Cover:
-In the second installment of Barron’s 2026 Roundtable, five investment experts shared their 30 stock picks, highlighting companies like DoorDash, LVMH, Home Depot, Starbucks, and Nike. The selected stocks are characterized by being undervalued, with potential for recovery due to factors including temporary setbacks from economic trends, managerial issues, or positioning for growth in the artificial intelligence sector. The panel, composed of seasoned portfolio managers such as Henry Ellenbogen and Christopher Rossbach, expressed a strong commitment to active stock-picking in contrast to the trend of index fund investing. Their discussion took place on January 5, 2026, in New York, focusing on market dynamics and future investment opportunities, with two sets of recommendations presented over the course of the Roundtable series.
Interview:
-No update
Tech Trader:
-Meta Platforms, under CEO Mark Zuckerberg, is embarking on a major initiative named "Meta Compute," aimed at establishing a global network of artificial intelligence data centers, with projected investments exceeding one trillion dollars. This strategy marks a significant pivot towards AI-first operations, necessitating substantial financing beyond the revenues from Facebook and Instagram. Meta invested approximately $70B in AI data centers in 2025, an increase from $37B the previous year, and anticipates even higher expenditures moving forward, as the operational costs for large-scale data centers can exceed $50B/gigawatt, especially using Nvidia hardware. Zuckerberg's ambitious plan involves building tens to potentially hundreds of gigawatts of power for these centers, creating a strategic advantage in AI infrastructure as new designs often incorporate on-site power solutions to meet continuous energy demands.
The Trader:
-Hilton, Marriott, and Hyatt are experiencing high stock values, with shares approaching record prices as traditional hotel amenities like room service draw customers back from short-term rentals. Analysts anticipate midteen profit increases for Hilton and Marriott, with Hyatt's long-term earnings growth projected at over 25%. However, their current premium valuations—29 times earnings for Marriott, 33 for Hilton, and a striking 46 for Hyatt—raise caution among investors. In contrast, Wyndham Hotels & Resorts and Choice Hotels represent more affordable options in the lodging sector, with Wyndham trading at a price/earnings ratio of just under 16. Mizuho analyst Ben Chaiken suggests Wyndham's valuation is unduly low compared to its peers, arguing for an adjustment closer to 15 times Ebitda. Both Chaiken and Truist analyst Patrick Scholes endorse Wyndham and Choice Hotels, with stocks considered to offer better investment potential due to their lower valuations.
-Netflix is making significant moves to enhance its presence in the movie industry, particularly with its pending acquisition of Warner Bros. Discovery’s streaming and studio assets, despite facing some investor backlash leading to a nearly 5% drop in IMAX's stock since the announcement. However, IMAX CEO Richard Gelfond remains optimistic, viewing Netflix as a partner rather than a competitor, especially as IMAX prepares to exclusively showcase Netflix’s adaptation of Narnia for two weeks this Thanksgiving before its streaming release. The performance metrics support this confidence, with IMAX reporting a 14% increase in domestic box-office revenue for 2025, contrasting sharply with a mere 1% increase for the overall US box office. IMAX's market share has grown from 3.9% in 2024 to 5.1% in 2025, indicating a shift in consumer preference towards premium movie experiences. Analysts, including Eric Wold of Texas Capital Securities, project continued growth with a favorable film slate for 2026, including titles like The Odyssey and Toy Story 5, and they maintain positive ratings on IMAX stock, with price targets around $42 to $47, suggesting substantial upside potential.
Features:
-Founded in 1962 amidst the Cuban Missile Crisis, CACI, based in Reston, Virginia, supplies national security technologies to the USA, UK and 15 NATO countries, with plans for further expansion. The company's offerings include sensors for detecting drones and threats across land, air, and sea, as well as agentic AI software for analytics and human expertise in software, cyber, and military fields. The national security market is valued at approximately $280B, and CACI is increasing its market share, reporting a revenue growth of 11% year over year, reaching $2.3B in the first quarter of fiscal 2026; diluted earnings per share increased by 15.5% to $6.85, and free cash flow surged by 189% to $143M. CACI’s backlog has also reached a record $34B, indicating strong demand. For fiscal year 2026, CACI maintains revenue growth projections of around 8% to $9.3B and aims for a 22% increase in earnings per share, alongside a minimum of 16% growth in free cash flow to $710M. Recent announcements included four major US military orders totaling up to $852M.
-In early 2026, the stock market, notably the S&P 500, reached new records despite a chaotic global environment, showcasing a 1.2% return for the year. Analysts, including Christopher Smart from Arbroath Group, caution against interpreting this market performance as a sign of overall stability, given the alarming geopolitical events such as the US capture of Venezuela's president, threats of military action in Iran, and concerns regarding the Federal Reserve's independence. These events have created significant risks, yet the market has historically struggled to reflect such uncertainties accurately. Smart notes that while growth indicators, like the Atlanta Fed's GDP growth forecast of over 5% for Q4, appear positive alongside moderate inflation rates, investors remain uncertain how to factor in these geopolitical threats, potentially leading to future market recalibrations as risk premiums adjust to reality.
Europe:
-President Donald Trump's campaign for US control over Greenland poses significant risks to NATO's stability and the dollar's economic dominance. Trump argues that Greenland is crucial for national security to counter Russia and China in the Arctic, intending to bolster the US air and missile defense system. However, Denmark, which has governed Greenland for centuries, along with European allies, firmly opposes this takeover. The White House has indicated a potential military approach, which could fracture NATO, as articulated by experts like Michael Froman and Jacob Kirkegaard, both highlighting the dire economic and political ramifications. Trump's history of conflict with NATO has already strained US-European relations, worsened by recent tensions over Ukraine. European nations view territorial sovereignty as non-negotiable, reinforcing their support for Denmark against US ambitions. Possibilities for resolution include Denmark maintaining sovereignty while allowing the US to enhance military presence, or negotiating access to Greenland's mineral resources.
Emerging Markets:
-No update
Commodities:
-William Blair has initiated coverage of MP Materials, a rare-earth metals producer, with a Buy rating, projecting that the stock will outperform the market. Following a significant defense deal, the average analyst price target for MP Materials rose dramatically from $27 to $79, reflecting increased optimism; all 17 analysts currently rate the stock as a Buy, an increase from 67% before the deal. Although MP stock experienced volatility, peaking at $68.44 and closing at $63.82 (down 2.3%), it has soared over 225% in the past year. The deal with the Defense Department is pivotal, as it includes an equity investment, a price floor for rare-earth materials, and a commitment for new production. This agreement addresses concerns over China's dominance in rare-earth production, which poses risks particularly for US defense supply chains. Prior to the deal, analysts had predicted a price target of $27 per share, illustrating the substantial impact of this transformative agreement on investor sentiment and stock outlook.
Streetwise:
-Tesla CEO Elon Musk predicts that Optimus robots will become top surgeons by the end of the decade. Walmart is collaborating with Alphabet to expand aerial drone delivery, reaching 40 million customers next year. Amid such innovations, small-cap stocks have been outperforming since mid-November, suggesting a potential long-term resurgence rather than a temporary blip. This shift may be linked to a recovery from a prolonged earnings recession among small companies. Historically, small-cap stocks experience cycles of significant performance changes over spans of about ten years. While small-caps may appear cheap trading at 18X 2025 earnings compared to 25X for the S&P 500, their relative value depends on the index used. Since November, the Russell 2000 index (41 times earnings) has outperformed the S&P 600 and 500 index, indicating diverse investment landscapes among small-cap companies.