lot of consumers to spread out the financial impact of big purchases. And like it or not, in difficult macro environments, I think we see usage of those tools increase even more. So I don't think that's going anywhere. When we come back, we're going to talk about some stocks on our naughty list.

You're listening to Motley Fool Money. things usually get worse before they get better. Apparently, that's how I roll. So bundle up and come along for the bumpy ride. Stream a new episode of North of North Tuesdays on CBC Gem. Welcome back to Motley Fool Money. We've talked about the stocks on our nice list, but we also have a naughty list here. Lou, who hasn't been so good this year in the stock market? Yeah, so we checked our list, checked it twice. And first off, we got to go to Washington and we've got to go to antitrust regulators. They were naughty. The best thing, though, as we tell our kids, if you're naughty, you have to see the consequences. They saw high-profile

defeats in big tech cases. Alphabet, looking at you, anything to say about them? Also, look at what happened this year with some of the companies that they blocked big deals, and what became of those companies. This whole preserve competition, shout out to Spirit Airlines. They were unable to be acquired by JetBlue. They did the coveted Chapter 22 this year, Travis. That's two separate Chapter 11 filings. Great job there, regulators. iRobot, remember? Remember when they wanted to sell to Amazon? I remember that. They were supposed to be the future of robotics. Right. Apparently, they were. We can't let Amazon own that. They ended up liquidated to their Chinese vendor. The idea there was Amazon can't have the data,

but now China has it. So, maybe not a great win. Yeah. Great year. Expect that coal in your stockings. A couple others, if you want, though, like with companies, Fiserv, ticker FI, they're down 65% year-to-date. I mean, Travis, I still don't know what to make in payments. I don't know who the big winners are. But the market decided that the Clover Terminal, Fiserv's big product, that's not going to be the big winner. Extra points for when your business decisions end up the target of congressional inquiries. That's going to be on the naughty list. I'll tell you the one that I didn't want to put on there, and I talked to the big man personally about this because it looks like it, but the Trade Desk. Trade Desk lost two-thirds of its value this year.

That should qualify for naughty. I still believe in the company, but I'll say this, they have a lot of work to do to stay off of the naughty list in 2026. Rachel, who is on your naughty list? Lou's on fire there. You've got some pressure following that up. I know. I think it goes without saying that there's a lot of consumer goods stocks that are on the naughty list this year. I had a lot of choices to pick from, but I went with Target and Starbucks. Both of these companies, their stocks have seen significant declines this year. Target shares are down about 30% year-to-date. Last I checked, Starbucks is down in the single digits. But, you know, this is a myriad of issues here, right? You have a situation where high

inflation is making a lot of consumers more price sensitive. They're cutting back on non-essential purchases. This has hit Target particularly hard. About half of their sales come from discretionary items. They've been lagging way behind the performance of companies like Costco and Walmart. Then you've got Starbucks. Of course, they're selling kind of expensive, non-essential drinks. That's an easy area for consumers to cut back in a difficult environment. for some people. Coffee is not essential. I mean, I don't want to tell you to make your coffee at home, Lou. But the other thing is, there are issues that are very specific to these companies. It's not just a macro element. Target, they've been facing declining in-store traffic for

multiple quarters now. There's been a lot of customer backlash over their reversal on certain initiatives. They've had inventory issues. Starbucks is obviously famously navigating a multi-year turnaround plan under their newer CEO. They've been facing a lot of margin pressure, competitive pressure in core big markets like China, which is their second largest market outside of the U.S. So there's a lot of issues afflicting these businesses. They're losing market share. Can they make a turnaround in 2026? I would be looking more for a turnaround going into 2027, if I'm being honest. But certainly, I think both these companies get some coal in their stocking this year. When we come back, we are going to go

