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Foreign.
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The calendar has flipped to 2026. So where are we investing? Motley Fool Money starts now. Welcome to Motley Fool Money. I'm Travis Hoyam, joined by Lou Whiteman and Emily Flippin. And since the calendar has now moved to 2026, we're recording this a couple of days early so that we can have a little bit of time later in the week. But we are thinking a lot about how we're investing in 2026, what the economy looks like, where there's value, maybe where we should be selling a little bit. So I wanted to start with a couple of different themes and the biggest theme that we have to talk about this has been the topic of the market for the last three years. That's artificial intelligence. Where are you looking at the AI trade in 2026, Lou? And you can take this in any number of different directions. Is there risk, is there opportunity? Or is this just something that you're monitoring from the sidelines and going, you know what? This is accounting for 50% of GDP growth. That's a pretty notable change in the way that we think about AI.
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C
The first thing is it's 2026 and wow, we're still doing this instead of AI. So cheers to us for that. Right?
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B
The disruption has not hit us yet.
- [01:21]
C
Yeah, yeah, not yet. Famous last words. So you know what strikes me about AI and I've been thinking about this a lot, is that the novelty is over. The magic is gone. When ChatGPT first came on the scene and it was, wow, it was magic and it was all this talk about virtual friends, you know, doing all these chores for us and, you know, just kind of what was new in magic before is now sort of mundane. And I think the answer from here is kind of boring. I think this is going to be the year of the agents, of all of this stuff.
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B
Wasn't 2025 supposed to be the year of agents?
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C
Well, it was and maybe that was the work. But here's what I think is happening here. It's again, it's not going to be the cor. Cool, magical stuff. They're not going to be planning our vacations or doing these wow tasks, but there is just all over the place. We are just at the tipping point where so many little automations making so many little tasks 10% better. I don't think that that is what we all hoped for. Maybe the virtual friend, the imaginary friend, is still coming. But I do think that matters. The theme this year, if it's a theme, it's specification over scale. It's no longer just this pure muscle do all things, just creating small AIs that can just make life easier all over the place. I think that is going to be the theme for 2026 in AI and I think there is real good news for investors there because I think that this translates to revenue and profits better than the imaginary friend on our shoulder.
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B
It's interesting you put it that way because it seems like that would just be a continuation of the last 30, 40 years in computing and software. Is that the way that you're thinking about AI now? And not just we're all going to be, we're not going to have to work anymore the way that Elon Musk says, you know, because robots or whatever are going to be doing everything for us. Is it just going to be more of an incremental technology improvement the way that we've seen mobile phones and PCs and Excel spreadsheets and things like that make things that we, that used to be commonplace in the 70s, 80s, 90s become just more efficient? Is that the right way to think about AI?
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C
That's a dangerous question because it's open ended. And I never want to say no to something if you give a long enough timeline. But yeah, I think you hit it on the head. This is how progress works. Progress is not flashy, Progress is not wow. Progress is incremental and maybe we will get to that vision. I don't think it'll be nearly as quickly as the pundits or the wow want to think. I think just incremental improvement is how tech works when it works.
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B
Emily, when you look at artificial intelligence, where are you looking at real business models being created and where again, where does that risk reward lie?
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A
Yeah, I love that point. And you know, to lose earlier comment about us still doing this as humans not being replaced by AI yet. I think part of the reason is, is because we're willing to go out there a little bit and come, come here with some takes that maybe wouldn't be generated by a chatbot and then you can hold me and Lou accountable for them a year from now when they inevitably end up wrong. But to your point, Trav, is it's not so much about creating new businesses, it's about evolving the business models that exist today. So the thing that I'm watching with AI in 2026 is actually advertising and I think that's the midterm game for AI and AI centered companies or companies that are looking to implement it. It's not the data centers, it's not the capex, not enterprise usage. I think it's characterized by what the Mag 7 and our large tech companies are going to do with advertising as it relates to artificial intelligence. You know there's only two of the Mag 7 and Nvidia and Tesla that aren't dependent upon advertising revenue source of sales. And I'd actually argue that Nvidia by proxy is actually really heavily dependent on advertising given the fact that it's larger customer base needs to sell ads in order to afford the hardware.
