Plus, our best and worst stock calls in 2025.
On this week’s episode of The Morning Filter podcast, Dave Sekera and Susan Dziubinski take a look back at some of their best and worst stock buy and sell calls of 2025. Although Morningstar’s approach to stock investing is decidedly long term, they discuss why reviewing stock pick hits and misses each year on the podcast is nonetheless important.
They end wrap this week’s episode with four undervalued stock picks from 2025 that still look attractive heading into the new year.
Episode Highlights
00:00:00 Welcome
00:01:25 Morningstar’s Stock Picking Strategy
00:06:03 How Our Stocks to Buy Did
00:38:10 How Our Stocks to Sell Did
00:46:38 Cheap Stock Picks for 2026
Read about topics from this episode.
December 2025 Stock Market Outlook: Where We See Investment Opportunities
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Viewers who’d like more information about any of the stocks Dave talked about today can visit Morningstar.com for more details. Read more from Susan Dziubinski and Dave Sekera.
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Susan Dziubinski: Hello, and welcome to The Morning Filter podcast. I’m Susan Dziubinski with Morningstar. Every Monday before market open, Morningstar Chief US Market Strategist Dave Sekera and I sit down to talk about what investors should have on their radars for the week, some new Morningstar research, and a few stock ideas.
Now this week, Dave and I are engaging in what’s become an annual holiday tradition here at the podcast. We’re reviewing some of our best and worst stock calls from 2025, and we’ll share a few picks from 2025 that Dave still likes heading into the New year. We’re taping this episode on Monday, Dec. 15. But before we begin, a programming note: This is the final episode of The Morning Filter podcast for Dave and I this year. We’ll be back with a new episode on Monday, Jan. 5, where we’ll recap 2025 and share some thoughts about what’s on radar for 2026. We hope you’ll join us then. And Dave and I would like to wish our viewers and listeners a very happy holiday season.
All right. Well, good morning, Dave. Before we dig into your stock hits and misses from the year, remind viewers what Morningstar’s investing philosophy is about. It’s really not short-term, is it?
David Sekera: Exactly. I mean, when you think about Morningstar’s investment philosophy, it’s really looking to focus on investing for the long term. And I think a lot of people sometimes confuse the difference between investing and trading. In my mind, those are two very different activities. With trading, essentially, you’re just looking to scrape some small, short-term profits off of a stock movement, typically either just due to some momentum factors or maybe a hard catalyst. And I’d say there are just very few people that I think are really adroit enough in their trading to be able to do that consistently and make enough money really to make that a full-time pursuit. Now, investing, on the other hand, is really conducting the research, doing the due diligence, doing your analysis to determine what you think the intrinsic value is for a company. Now, the intrinsic value in our mind is really just the present value of all the future free cash flows that a company is going to generate over the course of its lifetime, discounted at its weighted average cost of capital. And then you take that and look for those situations where stocks are trading at a significant, risk-adjusted margin of safety from that valuation. And then, of course, look to sell those stocks that are trading at a significant, risk-adjusted premium to that valuation. Now, considering how much noise there can be, how much sentiment changes there are in the market, sometimes it can take up to a couple of years for a stock to trade to what we think that intrinsic valuation is.
And I also have to acknowledge, no matter how much research you do, how much you think a company or a stock. There’s just always going to be instances where you’re wrong or the underlying paradigm changes. So really, for long-term investors, it’s just a matter of you need to be right more often than you’re wrong. You need to be able to ride those winners up and then be able to cut losses to the downside. So, just to reiterate, if you’re looking for short-term trading ideas, this is just not going to be the right podcast for you. Plenty of others out there where people are happy to give you trade ideas. This is really looking for those stocks that we think are trading at a big premium or a big discount from that valuation. I’d also say, too, investing in individual stocks is just not going to be the right thing for a lot of people. Investing in individual stocks going to require a lot of time and effort, requires a lot of ongoing analysis. So for a lot of investors, you’re probably just better off investing in ETFs and mutual funds, where you get broader diversification. And I would say, in my opinion, I think most investors are also going to be best off starting off with that broadly diversified portfolio in ETFs and mutual funds. And then, once you have that diversified portfolio, then go ahead and determine, like, what percentage of that you’d be willing to put into individual stocks, even before you start trading any one stock or another.
Dziubinski: All right. So, Dave, if Morningstar’s approach is longer-term, why do you insist every December that you and I sit down and we do a picks review at the end of every year?
Sekera: There’s a number of different reasons. I mean, first of all, unfortunately, there’s just not enough time every week for us to be able to talk about whatever new news is coming out, whatever. The changes in valuations or star ratings are on all of the stocks that we’ve highlighted or recommended over the course of the year. So, of course, in that case, I would certainly recommend to use some of the Morningstar tools to be able to develop watchlists. And that way you can monitor day to day, week to week, any new research that’s coming out. Any changes to our valuations, changes in star ratings, and so forth. So getting to your question, why do we do this year-end review? So first, I think we just owe it to our listeners. And to be honest, one of my goals for 2026 is going to be trying to figure out other ways to be able to improve our own accountability on an ongoing basis. Second, I think it’s just a good opportunity as well to be a learning experience, look at what’s worked and what didn’t work, and for those stocks where it hasn’t worked out, why hasn’t it worked out? Investing is always just going to be a process of continual improvement. And then, of course, lastly, looking for those opportunities where maybe the stock has run too far to the upside. Good time to be able to lock in profits. Identify those situations where maybe it’s a good opportunity to dollar-cost average down for those stocks that have traded off but yet still look attractive. And then, finally, try and identify where we’ve been wrong. Go ahead, take those losses, and move on.
