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Restaurants, Weed, and Other Stock Themes On Our 2026 Radar

Dec 24, 2025 15:12:00 -0500 by Nathaniel Baker | #Restaurants #On the Radar

Barron’s Investor Circle reporters pick their favorite ideas for the coming year.

Key Points

As 2025 winds to a close, Barron’s Investor Circle reporters are, not unexpectedly, already staking out the investment landscape for 2026.

What parts of the market are we bullish on for next year? Within those sectors, what stocks do we like? Do we have any particular favorites?

Internal discussions and brainstorming with market participants identified five segments we think can outperform the S&P 500 in 2026 (in no particular order):

We discuss each sector in turn, name individual stocks of interest for each, and in several sections even choose our favorite. Read on and supply your comments in the section below!

Restaurants

The argument for restaurant stocks starts with the fact that consumer demand is positioned well. The cyclical nature of the industry means restaurants can enjoy more growth against an encouraging macro backdrop: The Federal Reserve has cut interest rates, and will cut more if the rate of inflation continues to drop toward its 2% goal. It’s also pumping $40 billion monthly into the short-term Treasury market, another factor meant to keep fixed-income prices high—and rates low. This will help consumers spend more on going out next year versus 2025. Lower rates tend to boost economic activity gradually, not all at once.

The industry can also benefit from lowered expectations, with relatively easy sales comparisons for 2026. This year, mild inflation and a greater volume of meals sold pushed sales up just over 8% year over year, below the 11.5% annualized growth since 2020, according to our calculations of St. Louis Fed data. The takeaway: growth slowed this year, creating a low-enough base of expansion. As long as people have more money to spend next year and the economy ultimately keeps producing more jobs, continued growth shouldn’t be very difficult.

This will expand profit margins because wage growth has been a few percentage points below sales growth. Mix in some fixed costs, and revenue should rise faster than expenses.

If the market expects these trends to continue into 2027, the stocks could rally more.

Individual stocks to watch:

All trade within a point above or below the S&P 500’s 22 times forward 12-months earnings, whereas they can trade at substantial premiums in the last five years.

Our favorite: Domino’s trades at 22.5 times earnings, versus a more than 50% premium in moments when the market is more confident in its business. That confidence should arrive in 2026, given that analysts expect continued market share gains within the pizza category. Average analyst guidance is for total revenue growth of close to 7%, driven by mild same-store-sales growth and more locations around the world, according to FactSet. Key drivers include a ramp-up of its Uber Eats and DoorDash presence and faster delivery times.

—Jacob Sonenshine

Home builders

Now that the Fed has delivered on its anticipated 25 bps rate cut, a foundation for renewed growth in home formation has been laid. According to a study by Realtor.com, mortgage rates are expected to decline modestly to 6.3% from 2025’s 6.6% average, while single-family home housing starts are expected to climb 3.1% to 1 million. Investors may want to allocate room in their 2026 strategy as housing trends stabilize.

Individual stocks to watch:

Our favorite: La-Z-Boy. The nearly 100-year old company, founded in a garage in Michigan, enjoys universal brand recognition, trades at a forward P/E multiple of 12.9, and has grown its dividend 10% year over year. It stands to benefit not only from the potential lift in home formation, but also from the continuing preference of streaming new movies over theater attendance, according to a recent AP-NORC Public Affairs poll.

—Todd Chanko

Consumer Staples

Essentials have been anything but when it comes to stock performance: The State Street Consumer Staples Select Sector SPDR exchange-traded fund has basically gone nowhere in 2025. In fact, XLP has been a laggard for some time, with owners seeing a measly 16% gain over the past five years, a period when the S&P 500 gained nearly 85%.

Nor can they comfort themselves with the fact that defensives have been out of favor, as the healthcare and utilities sectors have rallied too.

“Everyone—just hit the reset button,” was the title of the recent 2026 staples outlook from RBC Capital Markets analyst Nik Modi, who wrote that “2025 has been one of the toughest we can remember in our 25 years covering the consumer staples sector (stock performance and stock-picking!).”

Unfortunately next year doesn’t look much better, with the Street nearly universally seeing another tough setup for staples, particularly packaged food, which has continued to be one of the most sluggish areas of the sector. A lack of pricing power and commodity volatility will continue to be hindrances for many of these stocks. GLP-1s are a worry for snack companies, and overall wellness trends mean highly processed foods remain out of favor.

Yet investors don’t have to avoid it all together if they look for companies bucking the trend with resilient volumes despite a tough backdrop.

Individual stocks to watch:

—Teresa Rivas

Artificial Intelligence

The bull case here is rather simple: AI capex continues to ramp higher and companies who are increasingly showing that AI is boosting their sales and profits will keep winning in the market. In other words, exactly what happened in 2025. The AIQ ETF offers a diversified way to express AI optimism with just three of the Magnificent Seven—Alphabet, Apple and Tesla—inside its 10 largest holdings.

Even in 2025 when the AI trade largely rotated away from some of 2023 and 2024’s market leaders, AIQ rose about 32%, outperforming the Roundhill Magnificent Seven ETF and the S&P 500. So this ETF could likely hang on if the AI trade shifts but doesn’t fully disappear.

The stocks listed below are held by AIQ and are also Barron’s stock picks.

Names of interest:

—Josh Schafer

Cannabis

The bull case rests in no small part on legalization efforts, including news that Trump will sign an executive order that reschedules marijuana under Federal law. This should ultimately pave the way for more states to legalize the recreational market, boosting demand that ultimately supports stronger growth and earnings for the major players. Dispensary stocks (MSOs) currently trading over the counter may be eligible to uplist to major exchanges like the Nasdaq or New York Stock Exchange.

Individual stocks to watch:

Our favorite: Curaleaf is the largest holding in the MSOS ETF. The company operates in 17 states with 153 retail locations, making it uniquely positioned to benefit from continued growth in the U.S. cannabis market. Curaleaf also has exposure to multiple countries such as the U.K., Germany, and Australia, each of which are expanding medical marijuana access. Generating $1.3 billion in annual sales, Curaleaf’s improving fundamentals warrant a spot on investors’ radars.

—Dan Victor

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