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B
Right, explain that because I think OpenAI is really the big question here and they're the obviously the elephant in the room. They're the ones with what is it now? $1.5 trillion in spending plans. A lot of that is Nvidia chips. But they don't have that advertising business model. But do they need it?
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A
They desperately need it. And I think 2026 is the year where these individual consumers are going to start seeing ads and other integrations into their chat GPT. And it's not just chat GPT, it's Gemini. It's any company that has some sort of large language consumer facing model is going to need to find a way to monetize the data that they have on the people using the application even if that comes alongside a subscription fee. And to me that screams ads. And without businesses generating ad revenue, they obviously to former point can't afford hardware to continue to expand and grow their business in their data centers which results and by proxy a declining sales for Nvidia. But it's not just OpenAI. I mean look, you can look at Meta, another Mag7 company, virtually 100% of their sales are ad based sales. Google is like 75% plus of their sales are ads. So all of these companies are really heavily dependent upon that. And what's really interesting about the world advertising is it's kind of a zero sum game. Which is to say just because OpenAI comes out and says, says hey, you could put ads on, on chat GPT. Now just using that as one example doesn't mean that the ad budgets for companies that are buying placements suddenly increases. They still have a finite amount of money.
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B
Unless you've built out that that's a longer game. Right. Like the businesses that are built because Shopify and Facebook exist but that doesn't happen in 2026. That's a five, 10 year story.
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A
Exactly. So hopefully, I mean I expect the world for advertising, demand for advertising, the advertising size of the market, that that is going to grow over time. To your point, Travis but thinking about it from of an individual business, if I'm into it, one of those businesses that just loves to advertise, especially around this time of year as we get into tax season, if I'm into it, I'm not saying, oh, I have new places to advertise, therefore my advertising budget for the entire year has increased proportionally to the number of places I can advertise. They probably still have a set budget. Let's say it's $100 million or whatever it may be. And they say, well, maybe I put less of that with Meta, maybe I put more of that with open AI. And that's when it starts to get interesting for how these AI based companies are going to monetize and advertise. Because it's not just about how effective ads are by usage of AI, it's actually how search and other interactions change as a result of where the money for ads is actually spent.
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B
Yeah. So are you able to extract the same number of dollars? What's the margin? I think that's going to be another one of these questions. Because it is more expensive to compute with AI than it is with traditional compute. And you know, we've seen that with margins at companies like Meta and Alphabet over a long period of time. One of the things that you touched on, Emily, that I think is interesting is are we at the point where this AI in general is proving to be much more of a sustaining innovation rather than a disruptive innovation? I think if you go back to that ChatGPT moment, you have stocks like Alphabet dropping or going at least nowhere despite the fact that they were growing revenue because they thought that this was going to disrupt their business, this is going to disrupt search, it was, you know, how they make money. Are we at the point where we can say, you know what, there's going to be new businesses formed, this is going to be an opportunity for entrepreneurs, but it's not necessarily going to destroy a whole bunch of older tech businesses. The way that we saw disruption when, let's say Google and Meta Facebook came around, that really destroyed kind of the newspaper business. Is that the right way to think about it, at least where we sit today?
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A
I definitely think it is. And what's so interesting about where we sit today versus where we sat even 20 years ago when we were going through the dot com crisis or that boom of the Internet, is that companies and their leaders and their decision makers are not unaware of the threat of disruption. I think everybody has become more aware. Disruption almost implies the idea that you're Being taken aback by something that you didn't see coming. AI isn't so disruptive because we have companies that could see the future, so to speak, but saw the existential threat and then decided to innovate around it. So it's, to your point, much more sustaining than it is disrupting for these companies because they're investing in it and.
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C
They can invest in it. That's the big thing. Like with the newspapers, they didn't have the resources, these companies have the resources to throw at the problem whether or not it makes everyone 100% a winner. I wouldn't say that, but I think that's the big difference is that so many of these companies have these virtual money printing machines that they can throw at the problem.
