3 Stocks to Buy (& 3 Stocks to Sell) Before 2026

Key Concepts

• Market Outlook: Constructive on stocks, not in a bubble, strong underlying economy, potential for a "melt up" before a bubble burst.
• Buy List:
  • Joby Aviation (JOBY): Electric aircraft, speculative, potential for commercial service launch and acquisition.
  • Match Group (MTCH): Dating sites (Match, Hinge, Tinder), undervalued, strong free cash flow, share buybacks, dividend.
  • Global Payments (GPN): Merchant acquirer, undervalued post-Worldpay acquisition, high margins, potential for multiple expansion.
• Drop List:
  • Palantir Technologies (PLTR): Extremely overvalued, high revenue multiples, AI and defense tailwinds but unsustainable valuation.
  • AppLovin (APP): High valuation, concerns about "shady" business practices and user experience.
  • Tesla (TSLA): Overvalued ($1.5 trillion market cap), headwinds in core EV business (US tax credit loss, Chinese competition), skepticism about future growth drivers (Optimus, robo-taxis).
• Valuation Metrics: Revenue multiples, earnings multiples, free cash flow, EBITDA margin.
• Investment Strategies: Value investing, speculative investing in emerging technologies, activist short-selling (cautioned against for most investors).

Market Outlook for 2026

Whitney Tilson expresses a generally constructive outlook on the stock market for the upcoming year, stating he does not believe it is in a bubble, despite high valuations, particularly in the artificial intelligence sector. He attributes this to a still "pretty darn strong" underlying economy, even with slowing job growth. Tilson suggests that bull markets tend to end with a "melt up" into bubble territory rather than a sharp downturn, implying there may still be time before a significant correction. He draws a parallel to early 1999, indicating that a peak is not imminent.

Buy List for 2026

Tilson presents three stocks he recommends buying for the new year, each with a distinct investment thesis.

1. Joby Aviation (JOBY)

• Company Description: Joby Aviation is developing electric aircraft, a highly speculative and emerging technology.
• Key Points:
  • The company has not yet begun flying passengers commercially and awaits FAA approval.
  • Commercial service is slated to begin in Dubai between Abu Dhabi and Dubai early next year.
  • The stock has tripled based on investor enthusiasm for progress towards commercial service launch.
  • Tilson believes the stock has potential for another double upon the actual launch of commercial service.
  • Current market capitalization is $15 billion.
  • Potential for acquisition by larger companies for its engineers and technology, similar to how Tesla develops electric motors and batteries with broader applications.
• Supporting Evidence/Details:
  • The stock was flat for 1.5 years around $6 before rising to $20, currently trading around $15-16.
  • Dubai approvals are in place, though less rigorous than US approvals.
  • FAA approval for US operations is anticipated in one to two years.
  • Tilson visited the company and was impressed by the "greatest collection of mechanical, electrical, aerospace engineers in the world."
• Caveats: This is a speculative stock, and investors should size their positions appropriately. It currently produces no revenues.

2. Match Group (MTCH)

• Company Description: Match Group owns popular dating platforms including Match, Hinge, and Tinder.
• Key Points:
  • These are "good businesses" with no capital expenditure (capex) requirements, operating primarily as websites.
  • The stock is described as "beaten down" and "out of favor," a characteristic of a "classic Whitney stock."
  • The company generates a significant amount of free cash flow.
  • Trades at 8.5 times next year's earnings.
  • Generated over $900 million in free cash flow in the last 12 months.
  • Spent $876 million on share buybacks, reducing the share count by 9% in the past year.
  • The business itself is described as "flat," not a "melting ice cube," but requires growth to be shown.
  • Offers a 2.3% dividend.
• Supporting Evidence/Details:
  • The stock is down 14% since Tilson recommended it a year ago.
  • Tilson anticipates that a single quarter of 5% revenue and operating income growth could lead to a 50% stock price increase.
  • The company has a new CEO who has outlined a plan to address issues like scammers and catfishers on the platforms.
  • Year-over-year comparisons are expected to be easier due to past stagnant performance.
• Investment Thesis: Market leadership, strong cash generation, and sensible capital return to shareholders through buybacks of a beaten-down stock.

3. Global Payments (GPN)

• Company Description: Global Payments is a player in the merchant acquirer space, processing credit card transactions.
• Key Points:
  • The business has a history of consistent earnings and free cash flow growth over the last 20 years.
  • Historically, the stock has followed business performance, but there has been a significant disconnect in the last four to five years.
  • The stock price has fallen by over 50% while the business continued to grow.
  • Historically traded at 19 times forward earnings, now trades at 6.4 times next year's earnings.
  • Tilson states he has "never seen such a big disconnect between the underlying performance of the business and the stock price over a multi-year time horizon."
  • The company acquired Worldpay, the number three player, making the combined entity the number one player in merchant acquiring.
  • Scale is crucial in this business.
  • The business already has a high 45% EBITDA margin, expected to increase to 50% post-acquisition due to cost-cutting.
  • Visa and Mastercard have EBITDA margins of 35-40% and trade at 35-40 times earnings.
  • Tilson believes the stock could triple if its multiple expands back to its historical 19 times earnings, in addition to earnings growth.
• Supporting Evidence/Details:
  • The acquisition of Worldpay is expected to close early next year.
  • The company has $14 billion in net debt on a $21 billion market cap, which is considered manageable given the steady cash flows.
• Reasons for Negativity/Disconnect:
  • Investor concerns about overpaying for the Worldpay acquisition and using a depressed stock for the deal.
  • Deviation from a promised stock buyback strategy.
  • Competition from smaller players like Square and Toast targeting small and medium-sized businesses.
  • Potential short-term integration hiccups from the large acquisition.
• Stanberry's Investment Advisory: The company was recommended in the June issue, and the stock is up 14% since then, with the S&P 500 up 13%.