Dziubinski: All right. Well, let’s get to the picks review. We’re going to start with five of your stock picks that haven’t worked out yet. And we’ll start with Baxter International, which is ticker BAX. Now, Baxter was a pick of yours a couple of times in 2025. And then in late October, the company lowered its guidance and cut its dividend. So walk us through what happened here.
Sekera: Yeah, so this was a recommendation on the March 31 episode and July 14 episode of The Morning Filter. So by way of background, this was a stock that actually was overvalued, was a 2-star-rated stock back in 2021. The stock has really just been on a four-year downward trend ever since. Short story here, supply chain issues hit the company pretty hard in 2022 and 2023. At that same point in time, inflation hit their margins pretty hard. They weren’t able to pass through those higher costs in their contracted agreements. So the investment thesis had been in 2024, we were expecting supply chains really to start normalizing. And that Baxter would then renegotiate a lot of those contracts to then include those cost pass-throughs in 2024. And so that was expected to then lead a turnaround in 2025. Unfortunately, that turnaround just hasn’t happened yet. Companies reported weak results pretty much all year. As you mentioned, most recently they provided downward guidance. That’s now the second quarter in a row that they’ve reduced guidance. And really, that’s just been especially disappointing, as fourth quarter historically has been a seasonally strong quarter for them. At this point, I just don’t think we have any better clarity on when that turnaround really should begin to start taking hold here. So I would just say at this point, an investment here is going to require a much longer time frame to play out than I think what we originally anticipated on this one.
Dziubinski: So any idea, do you feel like the worst is behind for Baxter and do you think the stock’s attractive?
Sekera: I wish I really had a crystal ball on this one. I mean, every time we thought that the worst was behind us, some new negative news just seemed to continue to keep coming out. So when I look at our valuation today, it is a 5-star-rated stock. It trades at about half of our fair value. Took a look at our model. We’re really not expecting much. We’re only looking for 1.5% revenue growth in 2026. For 2027, we’re actually looking for a very slight contraction, about a negative 0.5% growth, and then looking for normalized growth thereafter of about 4%. We are looking for margin improvement in 2026 to 6.9%. That’d be up from 3.4% this year, and then looking for that to continue to expand and rebound thereafter. Yeah, historically, before this company ran into trouble, the operating margin averaged 13%. When I take a quick look at our earnings, our EPS estimate for 2026 is a $1.89, $2.13 for 2027. So at this point, the stock trades at 10 times our 2026 estimate, 9 times our 2027 estimate. So it seems like at these levels, the market has just thrown in the towel on this name, and maybe that’s the buying opportunity at this point. I mean, to some degree, at these levels, it just needs to stop getting worse and really stabilize. And at that point, then it does seem like there is a lot of upside to our analyst evaluation here.
Dziubinski: All right, so cheap, but a lot of patience required on it. Now, FMC was a pick in January, and it’s down quite a bit since then. And on the Nov. 10 episode of The Morning Filter, you sat down with the Morningstar analyst who covers the stock, and you guys really did a deep dive into the name. So just give viewers today a quick recap on what went on here with FMC and what you think of it today.
Sekera: Yeah, I mean, I’ll acknowledge FMC has been by far absolutely the worst pick that we’ve had this year. It’s down 72% from the beginning of the year. And since the beginning of the year, we’ve also cut our fair value by 45%. I actually took a quick look. The credit ratings of the company are also continuing to weaken. Looks like they’re currently rated Baa3 by Moody’s, but they are under review with a negative outlook. So, fully expect Moody’s will downgrade them to below investment-grade as well. S&P’s already downgraded them to BB+. They have a negative outlook there as well. So these ratings are within that junk-rating territory. Granted, on the higher side of being rated junk, but still junk, nonetheless. I don’t think there’s anything else to say other than I think we just ended up misreading the situation.
As you mentioned, I talked to Seth on Nov. 10. So if you missed that one, or if you have an interest in this stock, I’d highly recommend going back to that. Fast forward into 18 minutes into the episode, and that’s where our discussion begins. Quick synopsis here, though. Patent expirations, generic pressure had been much more severe than we originally modeled in. Operating margins have been under a lot greater pressure than what we had originally expected. The company just hasn’t been able to cut costs enough to be able to compete against generics. So at this point, the story right now is about how fast can their new patent and products grow to more than offset that pressure from the generics. Looking at Seth’s financial models, that calls for the decline in revenue to stabilize, grow slightly in 2026. Looking for the adjusted operating margin to recover to 14.1% from 7.5% and continue to recover thereafter. For point of reference, the adjusted margin going back to 2011 averaged 16.1%. Our EPS estimate for 2026, that forecast is $2 a share. Based on where the stock is trading right now, that’s at 7 times, so deep, deep into value territory. Tells me the market is actually probably expecting much lower earnings than what our current estimate is.
So, as we discussed in November, the market just completely lost confidence in this company. It’s going to be a “show me” story for a long time until the company can prove that these new products that they’re bringing out is gaining traction, that these new products will be able to bolster their operating margins, so if this is one that you’re involved in, or maybe at this point thinking about getting involved in, I would say reserve this for the part of your portfolio that’s going to have the most speculative investments in it. This one could be very volatile for quite a while until the story works out.