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B
Well, the constraints seem completely different. If you're a newspaper, you had a geographic constraint that was your monopoly. You know, Google's playing in the world, the global economy. AI is going to do the same. It's just a different shift, it seems like. Lou, I wanted to ask you about robotics because this is one of the things that we often talk about with AI and it's sort of this amorphous thing in the future. IROBOT was the way to play this for a while. Obviously that didn't work out. But there are sort of these moonshots that are happening. You know, whether it's at Tesla, you know, one of the companies I think is interesting that's still private is figure is humanoid robots. You know, is that going to be something that's going to start impacting the economy, whether we're buying them as consumers or businesses are adopting those kind of products.
- [10:18]
C
So at least for 2026, I'm still very skeptical about the dancing robots, I don't think. I mean, this is going to be similar.
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B
The videos are pretty funny to be.
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C
Oh yeah. I mean they're awesome. But. But this is going to be similar to my boring answer on AI. I don't think this right now is about Rosie the Robot from the Jetsons making us eggs or doing our dishes. But the great thing about AI, and I think we're going to hear a lot about robotics, we're going to get to this in my radar stock even just to tease. But the great thing about AI is that all of these robotics that we have and all this automation we have were mostly single function machine one task machines. And AI gives us the ability to make them multifunction machines and to do more with the existing technology. Again, I don't think that ends up with, you know, a Robot Butler in 2026. But I think all over the automation world, what we can do with automation and what we can do with what we've already invested in is just going to really accelerate. And that is a huge productivity thing. It might not be fun for consumers, but it's great for us as investors because it does, I think, over time, move the productivity curve.
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I know I'm looking for a robot that will clean up after my kids, so when that comes out, I will be an early adopter. When we come back, we're going to talk about the economy and what we think about jobs and where spending is going in the future. You're listening to Motley Fool Money.
- [11:45]
D
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- [12:49]
B
Welcome back to MLE Fool Money. We talked a little bit about AI, but look, none of this works. And if all the spending in AI doesn't really work, if the economy tanks and there's some signs of strength in certain places, signs of weakness in others. So, Emily, where do you see the economy going into 2026? What's good, what's bad, and what's just worth watching as the year plays out?
- [13:11]
A
Well, I think I, like the average person is very confused about what we're seeing today, which is to say that the data that we have is painting two entirely different pictures. If you just take the reported data at face value, it shows strong real GDP growth that's rising and accelerating, driven largely actually by consumer spending. Right. Inflation. While still higher than what the Fed wants, it's well managed and it's inching downwards and we're easing back to those Fed targets. And the economy is still adding jobs and mortgage rates have eased. But when I say that, I know the average listener is probably going, excuse me, that's not the reality that I'm living right now. And underneath the data, I think we have a lot of confusion. There's economists and even members of the Fed themselves that are doubting the data, which is to say that not that the numbers are inaccurate, but not paying the full picture. Saying that inflation could be understated either due to the government shutdown or reporting metrics. Tariff impacts are yet to show their true teeth. Layoffs are actually accelerating. Powell himself said that the jobs data could be overestimated to the extent that the US has actually been losing jobs through the majority of 2025. So this is to say it forces me to watch a lot more than I probably would want to when I head into 2026. And what I'm having to do is look at ancillary data, right? Large layoffs, which companies are required to report. That's a great indicator of the job market. Credit spread or delinquencies show a lot about the average consumer as we expand to that K shape economy here in the United States. And obviously capex from big tech companies. I mean these in my mind are kind of like the canaries in the coal mine of the economy when you can't or won't or otherwise have doubts about the reported data.
- [14:44]
B
What is that K shaped economy? We talk about that a lot. But can you just explain what exactly that is? Because I think that will be important as we go throughout the year.
- [14:51]
A
A lot of people have summarized it as like the declining middle class, but and in effect the way that we have seen the economy grow and expand over the course, especially over the last couple of years, but you could even expand it over to the past few decades is that the rich get richer and the poor get poorer to an extent. And the people in the middle. So the average American who hasn't seen wage growth that matches inflation is effectively getting poorer and poorer. And so the big earners and the big spenders have been doing a lot to keep the economy afloat, which helps these reported numbers look good at face value because there's a subset of high spending, high earning Americans that are doing well, but a majority of Americans, those people who, who aren't seeing those raises or those increases are continuing to get worse year after year.