holiday shopping, what are we going to be buying? We'll talk about that next. You're listening to Motley Fool Money. New from Nespresso. Blend wellness into your coffee routine with the Coffee Plus range, infused with functional benefits. Choose the coffee you love with added B vitamins, like Coffee Plus B12 to help support immune function and Coffee Plus B6 to keep your day moving. Or go with the flow and choose Ginseng Delight, our new double espresso with ginseng extract. Whatever lies ahead, don't change your morning. Let your morning change you. Discover Coffee Plus on Nespresso.com. Welcome back to Motley Fool Money. As the holidays come to an end, we finally get to go shopping for the things we really wanted. Maybe didn't come under

the Christmas tree. So Rachel, what are you shopping for from an investment standpoint going into 2026? Well, I mean, you guys know healthcare is a huge area of focus for me as a stock analyst here at The Fool. Eli Lilly, Pfizer, those are a couple of healthcare companies that I'm looking at. But there's a few retailers, right? Walmart, Costco, Lululemon, looking a bit undervalued as well as attractive in the retail space. I have to agree with Lou. I think Alphabet is looking like a really compelling buy right now. I say this as an existing and longtime shareholder of the business. But I do think it's important to also note, when we're really identifying an undervalued stock, to differentiate that from a value trap, you've got to look beyond those

low valuation metrics. A lot of these undervalued stocks, they might be mispriced due to short-term issues. Value traps, on the other hand, tend to be cheap for a good reason. If you're looking for a truly undervalued business, you need to look for consistent and growing revenue, stable profit margins, positive cash flow, a sustainable moat and competitive advantage that protects the market position. Really key to differentiate between that versus stocks that maybe appear inexpensive based on traditional metrics, but are fundamentally struggling. A couple of those, Walmart and Costco, do look pretty expensive. Especially if the consumer starts to pull back. We haven't had a true recession for quite a while. It's possible

that happens in 2026. I think that they have their own durable competitive advantages for different reasons. For Walmart's part, about 60% of their revenue comes from grocery sales, which is obviously a non-discretionary expense. Costco makes most of their profits. Maybe less discretionary than coffee. Less discretionary than coffee, right. Costco, on the other hand, they make most of their profits from those membership dues, which has been something that's really enabled them to succeed in so many different macro environments. So, I like both these businesses going into the new year. All right, Lou, what are you shopping for? I'm glad you're qualified to have a stock,

so I don't go talk about the Lego Saturn rocket for just hours because that looks so cool. But look, two kind of themes that I'm looking for heading into 2026. First of all, and I've been saying this for a while, I think it's still true. There are so many opportunities right now in financials and REITs and other areas that have kind of just been ignored. We're all focused on AI. Interest rates are coming down. That tends to help these sectors. Yes, there's economic risk, but especially with the financial, especially the banks, that tends to just pull everyone down together, which creates real, real opportunities to buy high-quality companies on the cheap. I'm definitely looking at that. Secondly, if the economy does falter, I am going to lean into that

and look really hard at some riskier, smaller stocks. It's not going to play out quickly, and it could end in some disasters. But areas like space, automation, where I think there are real long-term trends, I'm going to lean in, maybe buy some of the better companies, knowing there could be some zeros, but I think that's where you find the big winners there. If we do have a market pullback, are you just looking at that as, hey, I want to have a little cash sitting around waiting so if a Rocket Lab goes on sale, if a Palantir goes on sale, I'm just talking about some very popular names, but there's a bunch of stocks here that have just absolutely gone crazy. Maybe valuations are stretched. If we do go through a down market, sometimes those stocks get hit harder

than anything else. And that's where the real opportunity is. Is that how you're thinking about the market if we do have a pullback? Yeah, I don't tend to have cash on the sidelines. I have cash and then I have equities and I just kind of buy with, you know, money I'm putting into equities. But so not really waiting for that. It's hard to time. But yes, definitely. I think I mean, downturns are the best time to buy if you're a long term holder. And so if we do see that this year. I'm curious about what might be out there one sale. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal

finance content follows The Motley Fool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For Lou Whiteman, Rachel Warren, Dan Boyd, Behind the Glass, I'm Travis Hoyum. Thanks for listening to Motley Fool Money. We'll see you on Friday.