Dziubinski: All right. Dow, which is ticker DOW, was a pick in early March this year. The company cut its dividend over the summer after a longer than expected downturn in the business. And Morningstar cut its fair value estimate on the stock a couple times this year. So talk about it,
Sekera: I mean, we’ve cut the fair value by a total of 35% over the course of this year. But again, the results have been much worse this year than what we had originally forecast. So, by way of background, the company’s key end markets include global constructions, auto, those type of things. They’ve had below-normal demand in both of those markets, that’s led to lower volumes. Generally, we think the global commodity chemical market is oversupplied. At this point, we were surprised by the dividend cut. Our base case had been that they should have been able to maintain that dividend. Now, in his most recent note write-up here, the analyst did note that he thinks the company should now be able to maintain the current dividend for the next three quarters, even if the demand picture remains relatively poor. However, if demand doesn’t start to recover, that dividend could be at risk once again.
Took a quick look at the credit ratings here. It’s a Baa2 BBB, negative outlook by both agencies. So I would say I wouldn’t be surprised to see this one downgraded another notch by both, but probably still remains investment-grade for now anyways. Looking forward, the commodity chemical market, especially in Europe and Asia, are both still oversupplied. We expect that with that oversupply and the low margins, some of that capacity should start getting shut down if it’s not already in the process of being shut down. That then would move the market back into more of a supply/demand balance by the end of next year. And I think that’s where the narrow economic moat in the story really comes in. So Dow’s moat is really based on cost advantages. So it should be better positioned than its competitors to be able to survive this ongoing downturn.
Taking a quick look at our model, we forecast the revenue decline of 4% in 2026. That would be the fourth year of sequential declines. And then we’re looking for growth to get back to, like a 4% type of compound annual growth rate going forward. We’re looking for the adjusted operating margin to turn positive in 2026. But even there, since we break even, we’re only looking for eight tenths of a percent operating margin. That’s after being negative in 2025. And then slowly start to normalize, averaging 8% over the next three years. That gets back to kind of what the average had been—8% from 2020 to 2024. So we are looking for negative earnings here in 2026 and then turning positive. And having a forecasted earnings per share in 2027 of $1.48.
Dziubinski: Given that those projections for 2026 don’t sound that exciting, do you think there’s an opportunity here with Dow?
Sekera: I think it’s pretty tricky thinking about the timing on this one. So I think to some degree, the investment thesis really depends on, one, if we’re right about competitors reducing their supply in order to get the market back in balance and not being able or not, willing anyway, to eat losses until the market starts to rebound and the global economy starts to rebound. It is a 5-star-rated stock, trades at about half of our fair value. So the question is, do you dip your toe into the water here? I just note the stock has been trading at a range between $20 and $25 since last August.
Now last quarter, they reported poor results. Revenue was down year over year across every segment, yet immediately after that report, the stock rallied a little bit. And that, to me, is probably an indication that the market already expected those weak results, and that was already at enough of a discount that you’re starting to see some people who are willing to start dipping their toe into the market here. So at this point, this is another one that I think should be in that more speculative portion of your bucket where while there is significant upside potential, if it trades at half of our fair value mathematically, we think this stock over time could be a double. But I also think that based on what’s going on with China and the global economy, things might remain weak here in the shorter term before we start to see kind of that expansion that we’re looking for.
Dziubinski: OK, Bath & Body Works, which is ticker BBWI, was a pick in late August. The company posted pretty weak third-quarter results. Morningstar trimmed its fair value estimate by $6, and the stock has really struggled, though it has shown some signs of life during the past few weeks. So what’s your take on Bath & Body Works today? Is this still something you like?
Sekera: Well, this is one where the stock was starting to slide a bit even before that earnings announcement. But I think the earnings announcement and the weak guidance really did surprise the market. The stock got hit pretty hard after that came out. Our analyst noted that the guidance indicates a high-single-digit sales decline and earnings being down 18% in the fourth quarter. So that’s really signaling to the market an accelerating demand weakness for this holiday season. And, of course, the holiday season represents about 40% of their annual sales. So that’s why it’s hurting the company so much here in the short term. The market is pricing in ongoing deterioration from here. When I look at the stock and I look at EPS, we’re looking at $2.83. Stock’s trading, I think, just a hair under 7 times that. So at this point, company has announced that they’re embarking on a turnaround plan.
In our model, we’re really only expecting a pretty stable kind of growth, looking for 1.2% compound annual growth rate for the next five years. Looking for margins to expand to 17.4% in 2029 from 15% this year. And again, even getting back to that 17.4%, it’s a lot lower than where it’s been in the past. It’s averaged 18.4% over the past five years. So this is one where I think it’s the same thing. Very undervalued, a lot of upside potential over time. But it looks like with as tough of a holiday season as they’re expecting, it’s going to be several years before this one really starts to work once again.
Dziubinski: All right. So the last stock pick that we’re going to talk about today that hasn’t really worked out this year has been Americold Realty, which is ticker COLD. This one was a pick early in the summer. So what happened here? And do you still like the stock today?
