Motley Fool Hidden Gems Investing - Three Stocks for a Tougher Economy

Episode Date: February 17, 2026

In today’s episode of Motley Fool Money, host Emily Flippen is joined by analysts Sanmeet Deo and Dan Caplinger as each gives a stock pick they think can outperform in a “worst case” economic environment of rising inflation, lower-than-expected rate cuts, and slowing economic growth. - Dan argues that Dollar General can keep delivering value to consumers - Sanmeet introduces us to a company that is “fitting” into the mold - Emily wraps up with a pitch for a pest-control parent company Companies discussed: PLNT, DG, ROL Host: Emily Flippen, Dan Caplinger, Sanmeet Deo Producer: Anand Chokkavelu 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

Emily Flippen. The macro picture is looking tough, but that won't prevent us from looking for diamonds in the rough. We're diving into three stocks we think can do well in a worst case economic environment today on Motley Fool Money. Today is Tuesday, February 17th. Welcome to Motley Fool Money. I'm your host, Emily Flippen. And today I'm joined by Fool analyst Stan Kaplinger and Sam Miteo for a fun chat where we're going to each be giving a theoretical stock pitch for a business that we think can do well in a tough economic environment. We had a few macro reports out last week that showed while the sky is not falling on us, the picture is maybe getting a bit murkier. I think it's that combination of labor numbers, jobless games, unemployment.

It led many to believe that we might be looking at maybe slightly higher interest rates for longer into the year than many expected and some maybe stickier inflation numbers to boot. So in my opinion, it begs the question of if there are really any businesses that we think can do well if we're heading for an environment of, say, higher inflation, less rate cuts, and slower economic growth. Traditionally, that combination isn't great for markets, but sometimes there are exceptions to the rule. So I want to ask you, is there a business that you think is breaking the mold today that's worth keeping an eye on if we're headed towards that type of environment? Yeah. Well, if anyone knows me, they know I like to observe the world and find stock picks that

I recently joined a local Planet Fitness, a brand new one that opened in my neighborhood. I was pleasantly surprised. I will say I have had a little bit of a bias against it in the past, but I kept an open mind. I was surprised with the affordability. It was clean and organized. Obviously, it was newer, so that helped. They also have some fun perks if you're a Blackheart member with massage chairs and red light therapy and drink discounts and stuff. Pretty good deal there. I think Planet Fitness is a good trade-down winner if inflation stays sticky and rates stay higher for longer because people cut big luxuries, but often keep affordable habits. So, you know, planet fitness ended the 2025 with about 20.8 million members across just

under 2,900 clubs while still growing same, same system wide, same club sales at 6.7% and opening 181 new clubs. So, and we've seen this model work in other similar environments In 2018, with late cycle rising rates, Planet Fitness delivered 10.2% system-wide same-store sales, opened 230 new stores. In 2023 to 2024, with those aggressive rate hikes, they still posted about 8.7% and 5% system-wide same-club sales, respectively. So, the pressure points to watch are franchisee-level costs, labor, rent, utilities. If those continue to go up, and it cuts their margins. And if churn with customers truly gets squeezed, then we could start getting a little worried. One of the things I really like about

PlanetFit is other than I actually was a customer for a while before I got my home gym here and I moved, but they kind of went through what you could imagine was the worst case scenario for any gym that was the pandemic. And I can't imagine, even if we enter some sort of recessionary environment, a business trying to survive a situation that is as bad for Planet Fitness the way that COVID was for that entire universe of businesses. And Planet Fitness actually came out of that environment much better than I think I expected. And Dan, I kind of want to pass this off to you because Planet Fitness, I mean, I have a hard time believing that you're not familiar with this company given the number of chains they have across the country. So I'm curious,

does this pique your interest as an investor? It does. And I'm a Planet Fitness member as well. I'm a black card member. I do a lot of traveling, and Planet Fitness has a vast network of locations all around the country that is extremely convenient for me. The machinery is generally pretty standardized, so I can generally expect to get the same kind of workout in regardless of where I go. It's been a huge value to me. Sammy, I think it's a great pick. I'm curious, when you're looking at this company, when you're looking at planet fitness, like what kind of key performance indicators do you look at? Do you look at black card mix versus non-black card mix? Do you look at how many members are signing up and doing the upgrade for, for the black card? Do you look at

folks that are given the black card up and just going with the local gym membership? Like what, what are you focused on here? Because yeah, these things, you know, we just went through another January where, you know, yeah, a whole bunch of people started coming in. Now it's mid February, a whole bunch of those people have stopped coming in. And so I'm just curious what you look at in this, in this company. Yeah. You know, with the fitness business, something I'm intimately familiar with is churn is like key. You know, if you have high churn, it's very hard to have a sustainable fitness business. And that's one of the things I like about Planet Fitness is 10 15 a month now their their regular membership is 15 15 a month or 30 if you're doing the black

card is relatively low given that the thought process is well you know that's really cheap i don't want to cancel and then like feel like i'm never gonna go i feel like i'll go so let me keep it as like an option you know like i know that i have the membership i can go at any time so it's not enough of a burn in their pocket to say all right i'm going to cancel so if the turn creeps up then then i'd definitely be concerned that black card to um regular membership mix is always very important to see how people are kind of playing the planet fitness uh membership and also what the churn and membership rates are at other gyms um la fitness and uh lifetime all those The customer demographic is different at a lot of these other gyms.