- [15:33]
B
Yeah, I saw a recent stat that something like the top 10% of spenders actually account for almost 50% of spending. So there is a have and have nots. Lou, what are you thinking right now?
- [15:42]
C
Well, yeah, and again, we have to kind of put everyone in buckets because we can't look at the individual. But really what we're talking about here is there's a lot of pressure on some people, but a critical mass of consumers are still employed, still spending. And really we make decisions based on our own checkbook. And so as long as that critical mass is there, whether or not it's a carve out in a middle class or something, I think those are all worrisome things to talk about. But the bottom line is that as of right now, there are enough people spending to keep things going. The question is, where from here does all of the job talk and all of these negative signs, does it build on itself, slowly swallowing more consumers and breaking down that critical mass, or do we see inflation ease, which kind of helps with the jobs and all of a sudden employment picks up and that critical mass kind of gets us through to the other side. It's really, really hard to know that. I think both are possible. You mentioned the data. The other thing right now is that, look, I don't even think you need to be a cy to question the data. Right now they are saying that they are making methodology choices which might be correct. There has been forever debates about how we do economic data. But when you do that, when you make changes, it makes apples to apples comparisons really hard. So I don't even think you have to be a conspiracy theorist to say I don't know how to read the data. And that makes life a lot harder for us who are trying to have an opinion or a prediction only where things are going.
- [17:14]
B
Lou, you may raise an interesting point about. I think about this like a snowball, you know, in 2008, 2009, when the economy got really bad, you'd have to go back to 2006, 2007 to see the start of this. And how does that play out? Let's just talk about that downside risk, you know, layoffs. It isn't one layoff announcement tells us that a recession has begun or something like that. It's this trickle that becomes uncertainty for executives. I remember sitting listening to the CEO of 3M in, I believe it was 2008, saying, we don't know where the bottom is. And so we're just going to cut as much as we possibly can because we don't want to be, you know, sol when, when we do hit that Bottom is that sort of the risk is that this snowball starts, maybe AI spending cuts back and we just don't know where it goes.
- [18:04]
C
Inevitably we always swing too far in either direction. Right. So yes, I mean, I think the risk when we started 2025, talking about the boiling frog economy, that everything's fine until it's not. And I think heading into 2026, it's just going to be that same theme where everything right now from an economic perspective, from a Wall street perspective is good enough. Wall street doesn't have to act with Main Street. That's one of the first lessons you learn. The stock market is not the economy. The stock market has kind of priced some of this pressure in it's all fine till it isn't. And to your point that when this critical mass, when we stop seeing just enough people doing their economic activity, keeping things going, that's the point where we're in trouble. And by then it's probably too late to avoid at least some impact.
- [18:52]
B
Definitely a lot to think about with the economy and AI in 2026. When we come back, we are going to play a game called up or down. You're listening to Motley Fool Money.
- [19:01]
D
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- [20:08]
B
Drinkag1.com fool welcome back to Motley Fool Money. In this section we like to play a little game and we're going to see what Emily and Lou think about some specific stocks. I'm going to call this up or down. The idea here is do you Think these stocks are going to beat the market in 2026 or not? I have 12 stocks on the list and I have asked them to split their votes 50, 50. You can't just say everything is going to beat the market. Lou, I'm going to have you go first with arguably one of the most important stocks for the stock market because it is the biggest piece of the S&P 500 Nvidia. Are they going to beat the market or not in 2026, an object in.
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C
Motion tends to stay in motion. I have them beating the market. Now look, huge caveat here. They've been going up well, well in excess to the market. I, you know, all they have to do is go up probably 7, 8% to beat. I think Nvidia might do less well than it has the last few years but still beat the market.
- [21:03]
A
That's a fair take, but I have to take the other end, say they'll lose to the market and the only reason is, look, I'm rooting for Nvidia here but to counter lose point about an object in motion, typically historically speaking the largest company in the world is not the largest company in the world. When you zoom out to a three year time period, Nvidia has already been the largest company through the majority of 2025. I can't think 2026 is probably going to be a high bar.