Sekera: Yeah, I mean, so essentially, the long story short here is Americold and its competitor Lineage started to build too much new cold storage capacity in 2021. And at this point, we’re finally starting to see that new capacity build coming to an end. Both companies really overestimated how much and how long the demand for cold storage was increasing. Of course, there was a huge pickup in demand during the early years of the pandemic, but that demand for cold storage has not only normalized, it’s actually under pressure right now as well. So it’s going the opposite way as opposed to what they were building for. If you take a look at spending at grocery stores on perishable and frozen foods, that’s been getting cut back. Inflation has caused prices to increase too much among those products. Households are under still a lot of pressure of wages, hadn’t really caught up to that past inflation, seeing a lot of substitution effect away from those frozen goods. So margins are just getting squeezed. Cold storage is a duopoly. And when we look at these two companies, they have 70% market share between the two of them and the top 25 markets. But unfortunately, they’re still competing on price. So the expectation is that, as a duopoly, over time, they will get more and more rational.
So at this point, we estimate it could take four to five years for the market to digest as much new supply as they have brought online. And that’s just going to be a combination of a long-term increase in demand for perishables and frozen. And at the same point in time, looking for those smaller, uneconomic players being forced out of the business. So, even with the sector under pressure, according to our analyst model, they should be able to cover and maintain the dividend. Still rated investment-grade by the agencies. 5-star-rated stock, trades about half of our fair value, 7.2% dividend yield. So, undervalued. But another one of these stories where it might even get worse before it starts to get better. And it’s going to take at least a couple of years for this valuation to start to unfold.
Dziubinski: All right. Well, let’s pivot and talk about some good news. And that would be five stock picks that outperformed in 2025 after you recommended them. So we’ll start with talking about Wayfair, which is ticker W. Now, Wayfair was a pick in March, and it’s up significantly since then. And Wayfair also isn’t sort of that standard, what I think of as a “Dave” type of pick. It’s a no-moat company, smaller company. So talk about what happened here and whether the stock is still attractive today.
Sekera: I know on past shows, we’ve talked about an old trader that I used to work for. His name was Jimmy. He was from Brooklyn. And in his best New York accent, he used to say, “Hey, just remember, everything’s always got a price.” So, as you’re mentioning, we rate this one with no economic moat, but it’s just a matter of between where it was trading, what the valuation was, and the fundamental setup that the analyst had highlighted. It just looked like a pretty unique opportunity. I think it’s also a good example of how the market over time often acts like a pendulum. So, by way of background, in 2020, sales had skyrocketed. They were up 55% during the early years of the pandemic. But the stock rallied way too high, well into 1-star territory. In fact, I think it traded at triple our fair value. Results over time just couldn’t justify those type of valuations, and the stock went into a multiyear decline. But then it ended up swinging too far to the downside. It went from being one of the most overvalued stocks under coverage in 2021 to one of the most undervalued stocks here in 2025. So, the investment thesis had been that the company had cut a significant amount of expenses out of their business.
Analyst noted that there would be a lot of fixed cost leverage once that top line began to start growing again. And she was looking for a rebound in sales this year and for the company to start recapturing market share once again. Story’s really played out that way over the course of the year. We’re seeing that top line growth. We’re seeing that margin expansion. And of course, we also have increased our fair value over the course of the year as well. So we’re now looking for a fair value of $80, up from $70 when we first recommended it. But, the stock, I think, has tripled. It was like $32 when we first recommended it. It’s now up in the upper 90s. So at this point, it puts it at that top of that 3-star range. So still within the range we consider to be fairly valued. Starting to get pretty close to t2 wo stars at this point.
Dziubinski: OK, Barrick, which is ticker B, was a pick early in the year and then again you picked it in summer, too. Had a great year as gold prices have surged. So have any other factors been contributing to performance this year, or is this largely a gold story?
Sekera: I think it’s really just largely a gold story. And in fact, in 2024, in April, my original gold pick was Newmont Mining. That one’s also done pretty well since then. That’s back when gold was 2,300 an ounce. But, beginning of this year, when I wanted to make another gold pick and I took a look at our coverage, Barrick was the more attractive of the two. So I believe it was the Jan. 27 episode of The Morning Filter when we recommended it. I think the stock was at like $16 back then. And gold was $2,700, $2,800 per ounce. And as you mentioned, we did reiterate that pick on the June 16 episode when the stock was at $21. It’s now at $43 a share. Gold has moved all the way up to about $4,300 per share. And then I also just want to make sure that people realize this is one where they changed their ticker. I think it was in May. They changed it to just the letter B, as in boy, from the prior ticker, which was GOLD.
Dziubinski: Now, so, given the runup we’ve seen in gold prices, Dave, do you think there’s any gas left in the tank here with Barrick, or is the stock a sell at this point?
Sekera: So my opinion, I think this is one where it’s really going to depend on your own independent view on your outlook for gold. So, our fair value is based on the analyst expectation that over time, gold prices will fall and they’ll fall towards, like, what his estimate is for marginal cost of production. How much it actually costs to get gold out of the ground, which right now that forecast is about $2,000 per ounce. But if you think gold prices stay here or move higher, or even if gold prices stay above his forecast over the next couple of years, then, in my opinion, I think our fair value estimate is probably too low.
Dziubinski: OK. Well, Alphabet, which is, of course, ticker GOOGL, was a repeat pick in 2025. You were recommending it in January and again in November, and I think a few times even in between. It’s been one of your best recommendations this year. So walk through this year’s story on Alphabet.