Drop List for 2026

Tilson identifies three stocks he believes investors should consider dropping or avoiding due to overvaluation and other concerns. He clarifies these are not short recommendations but rather stocks to avoid.

1. Palantir Technologies (PLTR)

• Company Description: Palantir Technologies is a software company focused on data analysis, particularly in AI and defense.
• Key Points:
  • The stock has a market capitalization of $423 billion, making it one of the 20 largest companies globally.
  • Revenue is approximately $4 billion.
  • Trades at over 100 times this year's revenue and over 200 times this year's earnings.
  • The company benefits from tailwinds in AI, defense tech, and relationships with the Trump administration.
  • Tilson calls it "the single most overvalued big cap stock I've ever seen in my career."
  • He estimates it is "4x overvalued" even with generous assumptions.
• Supporting Evidence/Details:
  • The company reported revenue growth of 48%, but this level of growth would typically warrant a revenue multiple of 20-25 times, not 102 times.
  • Tilson compares it to Cisco at the peak of the dot-com bubble in 2000, where Cisco's stock dropped 90% and took 25 years to recover its peak valuation despite earnings growth.
  • The large market cap (400-500 billion) makes significant growth challenging.
• Recommendation: For existing investors, Tilson suggests either implementing a tight stop-loss or taking profits and considering themselves lucky.

2. AppLovin (APP)

• Company Description: AppLovin is a mobile technology company.
• Key Points:
  • Market capitalization exceeds $200 billion.
  • Trades at 63 times this year's earnings and 36 times revenue.
  • While not as extreme as Palantir, the valuation is still considered "extreme by any other measure."
  • Multiple well-respected activist short sellers have exposed "shady business practices."
  • Concerns include tricking users into downloading apps, bombarding them with ads, and "pushing the envelope/shady practices."
• Supporting Evidence/Details:
  • Unlike Palantir, where the business itself is not widely critiqued, AppLovin faces scrutiny over its operational methods.
  • Tilson advises that if investors caught this "rocket ship," it's time to "get off."

3. Tesla (TSLA)

• Company Description: Tesla is an electric vehicle (EV) manufacturer, also involved in energy storage and developing robotics and autonomous driving technology.
• Key Points:
  • Valuation is $1.5 trillion.
  • Headwinds in Core EV Business:
    • United States: The $7,500 federal EV tax credit has expired, leading to a significant drop-off in US car sales after a surge in September.
    • International: Chinese EV makers like BYD are offering significantly cheaper EVs (as low as $8,000, 80% less than the cheapest Tesla). While these cannot be imported into the US due to trade barriers, they are gaining market share globally (China, Europe, Mexico, etc.), leading to Tesla's shrinking market share worldwide.
  • Skepticism on Future Growth Drivers:
    • Optimus (Humanoid Robots): Tilson is skeptical that this will be a significant enough business to justify the $1.5 trillion valuation. He notes it's a competitive space and mentions past instances where demonstrations may have involved human control rather than true autonomy.
    • Robo-taxis: Elon Musk's promises of widespread robo-taxi availability are questioned. Tesla's current robo-taxi service in Austin, Texas, is compared to Waymo's service from five years ago, which still required a safety driver. Waymo's current driverless service in San Francisco is highlighted as a benchmark. Tilson believes regulatory approval for driverless operation will take years.
• Supporting Evidence/Details:
  • Tilson previously shorted Tesla and advises against shorting it at any valuation, but now believes it's time to take profits.
  • He notes that Tesla's energy storage business (Powerpack) is its second-largest and may be decent, but not enough to support the current valuation.
  • He suggests that Optimus robots are currently a "skunk works on the side."
  • Tilson states, "There's nothing I see that comes even close to justifying a trillion5 valuation."
• Argument: The combination of cratering sales in the core business and the long timeline for emerging businesses to become material is not justified by the current market capitalization.

Conclusion and Takeaways

Whitney Tilson's analysis presents a nuanced market outlook, acknowledging the strength of the current bull market while cautioning about potential overvaluation in specific sectors and companies. His buy list focuses on a mix of speculative growth (Joby Aviation) and undervalued value plays with strong cash flow (Match Group, Global Payments). Conversely, his drop list targets companies with extreme valuations (Palantir, AppLovin) and a mature business facing significant headwinds coupled with unproven future growth drivers (Tesla). The core message is to be aware of market cycles, understand company fundamentals, and critically assess valuations, especially for mega-cap stocks. He emphasizes that while speculative investments can be rewarding, they require careful sizing and risk management.