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B
Let's move way away from AI to potential falling knife target. Emily, beat the market or not beat the market.
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A
Look, I've been meaning to buy Target for the better part of the last year. I'm happy that I, I dragged my feet on that. I intend to make that purchase at some point in early 2026. But I think they can get the merchandising strategy right and if discretionary spend comes back, they're well positioned.
- [21:46]
C
So I'm going the other way just because I think there can be a turnaround. But it's going to take more than a year and, and in this context I think one year is time frame. I'll also say, look, retail is really, really, really tough. Nobody has an inherent right to exist. Ask Sears, even Kohl's. Some of the problems. I'm worried about Target long term and I don't think even if they do recover it will be as quick as 12 months.
- [22:14]
B
Let's go to another popular stock, Chipotle. Lou, are they going to make a comeback in 2026?
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C
I think this is a tough, tough year for fast casual. Again, I'm not going to write them off, but I have lose here just because I think that there's a lot of choppiness. I think in general, fast, casual. There's just too many people chasing this audience now. So it's hard for any of them to really, really thrive. That doesn't mean it can't be a good business long term. But I'll take them losing this year.
- [22:40]
A
I think Chipotle had a tough year this year because they're coming off some really strong comps in the post pandemic period. In 2026 their comps are going to be a lot easier of a hurdle to jump over and I think are too low. So I have been beating the market.
- [22:53]
B
What about another one that has confused me? I mean this one could be up 100% or down 50% but intel, where are they going? Emily?
- [23:03]
A
Oh this is such a hard one. I have a tepid lose to the market because when I look at the chip space I just don't know if they're the leader that they need to be to sustain market beating performance. But it's a tepid lose. It's a tepid lose.
- [23:16]
C
Yeah. And I have a tepid beat because I don't know what to think too. And it's weird to live in a world where I'm not sure we even need intel. Imagine saying that 10 years ago. But I do think they have the backing of the full faith and credit of the US government. They just closed the investment with Nvidia. I do think there's wind at their back long term. I'm not sure I want to own this. I don't know where they shake out but I think it'll be a better 2026 for them.
- [23:42]
B
What about another consumer company? And this gets to what we talked about earlier. What are consumers doing? Are they spending or are they not losing Lululemon?
- [23:51]
C
So this is another one that I need to caveat that to me a year it doesn't tell the whole story. I think they do beat. I think you know, whatever momentum comes out of this proxy fight and the new CEO, I think there will be encouragement. I worry about this company long term as far as getting its mojo back. But I think for 2026 they're probably vibes go its way.
- [24:12]
A
I'm a lot less worried than Lou, but I do agree that I think Lulu beats over the course of the next year. Now there have been a lot of macro changes that have impacted them both in terms of compet competition and fashion trends. But there is no doubt in my mind that Lululemon can Work out their merchandising strategy. And I don't think that their brand has deteriorated to the point where it hurts their sales.
- [24:29]
B
Lululemon Stock is down 45% over the past year. I think that would have been a shocker coming into the year. We'll see if there's some value there. 15 times earnings. I don't know, is that a value or a value trap? We'll have to see. That'll be a fun one to talk about. Along the same lines, Emily, is Nike going to make a comeback? This is almost the same story, but just a different brand.
- [24:52]
A
It is to an extent and I have different answers here. I think Nike loses to the market. My concern with Nike is I actually don't see any desire to innovate to the extent that they need to to edge out the competition. And when I see companies like on holdings just continuing to eat Nike's own lunch, I get really worried about the long term viability of the brand.
- [25:12]
C
Yeah, and, and look, it's just a different market market. It's so much more of a crowded market to me. I think the company can be fine and the stock cannot be fine. And so I'm lose too. I think that this is just running to standstill, so to speak.
- [25:26]
B
It's wild to think that Nike has become a little bit like under armour for us. When we shop for gear, for the kids especially, that's Nike's where you find good deals. That's a tough spot to be in if you're in the consumer space. All right, let's go to AI, Robotics, electric vehicles, autonomy, whatever you want them to be. Emily, is Tesla going to beat the market or lose to the market in 2026?
