2025's Top 10 Picks: A Market-Analogist's Post-Mortem

The central investor question is whether a modest 2025 outperformance masks a deeper, more durable thesis. The numbers show a narrow beat: a list of 10 stocks beat the S&P 500 by 8 percentage points this year. That's a market-beating result, but not a dominant one. The real story, however, is the long-term lens. Over the past three years, the same list has delivered a staggering 235% return versus 69% for the S&P 500. This isn't about a single year's luck; it's about compounding conviction.

To put this in perspective, consider the market backdrop. The S&P 500's returns were buoyed by artificial intelligence (AI) enthusiasm, a powerful sector that disproportionately lifted the index. The analyst's list, by contrast, was low on AI. This structural divergence explains the narrower margin this year. It's a reminder that even a well-constructed portfolio can lag when the market's primary driver is a theme it doesn't own.

This pattern is not unique. History shows that the greatest stocks have off years. The key is whether those dips are destructive to the core thesis or a buying opportunity. The analyst frames the current underperformance of two high-conviction holdings as the latter. Their businesses are performing well, and the price weakness is seen as a chance to add at a discount. This reflects a classic long-term investment discipline: short-term noise, whether from sector rotation or sentiment shifts, must be filtered through the lens of a company's underlying economics.

The bottom line is that the 2025 result is a data point, not a verdict. It highlights the importance of separating short-term market noise from long-term value creation. When a portfolio has delivered a three-year return that is more than three times the market's, a single year's modest outperformance is less about failure and more about the inevitable volatility that comes with compounding returns over time.

The Mechanics of the Beat: Growth, Valuation, and Sector Rotation

The portfolio's performance this year is a study in the gap between underlying business strength and market sentiment. The list beat the S&P 500 by a narrow 8 percentage points, a significant drop from its three-year average of 166 percentage points. This year, the market's enthusiasm for artificial intelligence has been a direct headwind for a portfolio that is deliberately low on AI exposure. The result is a mechanical drag, not a fundamental failure.

Take Amazon. The company is demonstrating strong growth in all of its businesses and has tremendous AI opportunities. Yet its stock is trailing the market this year. The evidence shows a stock that is up 4.7% over the last 20 days and 3.6% year-to-date, but still well below its 52-week high. The market's concern is twofold: a perceived threat from competition and skepticism over its high AI spending. This creates a classic valuation disconnect. The sluggish price, driven by these concerns, is what makes the analyst more confident about the stock's long-term expansion potential. The margin of safety is being built on market anxiety.

Carnival presents a different dynamic. The cruise line's stock performed phenomenally this year, driven by a strong operational rebound. However, the market has already priced in much of that good news. As a result, the stock's performance was mediocre. Lingering debt concerns and a lack of exposure to the AI theme further contributed to its market-mediocrity. The lesson is that a powerful operational turnaround can be fully discounted, leaving little room for immediate multiple expansion.

The 'growth-at-a-price' dilemma is most acute with Dutch Bros and Lemonade. Dutch Bros had a fantastic 2025, but its stock is underperforming the market because it is expensive. The market is waiting for execution to prove that not all of its growth is already baked into the price. Lemonade, after a period of neglect, is back in action and on track to become profitable. Yet its stock's recent pop is a sign of a market that remains skeptical about its valuation and sustainability. In both cases, strong fundamental execution is being met with a valuation discount, leading to underperformance despite the underlying strength.

The bottom line is that the portfolio's beat this year is a function of selective rotation and market timing. It is beating the index not because every holding is soaring, but because some are falling less than the market due to specific concerns, while others are being priced for perfection. The long-term thesis relies on the market eventually recognizing the gap between business reality and stock price for these high-conviction names.

Risk & Guardrails: Where the 2025 Thesis Could Break

The portfolio's long-term thesis is built on a few high-conviction, high-momentum names. That strength, however, is also its primary vulnerability. The strategy's performance is heavily reliant on the continued outperformance of a concentrated group of stocks. If any single one of these names stumbles-whether due to a competitive shock, a regulatory change, or a simple earnings miss-the overall return could be disproportionately impacted. This is the nature of idiosyncratic risk: the fate of the portfolio becomes too closely tied to the fortunes of a handful of companies.

A more structural risk is the portfolio's low exposure to artificial intelligence. This is a clear disadvantage in a market where the S&P 500 has been buoyed by artificial intelligence (AI) enthusiasm this year. While the analyst notes that AI trends will eventually be a long-term tailwind, the current underweight means the portfolio is missing out on a powerful near-term catalyst. If AI-driven productivity gains accelerate, the portfolio's relative performance could lag for an extended period, testing the patience of long-term investors.

Global-e Online presents a concentrated geopolitical risk. The stock is a standout performer in 2025, yet it is also the biggest loser on this list. The reason is explicit: it specializes in cross-border trade and is expected to be heavily impacted by global trade wars. This creates a direct conflict between its high growth and early profitability and its exposure to tariff uncertainty. The company's ability to develop solutions for clients suggests resilience, but its business model remains tethered to a volatile external environment. A worsening trade climate could quickly reverse its recent gains.

The bottom line is that the portfolio's guardrails are thin. It lacks the broad diversification to absorb sector-specific shocks, it is positioned against a powerful macro trend, and it carries a concentrated bet on a single, geopolitically sensitive industry. For the thesis to hold, these specific risks must be managed, not ignored.

Catalysts and the 2026 Outlook: Reading the Signals

The 2025 results provide a clear signal: the market is pricing in a narrative of stagnation for these names. The portfolio's 8-percentage-point beat against the S&P 500 is solid, but the context is critical. The index was buoyed by artificial intelligence (AI) enthusiasm, a tailwind that directly underperformed the portfolio's low-AI holdings. This creates a fundamental tension for investors: the stocks are beating the market, but the market's outperformance is being driven by a theme that doesn't apply to them.

The catalyst for a re-rating lies in a shift in market perception. For Amazon, the primary overhang is the view of its AI spending as a cost center. The company's demonstrating strong growth in all of its businesses and its "tremendous AI opportunities" must be translated into a narrative of realized returns. The path to unlocking significant re-rating potential is for investors to see this spending not as a drag, but as the foundation for a new growth leg. The sluggish price action is the market's current verdict, but it also represents the margin of safety that could be erased if the AI story gains traction.

For Carnival, the catalyst is more concrete and monitorable. The stock's mediocre performance is directly tied to investor skepticism about its debt. The critical forward-looking signal is progress on its debt reduction plan. Any tangible steps that reduce leverage or improve the balance sheet will directly address the primary source of concern. If Carnival can demonstrate it is executing on this plan, the stock could outperform as the fundamental strength of its business model is no longer overshadowed by financial risk.

A broader market catalyst could also normalize the valuation gap. The current AI-driven rotation has compressed the relative value of non-AI stocks. A potential rotation away from AI, whether due to valuation concerns or a shift in sentiment, would allow these companies' fundamental strengths to shine without the artificial drag of the index's thematic outperformance. In that scenario, the portfolio's long-term track record of beating the market by a staggering percentage over three years becomes the dominant story.

The bottom line is that 2026 hinges on catalysts that change the narrative. For Amazon, it's proving AI spending pays off. For Carnival, it's delivering on debt reduction. For the portfolio as a whole, it's waiting for the market to stop rewarding a theme and start rewarding a track record. The current price action is a buying opportunity for those who believe the underlying business stories are stronger than the market is pricing.