Sekera: Yeah, I think regular viewers of The Morning Filter probably got tired of hearing me continually talking about Alphabet. It’s one of the few stocks that I recommended over the course of the year, five individual times, as you mentioned, as early as January and most recently as of beginning of November. So. Early in the year, I think there were two things. That really was weighing on the stock, really weighing on the story. That we had a much differentiated opinion from the rest of the marketplace. So first, we thought the market was wrong about the probability that Alphabet would get broken up by the DOJ with the antitrust lawsuit. And even if they did get broken up, our sum-of-the-parts analysis told us that we thought the stock was worth at least as much, if not more, than where the stock was trading at that point in time.
And then, secondly, the market had been very concerned that artificial intelligence would end up disrupting Google search business over time. So it turns out DOJ didn’t break up Alphabet. And then what we’ve seen is that the integration of AI features such as AI overviews within Google Search has actually been driving additional growth and engagement. So it’s done the opposite of what the market was expecting. When I think about our long-term investment thesis here, really nothing has changed. It’s still one of the few companies that has that full stack approach to AI, has the infrastructure, has the software, the applications, it’s applying the ads. And from a fundamental point of view, I mean, all of the lines are still running very strong, especially Google Cloud. It’s been adding more and more capacity over the course of the year. So we’re seeing that, benefit the company here in the second half of 2025 should still provide a very good tailwind in 2026 as well.
Dziubinski: So then would you say Alphabet’s still a buy today, even after the runup we’ve seen?
Sekera: At this point, I think it really is going to depend on how much of a margin of safety below intrinsic value you require. So last I took a look, our fair value is $340. The stock was at about a 9% discount to fair value, has a medium uncertainty rating. So with that rating, it would need to be a 10% discount in order to get to that 4-star rating. So it’s right on that border. If it pulls back just even a little bit from here, then it definitely puts it in that 4-star territory. It’s just, I think this company has a lot going for it. I mean, there’s been a lot of headlines recently about Google’s TPU chips, how they compare versus Nvidia’s GPUs. A lot of good news for the company there. I think Google recently announced its intention to roll out ads on Gemini, its AI chatbot, in 2026. So they’re definitely looking for ways to monetize via ads versus subscriptions. So what we’ve seen with AI is the subscription bot business model does offer more upside per paying user. For those users willing to shell out $20 a month or whatever that subscription is, but the people that are willing to pay that monthly subscription is pretty low. So in this case, I think like less than 5% of ChatGPT users are reported to be subscription users right now. While Google would make less per sub than a subscription model, when you look at just the huge number of users that they have, we think that they probably end up making more money with that ad model than they would with a subscription model. So our opinion is that, if this is done correctly, that actually will also be value additive to the stock over time.
Dziubinski: OK. Well, you recommended Advanced Micro Devices, which is ticker AMD, a couple of times very early this year, when a lot of people were writing off AMD’s role in the AI race. But, of course, market sentiment shifted on that over the course of the year, and AMD has been a winner. So walk us through that.
Sekera: Yeah, a little bit of background here, too. So, in 2023 and early 2024, AMD stock price definitely rode the AI wave much higher, but according to our evaluations, it traded into 1-star territory. It may have even triggered that 1-star stock rating range as well a couple of times. So I think back then, the market probably overestimated AMD’s ability to catch up to Nvidia in the short term. The stock then slipped throughout the rest of 2024, and it was in 4-star range by early 2025. We first recommended it this year on the Jan. 6 episode of The Morning Filter. Overall, the investment thesis has been, and still is, we think AMD will eventually be the number-two player in AI after Nvidia. Now that started to play out here in 2025. They’ve had several different deal announcements that they’ve made, the biggest of which we discussed on the Oct. 13 episode of The Morning Filter. That’s when AMD and OpenAI announced a strategic partnership. AMD is going to supply OpenAI with their AI chips. OpenAI is actually getting warrants for up to 10% of AMD’s stock. And that’s when AMD stock really took kind of that big leg up this year.
Dziubinski: Now, Morningstar has changed its fair value estimate on AMD a few times this year, of course, as new news has come out. So given all that, is the stock a buy heading into 2026, even after that runup this year?
Sekera: Well, we actually saw a pullback here. So the stock peaked at the end of October. It’s pulled back 20% since then. So right now, it puts it right on that border between 4 star, 3 star. So, if it’s a 4-star stock with a little bit more of a pullback, maybe that’s a good time to start with a smaller position. I would just say that, from there, start with that partial position, then set your next level to the downside. So if we do get, any kind of broad market selloff, you can then dollar-cost average in to the downside if we do get that retreat.
Dziubinski: All right. Well, the last winning stock pick we’re going to talk about this morning is Marvell Technology, which is ticker MRVL. The market was discounting the stock quite a bit earlier in the year. You recommended it a couple of times in 2025, and the stock has done in general pretty well since then. So what did Morningstar see here with Marvell that the market was missing?
Sekera: Yeah, and this has been a pretty volatile AI play. So if this is one, you had kind of a position in it, certainly been opportunities to be able to move your position around a bit. The stock soared in early 2024 and in early 2025 moved well into 2-star range. And then it just dropped like a rock in late January and into February. So we first recommended the stock on March 17. At that point, the stock was already down 40% from its highs. And then we reiterated that call on May 12. So I think the real differentiation here is two different areas where we have much more bullish forecasts than the market.