- [25:53]
A
Okay, this is where the time frame catches up to me here. Because here's what I'll say about anybody who's investing in Tesla. You're not doing so because you think it's going to do well in 2026. You're doing so because you think a decade, two decades, 50, 100 years from now, Tesla is going to continue to be an innovator that is leading the way. And whatever it may be, robotics, cars, you name it, actually have Tesla losing to the market over the course of 2026. And the reason is pretty obvious in my opinion. We've seen a decline in demand for electric vehicles. A lot of tax credits have rolled over. There's a lot of stiff competition from international sales especially lots of near term headwinds for Tesla. But does that change anything for the long term investor?
- [26:30]
C
Probably not spot on. I don't have much to add. Tesla, there's a lot of headwinds for this year, but I don't think that affects the bull case at all. So I am losing to.
- [26:39]
B
Are either of the two of you gonna be in a robo taxi with no safety driver in 2026?
- [26:45]
A
No, personally, probably not.
- [26:47]
B
That's the theory though is that they're supposed to be doing that. Well, supposed to be by the end of this year, but.
- [26:52]
A
Well, 2027 is always just around the corner.
- [26:54]
B
It is. Next year is always just around the corner for Tesla. All right, Alphabet, this was the surprise one that beat the market in 2025. Louis, is it going to do the same in 2026?
- [27:07]
C
This is kind of similar to Nvidia for me. I think that they are a leader and I think they will remain a leader and so I'm going to have them beating, but I don't think it's going to be a wow beat. I think a lot of that catch up was this year. But I don't think advertising or anything they're doing is going to fall off a cliff. And I do think that they're a pretty good bet to just beat what I think could be a boring market in 26.
- [27:29]
A
I completely disagree and I love that I have Alphabet losing to the market because I do think that advertising risks falling off a cliff in 2026. Now they've been heavily investing in Gemini and their own AI ambitions, which is important, but what they're doing is fighting to retain the three quarters of their revenue that comes from advertising. They need that to succeed and they need no competition to take, even at the margin, a portion of their ad sales. And I have a lot of reasons to believe that in terms of the ad revenue that's going to be headed towards Alphabet in 2026 is going to be less than what it was in 2025.
- [28:02]
B
Emily, does that extend over to a company like Meta too?
- [28:05]
A
Certainly does. And Meta. I will say the difference between the Alphabet and the Metas of the world is that Meta has better click through rate ROI for an advertiser than a lot of Alphabet platforms. Withholding YouTube. That's the wild card in my opinion. We don't have a lot of data about how well ads convert on YouTube. You have to imagine pretty darn well considering the performance of Alphabet. But that could be the saving grace here.
- [28:28]
B
I have to throw in one of the most talked about stocks on the market, trading for 111 times sales. Emily, Will Palantir Beat the market this year. Well, what a read.
- [28:39]
A
You have to say that right before I've about to tell you that I do think Palantir is going to beat the market. And my reasoning is not sophisticated. It's not based off the fact that I think it should be trading for 200 times sales. It's that I see no fundamental changes and their core client base and government spending over the course of the next year I have no reason to believe that there'd be a re rating on the stock in the near term.
- [29:02]
B
The vibes will remain high.
- [29:03]
A
The vibes are high.
- [29:05]
C
I think Emily has the right answer there and I just still can't get my head around it. So I have lose just because I just. On all the history of me looking at stocks I don't think there is a valuation that was harder for me to understand. And so I'm just going to assume that it's not sustainable. Although as Emily says, I don't know what's changing.
- [29:25]
B
Yeah, historically buying stocks at 100 times sales doesn't work out well. It has for Palantir's investors. So it, it has confused me and hopefully for them I will be wrong again in 2026. Let's go to another popular company. I want to give you a couple stats here about Apple. Over the last three years the revenue has grown at a compound annual growth rate of 1.8%. Their price to earnings multiple is 36. And yet over that period of time, three years their stock is up 110%. Lou, are they going to continue their market beating ways?
