Motley Fool Money - Our Stock Market Naughty and Nice List

Starting point is 00:00:00 What stocks are on our naughty and nice list in 2025? Motley Full Money starts now. Welcome to Motley Full Money. I'm Travis Hoyam, 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? So it pains me to do this because I am just.

Starting point is 00:00:42 so bored of just leaning into the Mag 7, but here I go. I am going to be my own worst enemy. Topps 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, stocks up almost 70%. That's the best return among the Mag 7. They are the biggest name in Autonomous. The biggest name in streaming. No offense, Netflix. And increasingly,

Starting point is 00:01:23 Gemini looks like the big winner here. I mean, I guess all of the search issues aren't completely answered, but there is at least a compelling answer to what becomes it as business. And it is very, very nice, I think shareholders would say. What else? In the AI space, you've got to think, especially, if you're looking at Meg 7, 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. And Vidia, they didn't surprise anyone.

Starting point is 00:02:03 They weren't like the turnaround story, but look, they went out and did exactly what the Bulls would hope. And again, very, very nice. You know, there is some more speculative stuff, too, if you want to get to it. I don't want to just, just do the MAG7. Well, what executives, yeah, 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 like, not block out the public markets. Your publicly trade CEO, you have to care. But don't

Starting point is 00:02:46 let investor excitement change your timetable. Stick to building the company you want to build. I haven't seen him change this long-term vision in any way. He is tops on my CEO, nice list. And May 26 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. Mercado Libre is one. I mean, this is the leading e-commerce and fintech giant in Latin America.

Starting point is 00:03:18 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 Mercado Libre, they're continuing to expand their logistics network. They're leveraging the power of AI to drive efficiency. Just a fantastic, a well-run business.

Starting point is 00:03:48 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 Tjax companies is on the nice list, right? The parent company of T.J. Max and Marshalls, They're an off-price retailer. They've had a really resilient business model. Their smart buying

Starting point is 00:04:09 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, Clarnah 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.

Starting point is 00:04:47 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, 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

Starting point is 00:05:35 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. In a world full of noise, long-term thinking stands out. On the Capital Ideas podcast, Capital Group Leaders explore the decisions that matter most in investing, leadership, and life. It's a rare look inside a firm that's been helping people pursue their financial goals for more than 90 years. Listen to the Capital Ideas podcast from Capital Group, published by Capital Client Group, Inc. 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

Starting point is 00:06:15 checked our list, checked it twice. And first off, we got to go to Washington and we got to go to antitrust regulators. Oh, no. They were, I mean, they were naughty. And 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? But 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, just 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.

Starting point is 00:06:58 Great job there, regulators. I robot. Remember when they wanted to sell Amazon? They were supposed to be the future of robotics. Right. Apparently they were. So we can't let Amazon own that. They ended up liquidated to their Chinese vendor.

Starting point is 00:07:13 So the idea there was Amazon can't have the data, but now China has it. So maybe not a great win. Great year. Expect that coal in your stockings. A couple others, if you want. though, like with companies, FISA, 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, FIERF's a big product, that's not going to be the big

Starting point is 00:07:43 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 had to talk, 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 Noddy. I still believe in the company, but I'll say this, they have a lot of work to do to stay off of the Noddy list in 2026. Rachel, who is on your Noddy list? Luz on fire there. So you've got some pressure back in that, following that up. I know. I mean, I think it goes without saying that there's a lot of consumer goods stocks that are on the Noddy. list this year. So I had a lot of choices to pick from, but I went with Target and Starbucks,

Starting point is 00:08:29 right? Both of these companies, their stocks have seen significant declines this year. Target shares are down about 30 percent 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 is 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.

Starting point is 00:09:00 That's an easy area for consumers to cut back in a difficult environment. Not essential for some people. Coffee is not essential. I mean, I don't want to tell you to make your coffee at home, Lou. But, you know, the other thing is there are issues that are very specific to these companies. It's not just a macro element, right? You know, 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.

Starting point is 00:09:26 They've had inventory issues. You know, Starbucks is obviously kind of famously navigating a multi-year turnaround plan under their newer CEO. They've been facing a lot of margin pressure, competitive pressure, and 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?

Starting point is 00:09:49 I would be looking more for a turnaround going into 2027 if I'm being in a lot of 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 Full Money. These days, I'm all about quality over quantity, especially in my closet. If it's not well made and versatile, it's just not worth it. That's honestly why I love Quince. The fabrics feel elevated, the cuts are thoughtful, and the pricing actually makes sense. Quince makes high-quality wardrobe staples using premium fabrics like 100% European linen, silk and organic cotton poplin. They work directly with safe ethical factories and

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Starting point is 00:11:08 and 365 day returns. Quince.com slash motley. Welcome back to Motley full 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 health care is a huge area of focus for me as a stock analyst here at the full. So Eli Lilly, Pfizer, those are a couple health care companies that I'm looking at. But there's a few retailers, right?

Starting point is 00:11:36 Walmart, Costco, Lou Lemon, 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, you know, 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. You know, a lot of these undervalued stocks, they might be, you know, mispriced due to short-term issues. Value traps, on the other hand, tend to be cheap, for a good reason.

Starting point is 00:12:09 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 may be pure and expensive based on traditional metrics but are fundamentally struggling. A couple of those, Walmart and Costco do look pretty expensive. Does that where you, especially if the consumer starts a pullback? I mean, there's a possible. We haven't had a true recession for quite a while.

Starting point is 00:12:38 It's possible that happens in 2026. I mean, I think that they have their own durable competitive advantages for different reasons. You know, 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,

Starting point is 00:13:02 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 qualified to have a stock, so 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 reeds and other areas that have

Starting point is 00:13:32 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 at really hard

Starting point is 00:13:58 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, you know, 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, you know, 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

Starting point is 00:14:37 down market, sometimes those stocks get hit harder than anything else. And that's where the real opportunity. Is that how you're thinking about the market if we do have a pullback? Yeah, I don't tend to have cash from the sidelines. I have cash and then I have equities and I just kind of buy with money I'm putting into equities. 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 once in a 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,

Starting point is 00:15:14 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.

Motley Fool Money - Our Stock Market Naughty and Nice List

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