Motley Fool Money - 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

The macro picture is looking tough, but that won't prevent us from looking for diamond 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 Full Money. I'm your host, Emily Flippen, and today I'm joined by Fool analyst Dan Kaplanar and San Mateo for a fun chat where we're going to each be giving a theoretical stock pitch for 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, Send meat, 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 bowl today that's worth keeping an eye on if we're headed towards that type of environment? Yeah, well, you know, if anyone knows me, they know I like to observe the world and find

stock picks that way. So I recently joined a local planet fitness, a brand new one that opened in my neighborhood. And I was actually pleasantly surprised because I will say I have had a little bit of a bias against it in the past, but I kept an open mind. Also, surprise with the affordability, it was clean and organized. Obviously, it was newer, so that helped. And they also have some fun perks if you're a black card member with, with massage shares and red light therapy and drink discounts and stuff. So pretty good deal there. So I think Planet Fitness is a good trade-down winner if inflation stays sticky and race 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% in opening 181 new clubs. 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, open 230 new stores in 2023 to 2024. where there's aggressive rate hikes and restrict, 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 get squeezed, then we could start getting a little worried. Yeah, one of the things I really like about Planet Fitness, other than I actually was a customer for a while before I got my home gym here and I moved. But they kind of,

of went through what you could imagine was the worst case scenario for any gym that was the pandemic. And I can't imagine, you know, 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 peak 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. Let's me get the machinery is generally pretty standardized. So I can generally expect to get the same kind of workout in regardless of where I go. And so 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 the black card? Do you look at folks that are giving the black card up and just going with the local gym membership? like 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 company. Yeah, you know, with the fitness business, something I'm intimately familiar with is turn is like key. You know, if you have high turn, it's very hard to have a sustainable fitness business. And that's one of the things I like about playing at fitness is, 10, $15 a month. Now their regular membership is $15.15 a month,

they're 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 going to 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 I'd definitely be concerned. That black card to regular membership mix is always very important to see how people are kind of playing the Planet Fitness membership. And also what the turn and membership rates are at other gyms, LA Fitness and 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 missus that he think could distinguish itself from the pack. This is Molly Full Money. The old adage goes, it isn't what you say, it's how you say it, because to truly make an impact, you need to set an example and take the lead. You have to adapt to whatever comes your way. When you're that driven, you drive an equally determined vehicle, the Range Rover Sport. The Rangerover Sport blends power, poise, and performance. Its design is distinctly British and free from unnecessary details, allowing its raw agility to shine through. It combines a dynamic sporting personality with elegance to deliver a truly instinctive drive.

Inside, you'll find true modern luxury with the latest innovations in comfort. Use the cabin air purification system alongside active noise cancellation for all new levels of quality and quiet. Whether you prefer a choice of powerful engines or the plug-in hybrid with an estimated range of 53 miles, there's an option for you. With seven terrain modes to choose from, terrain response to fine-tuned your vehicle for the roads ahead. The Range Rover event is on now. Explore enhance offers at Rangerover.com. Welcome back to Motleyful 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, you know, be prepared for. Dan, is there a business that you think is particularly well positioned to outperform in this type of environment? There is, 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 sort of case-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 kind of hard to find what you're looking for. And, you know, 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 linky 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, like 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 like 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 Vesos, 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 shrink in the packages that are 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 built itself enough, 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. I mean, with 21,000 locations, does 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 someplace that I've been. It's like, okay, there's a dollar general on 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. I don't inherently disagree, but just so the listeners are aware about how many locations, 21,000 location is. If you think about the number of McDonald's in the United States, there's an estimated 13 to 14,000 McDonald's in the United States. So we're talking the order of five to eight thousand 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 set the bar high, but let's see if I can live up to the expectations.

Stick with us. 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 what 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 cut out the middlemen so you aren't paying for brand markups or fancy stores, just quality clothing. Everything they make is built to hold up season after season and is consistently rated 4.5 to 5 stars by thousands of real people like me who wear their clothes every day. The Quince, Mongolian, Kashmir Kru Neck sweater may be the most

comfortable one that I own. It's light, soft, and it was a lot more affordable than you think quality cashmere would be. Stop waiting to build the wardrobe you actually want. Right now, go to quince.com slash motley for free shipping and 365 day returns. That's a full year to wear it and love it, and you will. Now available in Canada, too. Don't keep settling for clothes that don't last. Go to QINCe.com slash motley for free shipping and 365 day returns. Quince.com slash motley. Welcome back to Motley full 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 tickers, ROL 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, anticyclical 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 topline 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 right 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 kind of just want to pass it off to each of you to give any last thoughts. I mean, maybe was it, 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. And so, you know, some prediction against that I think is valuable. I'm a Planet Fitness member. As I see said, it's interesting to kind of look at that business from an investor perspective. And I will say this, Dollar General stock is 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. You know, maintaining a home is an ongoing task. It doesn't slow down, dude.

Inflation, rising rates or any other macroeconomic factors. You know, I can see some pullback from customers, maybe save a buck. But, you know, 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 is very interesting. And I hadn't thought about it, like Din had said. I agree. And I actually, I like both of your stock pitches.

well. I 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 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, Summeet, 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 to 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 in the program may have interest in the stocks they talk about in the Motley Fool may have formal recommendations for or against, so don't buy our sell stocks based solely on what you hear. All personal finance content follows the Motley

full editorial 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 Sanmideo, Dan Kaplanaranger, and the entire Motley Full Money team, I'm Emily Fippin. We'll see you tomorrow.