- [30:00]
C
I think they will. And again I don't think it's going to be like a crazy great year but I do think that they are finally sort of getting AI right which is let's just get someone's AI on our phones. And I do think that will help support maybe not this huge super cycle but continued sales. Apple is the definition of fine.
- [30:20]
B
What an inspiring call from Lou.
- [30:22]
C
I wish I had more. I mean I wish, I wish I knew what the next big thing was. But I think Apple's just will continue to be Apple. That's the safest prediction I'll make.
- [30:30]
B
Fair enough. Emily.
- [30:31]
A
I completely agree with Lou. I think Apple beats the market. Maybe it's a bit higher conviction than Lou has though if I don't think Nvidia is going to be the largest company in a year I think it's probably going to be Apple. And for all the reasons Lou mentioned, Apple I think out of all the Mag 7 companies is the most disciplined with its capital management. They haven't over invested in AI, but they also haven't been sitting on their hands with regards to it. The upgrade cycle is still really strong for this company and they're not heavily dependent upon, you know, services or advertising more so than they're on hardware. And I think it's a lot easier to motivate consumers to upgrade even in the environment we're operating in, as opposed to heavily relying upon software.
- [31:06]
B
Yeah, I may help Apple in 2026. A computer, a new iPhone, probably on my list at some point in the year. Lou, what about Amazon next year?
- [31:15]
C
Again I have this as a beat in part Travis, because you made us even up our beats and misses and this was kind of the one I was fence about. So I will say I'm kind of on the fence. Amazon has a lot of capex in a lot of their business and they have a lot of low margin but AWS is just AWS and I think that's enough to drive this truck forward.
- [31:35]
A
I also have Amazon as a beat. I'm now doubting myself as I think about it. I mean the logic at the time when I want to consider this is Amazon is well positioned regardless of the market environment we're operating in. AWS does generate a sizable portion of their operating income. They that's enterprise spending. Consumers generally go to Amazon for low cost goods and they're shipping or changing where they shopped. Amazon still gets a big portion of that. I do have some concerns for Amazon in regards to their capex though and a muted free cash flow year could be bad for them.
- [32:08]
B
Yeah, they also have a huge advertising business that accounts for a vast majority of the profitability for the retail business.
- [32:13]
A
Yes, around 10% of sales and that retail business is low margin to begin with. So the, the margin that's coming from ad placements is good for them. But I will say those are placements that I think again convert really well for the people who are advertising on on Amazon.com and other platforms that I I see less existential threat from versus the search engines.
- [32:32]
B
All right Emily, are you seeing value in Airbnb or will this continue to be a market loser?
- [32:39]
A
I unfortunately view it as a market loser over the next year. I do hope that I'm wrong, but there's a couple of headwinds that I have some skepticism built in for Airbnb. They changed their policy in regards to upfront payments for a lot of their member base. So they get to this strong high margin interest income on revenue that they collect at the time of booking, even if they end up having to give that back to the person in case of cancellations or refunds. And that margin has been really profitable for them. Interest rates are coming down, which is hurtful, but they also change that policy so less people are paying upfront, which also impacts some of their high margin revenue. I don't see any other massive tailwinds here that would cause their sales to otherwise guys be market beating and I don't know where they're going to make up for the margin on that. So in my mind I I think it's a great company and probably fine as an investment, but I don't view it as a market beater in the next 12 months.
- [33:30]
C
Yeah, I'll admit I'm biased because I just came from an Airbnb and I had all of the eye rolls that you get when you're at an Airbnb, just all the little things. But I think Emily said it best. There's another one of these just I love the company, love the business, but I don't know where market beating growth comes from. So I had them losing to the market.
- [33:49]
B
When we come back, we are going to talk about some more stocks on our radar. You're listening to Motley Fool Money.
- [33:55]
A
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- [34:24]
B
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. One of the things I wanted to bring up quickly here at the end is commodities. This has been a hot topic over the past month. Gold outperformed the S P 500 this year. Emily, how are you thinking about commodities going into 2026?