First, being in their custom AI accelerators, and second, in the optical connectivity products they have for data centers. We also talked about this summer, there was a hard catalyst. We had noted that Marvell was hosting a webinar to present details on its XPUs, XPUs being its custom AI accelerators. We expected that would allay a lot of the market concerns. The market was concerned that their technology was starting to lose out to competitors. We didn’t think that that was true. So when they hosted this market webinar really highlighting some of their products, I think it did end up having really the outcome of helping to calm some of those fears that the market had, that the company was losing out to some of its competitors. And I think that’s helped the stock kind of remain up until the right momentum over the past couple of months. And then it doesn’t hurt that they’ve also announced some other wins, as they have with Microsoft. So some good momentum on this one, although a little bit of a pullback most recently.
Dziubinski: So then, how does Marvell look today from a valuation standpoint? Would you say it’s still attractive?
Sekera: Yeah, so this one, I mean, the stock had run up to our fair value, but we actually just recently raised that fair value up to $120 a share from $90. And that was following their earnings announcement, which they beat expectations there. So, at this point, there’s still a lot of concern in the marketplace regarding their competitive dynamics. The stock sold off. There were reports that Microsoft was out there in talks with Broadcom. Our opinion is that this really is much more Microsoft risk management activity, getting some multisourcing contracts in a place so that they’re not solely reliant on Marvell. It’s not an indication, in our view, that Marvell is losing its edge.
I’d also note, too, our analysts noted that our valuation isn’t completely contingent on being a sole source for Microsoft AI. So I would say take a look, read his most recent stock analyst note. He kind of outlines his argument there and why he remains confident in Marvell’s design skills. So, in my opinion, I think this is still a stock that’s going to remain pretty volatile over time as that confidence in the company’s technology ebbs and flows. Again, we’re not traders, but I think this is a stock you can probably manage around a position. Be able to dollar-cost average in to the downside when the market doubts, kind of reach that crescendo to the downside, and then be able to take some profit to the upside When Marvell is able to assuage some of those market doubts.
Dziubinski: Now, we also occasionally talk about stocks to sell on The Morning Filter. And given the number of questions we receive from our audience about that, in particular, the sell decision seems to be a tough one. So do you think that most investors do find it to be the harder decision—when to sell? And as a second question, any tips on how to think about that and how to move out of a position?
Sekera: I fully agree that that sell decision is often some of the hardest to be able to make. So, while we certainly advocate for investing for the long term, that doesn’t mean buy and forget. We also advocate for managing your investments and your positions, being able to weight your portfolio in those areas that we see a large margin of safety below intrinsic valuation. And then take profits when those investments are moving up and trading it too high of a premium to its intrinsic valuation. So whether that’s at the entire stock market level, if you remember, we advocated an underweight in the beginning of 2022 in our market outlook and then moved to kind of that market weight And then overweight later that year after the market sold off. I think it was on the April 7 episode this year of The Morning Filter, we moved to an overweight recommendation after the market had dropped too far. And we’ve also made a number of recommendations by style, capitalization, and individual stocks.
But getting back to the original question, the selling decision is just as, if not more, difficult than buying. So I think as an investor, you just have to accept the fact rarely, if ever, are you going to top tick a stock when you want to sell, just as you’re never going to be able to bottom tick a stock when you’re buying to the downside. And that’s why I prefer doing that dollar-cost averaging to the downside. And then when the stock is moving up, layering out to the upside as well. So you’re not making all in and all out every time you buy and sell a stock. Thinking about how to do this, I would say, even before you buy a stock, determine how large of a position compared to your overall portfolio you would be willing to own of it at the end of the day. So when you buy a stock, buy that partial position and then set a range first to the downside. If it hits that, that’s going to be your trigger to take a look and decide whether or not you want to buy more. And then also set that upside trigger that, if it hits that number, that’s where you’re going to be willing to start taking some profits. And of course, you always have to continually reevaluate if anything has changed, anything has changed your investment thesis since you first made that buy or sell decision, and then if really anything hasn’t changed, that’s when you go ahead, execute that trade. And then you need to set kind of those new ranges as far as your targets.
Dziubinski: All right. So let’s talk about three stocks that you’d recommended investors sell, but the stocks kept going up. So these were sells that maybe shouldn’t have been sells. OK. First, we’ll talk about Broadcom, which is ticker AVGO. Now you recommended selling this one in June, and it’s generally done pretty well since then. So do you think Broadcom is still a sell today?
Sekera: Yeah, and I’ll admit this is just one of those years. Anything that you’ve recommended to sell has probably been the wrong decision. I mean, even some of the best sell recommendations that we made are only down a couple of percent from where we made that recommendation. Now, granted, on an opportunity cost basis, if you sold and it went down a couple percent and you reinvested in the broad market, you’re still looking better off. But getting back to the question here with Broadcom, no, it’s actually not a sell at this point. And I think this is an example of how our analyst team adjusts their fair values as they incorporate new or different information into their projections. So when we recommended that sell back in June, it was a 2-star-rated stock. Trading at a 30% premium to our $200 fair value. Since then, our analyst team has made some very substantial fair value increases. Our fair value now is up to $480 a share. It’s just a matter of, over the course of the year, incorporating much better than expected results and guidance into their forecast than what they had originally projected. So, whereas the stock has increased to 360 from 260, according to our current valuation, it’s now a 4-star-rated stock.