I feel like Planet Fitness has a broader range of demographic. Well, our first stock pick for this theoretical but challenging environment already off to a strong start. Up next, we're going to be passing the mic to Dan to hear about a unique business that he thinks could distinguish itself from the pack. This is Motley Fool Money. Welcome to Planet Fitness, aka Planet Strength. Planet Sweat.

planet calm planet social planet me time and of course planet value whatever you're here for we're here for it judgment free get started at planet fitness for one dollar enrollment and then 15 a month 49 annual fee applies deal in september 10th welcome back to motley fool money we're diving into three stock pitches for a quote worst case scenario of economic environment consisting of rising inflation, less rate cuts, and potentially lower economic growth. A scenario, of course, nobody wants to happen, but it's always nice to be prepared for. Dan, is there a business that you think is particularly well-positioned to outperform in this type of environment? I'm looking at the retail sector,

and I'm looking at the particular macroeconomic environment that we're in right now. We've got this K-shaped economy. You've got higher-income wealthy folks. They're still doing really well. they're still spending. Middle class and below, though, it's been a big struggle. Higher inflation, higher prices on the things that they need the most. It's become really essential for them as shoppers to find value anywhere that they can. And that is the justification for my pick. Dollar General, which is ticker DG, has been an increasingly popular destination for shoppers who are trying to save some money, make their budgets work in a difficult time. Now, I'll tell you, if you've never been in a Dollar General, you might not know what I'm

talking about, but I'll be the first to admit, the store experience of Dollar General isn't necessarily for everybody. We're not talking about a Target. We're not talking about a Walmart. Dollar General stores can feel cramped. Sometimes the goods are disorganized. It can be hard to find what you're looking for. It used to be that at least the crowning jewel of the Dollar General was, you'd go in, you'd buy a certain number of things, you'd multiply by a dollar, and that's how much you were going to pay. Those days are long gone. Both Dollar General and pretty much every dollar store out there have succumbed to inflationary pressures, but also to the fact that they want to offer a broader mix of products. And so, not everything you're going to buy at

a dollar store like Dollar General is going to cost you a dollar, but in general, the value is there. And not only that, but Dollar General has quietly become one of the most ubiquitous chains in retail. Anybody outside of a major metropolitan area can attest to the fact that oftentimes it's those yellow signs and those dinky little box-shaped stores that are the most convenient place to go to get the things that you need. Close to 21,000 stores in the U.S. is going to put Dollar General on the top 10 list of a lot of retail chains worldwide for the number of locations. And it's got some great deals on things that people need more and more in ways that seemingly defy inflation and price pressures. It's become the go-to place for a number of things

that I get on a regular basis. This from somebody who, three or four years ago, I wouldn't have set foot in that store. But it just makes economic sense now. I'm always shocked by how pervasive Dollar General is. And you're right, it's changed its tune over the course of the past couple of decades in terms of the value proposition it brings to the communities in which it operates. But I have to say, I don't typically think about this type of business as a pass-through inflation business. So I'm curious what makes you confident that they'll be able to keep margins high, if costs keep rising. So I think your skepticism is warranted by the fact that investors totally agreed with you in 2023 and 2024. The bout of inflation in 2021 and 2022,

it caused some problems at Dollar General. They had some inventory issues. They had difficulty getting the inventory that they needed to keep consumers coming in the doors. But what happened was Todd Vasos, who had been CEO, had stepped down in 2022. He came back in 2023, and he basically said, look, what we were starting to do was not the right approach. And so what he did instead was to reemphasize expansion while also looking at ways to manage inventory in a way that would be receptive to what consumers were needing. And in many cases, that involved working with manufacturers. You've heard about shrinkflation, and you can see that at Dollar General where, yeah, oftentimes the price of an item won't change, but the size of the packaging will change.

That's obviously not necessarily perfectly consumer-friendly, but it is in many cases friendlier than what you're seeing at traditional grocery stores, where not only are they shrinking the packages, they're also charging a lot more for them. And so I think working with manufacturers on the goods that they are using. I think Dollar General's put itself in enough of a bargaining position where it can at least have some pricing power in dealing with suppliers, and to that extent, not have to pass through as much of cost increases as what you see at traditional grocery stores and retail stores. Quick question. With 21,000 locations, is there room left for store expansion or is this primarily like a same store sales growth story where they just need to

have more efficiency in their current store base i think that it is a situation where you're not quite to saturation yet there have been some places i've been it's like okay there's a dollar general one end of town there's a dollar general on the other end of town they're like a mile apart really but convenience is a factor and so the cost is low enough it doesn't cost that much to build a Dollar General store compared to a larger department store. So they can push the boundaries of saturation in ways that other chains can't. I don't inherently disagree, but just so the listeners are aware about how many locations, 21,000 locations. If you think about the number of McDonald's in the United States, there's an estimated 13,000 to 14,000

