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Today's Bonus Story Beyond the Santa Claus Rally—5 Quality Stocks to Buy in 2026Authored by Chris Markoch. Published: 1/2/2026. 
In Brief - Morningstar’s valuations indicate that U.S. equities are still trading slightly below their intrinsic value, despite record-high indexes.
- These five high-quality large-cap stocks offer catalysts from lower rates, earnings acceleration, and normalization of economic cycles.
- Each stock offers differentiated upside in 2026, ranging from defensive strength to premium growth.
Investors hoping for a Santa Claus rally were disappointed. After a promising move on Dec. 26, markets were down heading into 2026. It's a reminder that long-term investing isn't defined by one short period. The setup for stocks in 2026 remains constructive. Major indexes are near record highs despite a cloudy macroeconomic backdrop. While many stocks — notably in technology — appear overvalued, Morningstar's December 2025 fair-value work shows U.S. equities trading roughly 3% below intrinsic value. A tiny government task force just wrapped up 20 years of work.
And buried in their federal filings, I found something remarkable:
American citizens now have a legal birthright claim to something previously inaccessible.
Under U.S. law, you can stake your claim right now. The name and ticker are available here now >>> Analyst targets rose faster than prices in the last two months of 2025, likely reflecting expectations of stronger earnings in 2026. This should help high-quality, large-cap stocks carry momentum and could trigger a rerating in 2026. Here are five stocks that fit that profile. Microsoft Is Likely to Return to Its Market Leadership Position Microsoft Corp. (NASDAQ: MSFT) finished 2025 up 14.7% — a strong year, but slightly below the S&P 500, which left Microsoft in the rare position of a market laggard. Investors worry Microsoft is committing billions to AI infrastructure amid skepticism about when — or if — those investments will pay off. Still, the company's CapEx is supported by a strong balance sheet. Microsoft has built a durable moat that makes switching costly for many customers. Analysts expect that moat to hold in 2026, with forecasted earnings growth above 12%. After a 6.9% slide in the last quarter of 2025, MSFT is trading roughly 30% below its consensus price target. That dip may be attractive to buy-and-hold investors and could offer an entry point for traders looking to take a long position in 2026. Lower Interest Rates Will Support JPMorgan's Best-of-Breed Status Throughout the macroeconomic twists of the past five years, JPMorgan Chase & Co. (NYSE: JPM) has shown why it's considered best of breed among financial stocks. The stock finished 2025 with a 34% gain and has delivered a total return of over 188% in the last five years. A catalyst for JPM in 2026 would be lower interest rates, which should steepen the yield curve and improve lending and credit conditions. Analysts seem to agree: price targets are being raised on expectations of a January rate cut, which could ease recession concerns even as inflation lingers. Even if the Fed pauses rate cuts, JPMorgan's fortress balance sheet makes it one of the safer bank stocks to own. Analysts forecast about 7.2% earnings growth in 2026 — below the roughly 12% five-year average — partly because first-quarter outcomes remain uncertain. Deere Will Give Investors a Way to Play a Normalizing Economic Cycle Deere & Company (NYSE: DE) is a blue-chip that offers exposure to an improving macro backdrop. Over the last five years, Deere has grown earnings at a high single‑digit annual rate despite soft demand in agricultural and construction equipment. DE rose 9.9% in 2025 — below its five-year average annual gain of 16.9%. Analysts expect EPS growth of around 14% in 2026, suggesting the $522 consensus price target (as of Jan. 1) may be conservative, provided farmers and contractors retain purchasing power. From a trading standpoint, DE's pullbacks toward key support zones could offer attractive entry points for 2026. Investors may accumulate shares on weakness ahead of seasonal ordering cycles, targeting upside as the market prices in a turn in the CapEx and industrial demand cycle. Costco Offers Premium Defense With Steady Growth Costco Wholesale Co. (NASDAQ: COST) plays a unique role as a "premium defensive" name that still delivers mid‑teens earnings growth. Over the last five years, Costco has compounded EPS at roughly a mid‑teens pace, driven by steady traffic, high‑quality membership income, and disciplined expansion. The earnings outlook helps explain why COST was down over 5% in 2025. Analysts forecast just over 9% EPS growth in 2026 — well below the ~15% five-year average — which has put pressure on its premium multiple. That said, Costco should continue to benefit from value‑conscious consumers. Membership fee increases, new warehouse openings, and steady same‑store sales can support another year of healthy profit growth even if discretionary spending remains uneven. For long‑term investors, that combination of resilience and growth makes COST a core-holding candidate in a broadly constructive market. Lululemon Is a Rebound Story With Above‑Market Growth Lululemon Athletica Inc. (NASDAQ: LULU) offers a different angle on quality names for 2026: a premium brand working through a mid‑cycle slowdown rather than an ex-growth story. Over the past five years, Lululemon delivered compound EPS growth of about 25%, well above the broader market. Yet LULU is down roughly 40% over that period as North American growth cooled and momentum in China moderated. That reset has lowered expectations and valuation heading into 2026, which can set the stage for a rebound if execution stabilizes. Analysts call for about 7% earnings growth in 2026, supported by continued store expansion, product innovation, and operating leverage as newer markets scale. For investors willing to accept near‑term volatility, LULU provides a way to add higher‑beta consumer exposure backed by a credible brand and strong balance sheet.
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