Dziubinski: Well, Tesla, which is ticker TSLA, of course, was recommended as a sell in late July, and the stock’s done pretty well since then. So what happened, and would you still suggest selling Tesla stock today?
Sekera: Yeah, Tesla is just a roller coaster of a stock. And to be honest, it’s one of these ones where I think it trades more thematically than it does fundamentally. If you look over the past few years, I mean, this has gone from being a 2-star rated stock in early 2022, to a 5-star-rated stock in 2023, to a 1-star stock beginning of 2025. 3 stars in March, and then back to 2 stars. So huge, huge swings in this stock price based on the market sentiment and kind of what’s going on thematically. Now, we’ve made adjustments to our fair value as fundamentals have changed, but nowhere to the degree of that the range of the stock has moved in between. So right now, I’d say a lot of the valuation is not necessarily just its EV business, but very high expectations as far as autonomous vehicles, storage batteries, the potential for humanoid robots. I mean, even other business lines that they have like their insurance business. So, again, we incorporate into our future projections our expectations, but it’s not anywhere near where the stock is incorporating those today. We forecast earnings this year of $1.48. We’re expecting that to grow all the way, up to $5.71 cents in 2029. But it’s a 2-star-rated stock, trades at a 50% premium to fair value. So even with our earnings growing a factor of four up to 2029, the stock is still well, well above those growth expectations.
Dziubinski: OK, so then your last sell from 2025 that didn’t quite work out is Vistra, and that’s ticker VST. Now. You recommended selling it in the first quarter, and it’s up since then. So is Vistra still a sell in your mind?
Sekera: Yeah, and this is another one where it’s a very thematic type of stock. So, of course, artificial intelligence, everyone knows, requires multiple times more electricity to run than traditional computing. And in fact, the amount of electricity and the supply of electricity is going to be a limiting factor on just how quickly AI can be built out. I’ve talked to Travis. I mean, he’s just noted, it takes four, five years from, really, when you start that permitting process to build a new electric power plant to actually being able to turn it on. So utilities and energy providers the past couple of years now have really been a second derivative play on artificial intelligence. Vistra is, of course, one of the largest power producers and retail energy providers in the United States. The stock really skyrocketed higher because it’s one of the few independent power producers, so they don’t have the same restrictions as regulated utilities. Stock’s up over 600% since the end of 2022. Over that same time period, our fair value is only up 280%. Now, the stock did peak in September. Looks like the market’s finally accepting that they’re not going to be able to grow as fast as the market had been pricing in. At this point, it still trades a double our fair value estimate, so still a 1-star-rated stock.
Dziubinski: All right. So let’s flip the conversation and talk about a few of your sell recommendations from 2025 that, in fact, were great sell ideas. So the first is American Water Works, which is ticker AWK. This one was a sell for you in May, and the stock really kind of cratered recently. So, what happened with American Water Works, and is it still a sell today?
Sekera: Yeah. And this one was really just much more a matter of valuation, and that we do assign a low uncertainty rating to the company. So when you think about our star bands, as far as like, a low uncertainty rating, you only need to be plus or minus 5% from intrinsic value to go to a 2 star or to go to a 4 star. So this was a 4-star-rated stock coming into the year, it rose enough to go into that 2-star range. It’s now fallen enough that it’s back to being a 4-star-rated stock, trading at a 6% discount. We assign a narrow economic. moat. Has a 2.5% yield. So maybe not necessarily all that attractive right now, but it’s actually one of the few stocks in the utility sector that’s now back to undervalued again.
Dziubinski: OK, well, Philip Morris, which is ticker PM, was a sell in May. The stock is off a bit since then, so how does it look from a valuation perspective?
Sekera: Well, I mean, full disclosure here. I just have to acknowledge to everyone I have my own bias against investing in tobacco companies. Having said that, you should never let your own bias interfere with your investment decisions. Yeah, I think the big story here with Philip Morris is that they make Zyn, which are these new nicotine pouches, very strong growth in that product among younger adults. We increased our fair value several times since mid-2024 to incorporate just how strong that product growth has been. But this is an example of the market overestimating the amount and the duration of that growth. Stock had a really strong run in 2024, and the first half of 2025 is up 93% to where it peaked in June of 2025. It’s sold off pretty substantially since then. So at this point, it’s now a 3-star-rated stock, trading pretty close to fair value.
Dziubinski: OK. And then Wingstop, which is ticker WING, was a sell recommendation a few times in 2025, and the stock has pulled back. So what do you have against Wingstop, Dave?
Sekera: Nothing against Wingstop. Actually, when I tried their food, man, yeah, I actually enjoyed it. But, this is a story, and I’ve seen this happen as long as I’ve been in the business, The market always seems to overpay for growth stocks for new restaurant concepts when they’re in the expansion phase. And then once you get any kind of hint of slowing down, these stocks roll over very quickly. So we are looking for very substantial growth. We’re looking for revenue to go from $626 million in 2024 up to $1.4 billion in 2029. Based on a combination of ongoing same-store sales growth and new franchises opening every year. It’s just a matter of we think that it’s just overpriced. I mean, the stock peaked in 2024, 425 a share, is 2.5 times our fair value at this point. Even after as much as the stock has dropped, it’s still trading at 41 times our 2026 earnings estimate of 570. So again, still just overvalued, still on a downward trend. At 235 it’s still overvalued. It’s a 2-star stock at a 27% premium.