McDonald's in the United States. So we're talking the order of 5,000 to 8,000 more Dollar General locations. It's crazy how big this chain already is. But you're right, Dan. Clearly, there's a market there. Up next, we're going to be wrapping up the show with the best pitch. Oh, I'm sorry. I mean, my pitch, of course. Y'all have set the bar high, but let's see if I can live up to the expectations. Stick with us. Stop wasting your nights on a mattress that doesn't get you. Experience the most comfortable mattress in the world, the Sleep Number Smart Bed. at the touch of a button. You can personalize your comfort. Choose firmer or softer. Adjust cooler to warmer. And right now, save up to $2,500 during our massive Labor Day event.

Hurry into your local Sleep Number store today, because we have your number. Welcome back to Motley Fool Money. As we wrap up today's show on stocks that could perform in a worse-than-expected economic environment, I have one last stock pitch to run past you both. The stock that I want to talk about is actually Rollins. The ticker is R-O-L or Rollins. It depends on how you prefer to pronounce it, but let me explain why I'm focused on this company. When I think about this type of worse than expected economic environment, I want low balance sheet exposure in terms of debt in case interest rates are high, as well as clear pricing power or the ability to say like pass through inflation to their end consumer. And there's a

lot of industries that have that. Classically bond proxy stuff like utilities or commodities, even low growth anti-cyclical ideas. But I kind of like the idea of entering a contrarian idea that still has market beating potential even in this environment. And that's why I like Rollins. It's a higher growth pest control business. It's been a quality compounder, a stock advisor recommendation going back a number of years. And I like it because demand doesn't go away in lower growth economic environments. And it has a really nice recurring revenue service model with proven pricing power. They can typically pass through inflation to their end consumer. And I think it has top-line growth that beats the market as long as they make some decently

priced acquisitions. And that's something, again, that they're pretty able to do in weaker economic environments because the prices of those acquisitions typically come down. This year, they're targeting around 7% to 8% organic growth with more white space on top of that if they make those acquisitions. So the debt is not nominal, but it is serviceable for this company. So I really like it. I think it goes underappreciated by the market, especially after their quarter, which they just reported last week. I don't know if either of you guys have any follow-up questions, but as you wrap up the show here, I just want to pass it off to each of you to give any last thoughts. Maybe if it's Rollins, Planet Fitness, or Dollar General, if somebody else swayed your

minds here as you think about how to invest in a higher inflation, lower growth economic environment. I'm just curious if you have any takeaways for our listeners. Dan, I'll pass it to you first. Emily, I'm always glad to hear new good ideas. I think Rollins, great business, largely hiding in plain sight. Nobody wants to talk about pest control, but it is a necessity. It's hard to see AI disruption there either. Some protection against that, I think, is valuable. I'm a Planet Fitness member. As I said, it's interesting to look at that business from an investor perspective. I will say this, Dollar General stock has just about doubled in the past year. Rollins Planet Fitness has not seen those kinds of gains. I think that leaves

more money on the table potentially for future appreciation down the road. Home services are all, like Dan said, are always in need. Maintaining a home is an ongoing task. It doesn't slow down due to inflation, rising rates, or any other macroeconomic factors. I can see some pullback from customers, maybe save a buck, but you can only do that for so long before the pests start invading your home and making things very problematic. So I like the Rollins pick. It's very interesting. And I hadn't thought about it, like Dan had said. I agree. And actually, I like both of your stock pitches as well. Look, I'm still partial to Rollins, of course. Not teasing. But I do. Dollar General is one that I have unfortunately slept on.

And to your point, Dan, it's been an incredible compounder with plenty of room to grow within And Planet Fitness is within itself one of those little luxuries that you mentioned this on me, but I really do believe in it. Even during tough economic times, there are things that people will continue to pay for because it's comparatively affordable and infinitely beneficial to their quality of life. And cheap gym memberships are that for a lot of people. So some meat, I really do like that as well. I think Planet Fitness is worth digging into deeper, but hopefully these three stock picks give people an idea about good businesses that are worth looking at, even if you're concerned about the macro environment we're operating in. It's always a

good time to be an investor. Always looking for great companies, regardless about general economic fears that can sometimes get people down. So even if you're not excited about investing today, I hope this podcast has reminded you that there's plenty to be excited about and great businesses hiding around every corner. Samit and Dan, thank you both so much for joining today. 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 editorial real standards and is not approved by advertisers. Advertisements are sponsored content and provide

for informational purposes only. To see our full advertising disclosure, please check out our show notes. For Sammy Deo, Ben Kaplinger, and the entire Motley Fool Money team, I'm Emily Flippen. We'll see you tomorrow.