- [34:58]
A
I'm not thinking about commodities in 2026, and maybe that's a hot take, but I think it's a mistake to assume that just because a commodity moves, it's a recession indicator. Right. The classic example is the inverted yield curve, which is what predicted 10 of the last, last three recessions. I mean, there's so many different factors that impact commodity pricing. Some people may view gold as a safe haven, but silver and other commodities are obviously have industrial usage. Demand for gold was driven largely by central banks recently. So there's so many different factors here, and I don't view them as investment so much as, for an individual investor, a panic button in a lot of places, even though core demand is driven by lots of other factors. So when I look at the actual track record, which is episodic at best and misleading at worst, it's not something that makes me want to pay attention.
- [35:41]
C
Yeah, agreed. I think if anything, it's geopolitical and we don't have to get into that now. And it doesn't mean the end of the world. It doesn't mean the end of the dollar. One piece of advice, though, I don't know if it'll continue or not, but if you do think so, just buy the metals, buy the ETFs. I've seen so many people saying it's time to buy the miners. Mining is really, really hard and mining stocks traditionally have not gone well. Please, please do your homework. Just buy an ETF with the metal. If you believe in the metal. Don't, don't just start buying penny stock, copper mines or silver mines, please.
- [36:12]
B
Yeah, this is a much more complicated area than a lot of people think. And there's people that spend their entire lives just looking at metals, whether it's gold, silver. So, yeah, maybe not something for everyone to just jump in, but definitely something to watch in 2026. We like to end the show with stocks on our radar. And I'm going to give you some thoughts. Lou, you are up first. What's on your radar this week?
- [36:32]
C
All right, Travis. One of the stocks I find most intriguing heading into 2026 is Honeywell ticker H O N. Now, this has been a great group of businesses that somehow haven't worked together as far as stock gains. Times are changing. Honeywell has already split off its advanced materials business. It's now Solace, I think it is, that's already trading publicly this year, 2026. They will separate the remaining businesses, aerospace and automation, into two independent companies. These are all very interesting businesses on their own. I'm kind of hoping, thinking we might see something similar to what happened at Georgia. Another multi year, disappointing. Conglomerate split itself in three. We saw the strength of these businesses and the parts have all kind of taken off. Honeywell and its many pieces I'm really watching in 2026.
- [37:18]
B
Really, really intrigued if I have to pick one. Solstice, Honeywell Automation and Honeywell Aerospace. Which one should I be looking at?
- [37:26]
C
You know, we talked about robotics before. The automation business is a lot of the kind of tools behind that. That and aerospace are probably the two that I might want to add to my portfolio. One Monday.
- [37:38]
B
Emily, what's on your radar?
- [37:39]
A
Okay, I know this is going to be a hard sell for you, Travis, but hear me out. Novo Nordisk, the ticker NVO is on my radar. This is the Danish drug maker who's best known for making Ozempic and Wegovy. And there's so much skepticism on this company right now, a lot of it earned. But I think at this point has become entirely overdone. They are losing to Eli Lilly in the interim. And there's issues around reimbursement. Obviously really expensive. But I do think that Novo Nordisk has one of the most effective methods of weight loss on the market today, with the strong pipeline of new drugs and a lot of potential few treatments associated with semaglutide, which it mostly still has on our patent. So I think there's opportunity left in front of this company that investors are just writing off.
- [38:19]
B
GLP1s are about half of Novo Nordisk's revenue. As more and more of these products hit the market, we've got the oral product coming. It just seems like there's more and more competition. Is that a worry that both sales growth and also margins are going to be impacted negatively?
- [38:33]
A
That's certainly what the market is pricing in today. But I will say the reason why those concerns exist around competition and pricing is because demand is so high. There are so many people that can benefit from these drugs that don't have access to them. So prices should and rightfully will come down. But I still think demand will be there for Novo Nordisk.
- [38:50]
B
Emily, I'm sorry, but with Honeywell getting at least, you know, splitting up that automation business, I'll give Lou the nod here, but I'll at least take a look at Novo Nordisk. An interesting space for 2026. That's all the time that we have. Thanks to Emily and Lou and Bart behind the glass, I'm Travis. William, thanks for listening to MLE.