Dziubinski: OK. Well, we’re going to end today’s episode with four stocks to buy that Dave recommended in 2025 that he still likes as we’re heading into 2026. So your first pick is Biogen BIIB. Why do you still like it?
Sekera: Yeah, so that was a pick on the Aug. 4 episode of The Morning Filter. I think it’s up a little bit over 30% since then, but it’s still a 4-star rated stock at a 20% discount. Not appropriate for dividend investors. They don’t pay a dividend. Does have a high uncertainty, but we do rate the company with a narrow moat. I mean, the key here is just the launch and how successful ultimately will be its Alzheimer’s drug, Leqembi. This drug is helping to offset some of the declines it has in its multiple sclerosis franchise. I mean, there’s a lot of uncertainty on the launch trajectory. Thus far, it looks like it’s on its way to exceeding our full-year sales forecast. We’re looking for this stock, or for that drug, to end up being a $3 billion drug in global peak sales. There’s also a couple of different catalysts out there. We’re waiting for some decisions on a couple of other things that they have in their pipeline. So that could be some upward additional fair value increases if those come out positively as well. We maintained our fair value after the last earnings call. So I still like the dynamics on this one.
Dziubinski: OK, well, your second repeat pick this week is Microsoft MSFT. Now, the stock has had kind of a ho-hum 2025 when you compare it to some of the other AI-related names. So why is Microsoft a pick for 2026?
Sekera: And this is another one where regular viewers of The Morning Filter are probably tired of me continually recommending this one. I know over the course of 2025, I think we recommended it at least five times. And in fact, if you go all the way back to when we first started our podcast, This is one I’ve been recommending multiple times over multiple years. Yes, this year it’s only up 13% to 14% year to date. I mean, yes, it’s still lagged the broad market, and it’s lagged all those other AI stocks, but yeah, that’s still a pretty respectable return. And over the past three years, I mean, the stock is up almost a hundred percent. Still 4-star-rated stock. 20% discount. Medium uncertainty, wide economic moat. I just like the combination. You’ve got some pretty steady-Eddie types of businesses. I think that will help cushion to the downside if we were to slip into any kind of recession. Yet they also have a number of higher growth businesses to drive that long-term earnings growth. They’re a leader in the businesses in which they operate. You’ve got the cloud computing platform, Azure, still large total addressable market looking for 30% type of return for growth rates there. Enterprise Services, AI, their Co-Pilot. So again, a lot of things are going right here that I still think that over the long term, at a 20% discount, this one is still going to be attractive as a core holding.
Dziubinski: All right. LPL Financial LPLA is another former pick that you still like in the new year. So run through some of the key metrics and tell us why it’s still a buy.
Sekera: Yeah, we recommended that one on the Oct. 6 episode of The Morning Filter. It’s up a little over 20% since then. But even after that, it’s still 4-star-rated stock at a 24% discount. Now, this one initially had caught my eye, really wasn’t a company or stock I’d paid to in the past. But we upgraded the economic moat to wide from narrow, which is why I did a little bit more due diligence and reading into this one. Effectively, the moat committee just became more confident in the company’s ability to generate excess returns on invested capital over a longer time period. It’s based on switching costs and cost advantages. I like this one from two different aspects. I think they can benefit in the short term. Existing assets under management, as the market goes up, those assets continue to increase as well, so they get higher fee income there in the short term. Over the long term, the percent of advised assets overall continues to keep growing. So we believe, we’ve got good long-term increases in assets under management as more comes on platform. Recent earnings results just confirmed that investment thesis. The underlying results were pretty strong. Their fee-based business is benefiting from market tailwinds, higher interest rates propping up income from the cash sweep programs. So really, it’s just one of these ones is just doing what we expected. It’s exhibiting good organic growth from assets under management in the short term, benefiting from the rising stock market. And it’s also growing from making some select acquisitions here and there as well.
Dziubinski: All right. Well, your final repick for 2026 is Devon Energy DVN. Why?
Sekera: The energy sector has really been on a lot of downward pressure as oil prices have been on really a multiyear downward slide. A lot of negative market sentiment, which I think is driving some of the opportunities here. Overall, we see the sector trading at about a 10% discount to fair value. Now, when I look at how we do valuations for our energy, specifically our oil companies, our valuations are going to be based on using what the market is already pricing in over the course of the next two years for oil prices using that two-year strip. And then from there, we trend towards our forecasts for oil in year five. So we’re currently looking at WTI of $60 a barrel and $65 a barrel for Brent. So really not that far from where oil is currently trading today. Now, Exxon has long been our go-to pick along the global majors. That’s risen up into three-star range a couple of months ago. So our go-to pick now, especially among US domestic producers, has been Devon. Even using what I consider to be relatively modest oil price projections, this one still models out pretty undervalued. As far as the energy companies and the oil producers here in the US, we think Devon is among the lowest-cost providers in the US shale cost curve. Narrow economic moat, 4-star-rated stock, 30% discount. So this is still our pick for the domestic oil companies.
Dziubinski: All right. Well, thank you for your time, Dave. Viewers and listeners who’d like more information about any of the stocks Dave talked about today can visit Morningstar.com for more details. We hope you’ll join us on Monday, Jan. 5, at 9 a.m. Eastern, 8 a.m. Central for our next episode of The Morning Filter. In the meantime, please like this episode and subscribe. Happy holidays.