B (3:06)

All right Rachel, who's on your nice list this year?

D (3:09)

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 Americ. I mean this is a region where both digital commerce and financial services are still really heavily under penetrated 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 and well run business. Switching to a completely different sector. Retail, right? Not the most loved space this year to be sure, but TJ Maxx, a.

B (3:54)

Lot of retail losers this year.

D (3:55)

There's been a lot of retail losers this year. A few of them are on my naughty list. But TJX companies is on the nice list, right? The parent company of T.J. maxx and Marshalls. They are an off price retailer. They've had a really resilient business model. Their smart buying strategies have paid off and it's interesting because we've seen that that off price treasure hunt model that they deploy tends to really thrive in various. They've been a really smart buyer of goods. They've been really efficient at sourcing and moving their inventory around. So that's one in the retail space. Finally, Klarna in the buy now, pay later industry, right? The fintech company, they recently went public in the us they're gaining significant market share. They've got newly launched partnerships with major retailers like Walmart and ebay. And beyond being a traditional buy now pay later business, they operate as a digital bank in Europe. So really fascinating company and one that I think investors should watch going into the new year.

B (4:52)

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 you know, maybe we'll look back and say that buying your groceries from Walmart on buy now, pay later, maybe not a great idea.

D (5:08)

I don't think it's a fad. I don't think it's going anywhere. I think this is going to be one of many tools in the consumer's toolkit. I mean, there's probably a different discussion to be had about how wise that can be from a fiscal perspective, depending on what purchases it's being used for. But I think it's also proven to be a meaningful tool for a lot of consumers to spread out the financial impact of big purchases. And like it or not, in difficult macro environments, I think we see usage of those tools increase even more. So I, I don't think that's going anywhere.

B (5:38)

When we come back, we are going to talk about some stocks on our naughty list. You're listening to motley fool money.

E (5:43)

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B (6:48)

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.

C (6:58)

Yeah, so we 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. Okay. 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. Great job there. Regulators, iRobot, remember. Remember when they wanted to sell? I remember that.

B (7:48)

They were supposed to be the future of robotics, right?

C (7:50)

Apparently they were. And so we can't let Amazon own that. They ended up liquidated to their Chinese vendor.

B (7:57)

So yeah, so the idea there was Amazon can't have the data, but now China has it. So maybe not a great win.

C (8:04)

Great, great year. Expect that coal in your stockings. A couple others if you want though. Like with companies Fiserv ticker fi. They're down 65% year to date. I mean, Travis, I still don't know what to make in payments. I don't know who the big winners are. But the market decided that the clover terminal Fiserv's big product. That's not gonna be the big winner. Extra points for when your business decisions end up this target of congressional inquiries that's gonna be on the n. 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 naughty. I still believe in the company, but I'll say this. They have a lot of work to do to stay off of the naughty list in 2026.

B (8:57)

Rachel, who is on your naughty list? Lou's on fire there. So you got some pressure back in there following that up.

D (9:03)

I know. I mean, I think it goes without saying that there's a lot of consumer goods stocks that are on the naughty list this year. So I had a lot of choices to pick from, but I went with Target and Starbucks. Right? Both of these companies, their stocks have seen significant declines this year. Target shares are down about 30% year to date. Last I checked, Starbucks is down in the single digits. But you know this is a myriad of issues here, right? You have a situation where high inflation is making a lot of consumers more price sensitive. They're cutting back on non essential purchases. This has hit Target particularly hard. About half of their sales come from discretionary items. They've been lagging way behind the performance of companies like Costco and Walmart. Then you've got Starbucks. Of course they're selling kind of expensive non essential drinks. That's an easy area for consumers to cut back in.

B (9:47)

In a difficult, not essential for some, for some people, coffee is not essential.

D (9:51)

I mean, I don't want to tell you to make your coffee at home, Lou, but, but you know, the other thing is there are issues that are very specific to these companies. It's not just 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. 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 in core big markets like China, which is their second largest market outside of the US So there's a lot of issues afflicting these businesses. They're losing market share. Can they make a turnaround in 2020? I would be looking more for a turnaround going into 2027 if I'm being honest. But certainly I think both these companies get some coal in their stocking this year.

B (10:41)

When we come back, we are going to go holiday shopping. What are we going to be buying? We'll talk about that next. You're listening to Motley Fool Money.

A (10:49)

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B (11:52)

Welcome back to Motley Fool Money. As the holidays come to an end, we finally get to Go shopping for the things we really wanted, maybe didn't come under the Christmas tree. So Rachel, what are you shopping for from an investment standpoint going into 2026?

D (12:07)

Well, I mean, you guys know healthcare is a huge area of focus for me as a stock analyst here at the full. So Eli Lilly, Pfizer, those are a couple healthcare companies that I'm looking at. But there's a few retailers, right? Walmart, Costco, Lululemon looking a bit undervalued as well as attractive in the retail space. I have to agree with Lou. I think Alphabet is looking like a really compelling buy right now. I say this as a existing and longtime shareholder of the business, but I do think it's important to also note when we're really identifying an undervalued stock to differentiate that from a value trap, you've got to look beyond those low valuation metrics. A lot of these undervalued stocks, they might be mispriced due to short term issues. Value traps on the other, tend to be cheap for a good reason. If you're looking for a truly undervalued business, you need to look for consistent and growing revenue, stable profit margins, positive cash flow, a sustainable moat and competitive advantage that protects the market position. Really key to differentiate between that versus stocks that maybe appear inexpensive based on traditional metrics but are fundamentally struggling.

B (13:09)

Couple of those. Walmart and Costco do look pretty expensive. Does that where you especially if the consumer starts to pull back. I mean, is it possible we haven't had a true recession for quite a while. It's possible that happens in 2026.

D (13:21)

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 maybe more.

B (13:34)

Less discretionary than coffee.

D (13:36)

Less discretionary than coffee. Right. Costco on the other hand, you know, they make most of their profits from those membership dues, which has been something that's really enabled them to succeed in so many different macro environment. So I like both these businesses going into the new year.

B (13:51)

All right, Lou, what are you shopping for?

C (13:54)

I'm glad you qualified to have a stock. So I don't go talk about the Lego Saturn rocket for just hours because that looks so cool. But look, two kind of themes that I'm looking for heading into 2026. First of all, and I've been saying this for a while, I think it's still true. There are so many opportunities Right now in financials and REITs and other areas that have kind of just been ignored. Once we're all focused on AI, interest rates are coming down. That tends to 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 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, 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.

B (14:59)

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 down market, sometimes those stocks get hit harder than any anything else and that's where the real opportunity is. Is that how you're thinking about the market, if we do have a pullback?

C (15:27)

Yeah, I don't tend to have cash on the sidelines. I have cash and then I have equities and I just kind of buy with, you know, money I'm putting into equities. But so not really waiting for that. It's hard to time. But yes, definitely, I think, I mean downturns are the best 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 on sale.

B (15:49)

As always, people on the program may have interest in the stocks they talk about and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows the Motley Fool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes for Lou Whiteman, Rachel Warren, Dan Boyd behind the glass. I'm Travis Hoyam. Thanks for listening to Motley Fool Money. We'll see you on Friday.