It’s a Small World After All

0:04It's a small world after all. I promise this will make sense soon because Motley Fool Money starts now.

0:20I'm Rick Minars and today I'm joined by fellow analysts Nick Seipel and John Quast. We're going to take a look at some potential bounce back candidates for 2026 and a look at Disney predictions heading into the new year. But first, Venezuela. The big news over the weekend was the U.S. capturing Venezuelan President Nicolas Maduro and his wife, detaining them in the U.S. to face charges of narco-terrorism, drug trafficking, and conspiracy. Nick, you are covering this story. We will obviously not be digging too deep into the political ramifications. That's not really what we do here. But what are the biggest implications of this news for investors?

0:53Certainly huge news geopolitically. Would argue this is the biggest U.S. military commando operation, really going back to the Bin Laden raid more than a decade ago, for investors, for the business community. The big takeaway is what's going to happen with Venezuela's energy production. Venezuela has more proven reserves than Saudi Arabia, yet produces less than 1 % of global supply today. And that's really a trend of kind of withering infrastructure that's been going on for the past couple decades. first under the Hugo Chavez administration and then under former president, now Maduro. As I mentioned, Venezuela has over 300 billion barrels of proven reserves, about 17 % of the global total.

1:35But production today, just 1 % of global supply. In the late 1990s, Venezuela was producing 3.5 million barrels of oil per day today, now under$1 million. That's a 70 % decline under the Chavez-Maduro administrations. And if you look at disclosures from the National Oil Company of Venezuela, its pipelines haven't been updated in, by some accounts, 50 years, would need over$58 billion to rebuild those pipelines. And by the reports of the administration, the U.S. administration, part of what's going to happen after this regime change is an investment in that energy infrastructure. What becomes of Venezuela's oil production going forward?

2:14Can new investment return that trend to the growth that we saw in the late 90s? Yeah. Speaking of that growth and potential, who are the potential winners and losers from a comeback in Venezuelan energy production? The big winners that really jump off the bat are the U.S. oil majors. Chevron, the big one, they're the only U.S. major currently operating in Venezuela, produces about 150 ,000 barrels a day, about 70 % of Venezuela's overall output. Those other oil companies formerly operated in Venezuela. However, in the nationalization push over a decade ago, lost some of their production, have some claims against the Venezuelan government to try to get some of those back.

2:56So those big U.S. oil companies, particularly Chevron, have the relationships, the infrastructure, the head start to get underway in Venezuela. However, these are companies that were burned in the past under nationalization. They're going to want stability before they line up to spend big money on the investment needed to get production back in line. Any realistic timeline, we're looking three to five years before really meaningful production increases take place. That's really a long-term thesis. That said, to the extent that production can get back online, the losers here would be potentially Canadian oil producers.

3:31Venezuelans crude oil is very similar in grade to the oil that comes out of Canada's oil sands, that same heavy, sour grade of oil that are used to produce things like diesel fuel in U.S. Gulf Coast refineries. With that decline in Venezuelan oil production that I talked about earlier, Canadian producers have come in to fill that gap. Canada went from producing 2.7 million barrels a day, exported to the U.S. in 2013, up to 4.4 million barrels back in 2024. Obviously, if those Venezuelan barrels come back online, that is direct competition for those Canadian oil producers and could put downward pressure on that production.

4:12But again, as I said, we would need several years of investment to get that production back online. And again, these aren't all one-for-one substitutions. A lot of this Canadian heavy oil gets piped directly to Midwestern refineries. So the competition would be really more for oil that goes to supply refineries on the Gulf Coast. But if investment can get Venezuelan oil production back online, that would be direct competition for Canadian producers. That's why you've seen the same way big U.S. oil companies have moved up today on the news of what's going on in Venezuela. You've seen some real downward pressure on the Canadian producers.

4:49Speaking of the initial market reaction, the market tends to weaken when there's geopolitical crossfire. That definitely happened over the weekend. The U.S. markets initially moved higher on Monday. Why do you think that's the case beyond just the energy companies, the general buoyant market? Yeah, I mean, I think the market was relieved to see there doesn't appear to be further kind of, you know, you mentioned crossfire. And your question, there really wasn't any crossfire, right? There was only kind of fire going one direction for the most part when you look at the casualties and the success of the operation.

5:19So I think the market was relieved to see it appears this is the end of conflicts here. Now, that is obviously far from certain, but I think that's what the market is saying here, is that this is a one-and-done operation and that moving forward, we should see more stability and perhaps more investment in Venezuela, which would be good for the global economy. Yeah. So, I was surprised to see key Latin American stocks moving higher on the news, since they may be potential targets if things keep escalating. Long-time rule breaker recommendation, Mercalli Libre, was up 10 % just two hours before the close today.

5:51Does that make sense to you? But potentially, again, if Venezuela's economy can get back on track, really huge opportunity for MercadoLibre and other e-commerce players in the industry. So, I mean, currently, Venezuela, less than 5 % of MercadoLibre's revenue, but there's more than 30 million people in Venezuela. And this has been bordering on a failed state for the better part of a decade. No e-commerce infrastructure. I mean, you follow MercadoLibre more than me, but it's been a recurring thing on the earnings calls of, if you back out Venezuela, we're doing pretty good. Well, can you imagine if Venezuela turns from a headwind to a tailwind for Mercado Libre?

6:27This is a company that you saw what happened when Argentina got back on track under a new administration. That became a tailwind for the business. So I think folks are optimistic about Venezuela going from being a real laggard in the South American economy to being something that can be a tailwind for further growth. And if that's the case, then Mercado Libre won't be the only company benefit from that. Excellent. John, let's bring you into the mix. as an investor, what's your takeaway from the situation? Yeah, as everything that Nick just said, the arrow is pointing in a positive direction for various perspectives, especially going back to MercadoLibre.

7:03One of the big reasons it has struggled in Venezuela is because of currency debasement. That currency just keeps going down and down. It's hard to do business in that environment. So, pointing towards stabilization, That is good long-term. And I think it's a little bit premature to say that we're already there, that MercadoLibre and others are already going to enjoy that benefit. It's going to take a long time to play out if it ever does. I think that probably the market is going to get a little bit impatient, right? Because it does tend to overreact both positively and negatively. I wouldn't be surprised if we saw that.

7:37But I definitely understand what it's seeing and why it's having a positive outlook. And I think it's right. If we see Stabilization in Venezuela, that's a good thing for some of these businesses. Thank you, John. And Nick, thank you for your expertise on this. Ultimately, a big story to kick off the new year. The world and its investors will be watching. Coming up next, can some of last year's losers be big winners? Let's see if two out-of-favor stocks can have monster makeovers in 2026.

8:07Hörst du das? So klingen Füchse, wenn sie Schmetterlinge im Bauch haben. Und die habe ich auch. Der Sparfuchs von Sparsim. Because for Valentine's Day I have something to love for you. 60 GB in the Vodafone-Net for 9 ,99€ monthly. And thanks to 50€ Wechselbonus, you will be able to get a free ride with a free surfer. Make a break with your old tax. Make sure you do your deal until the 17th February. Make sure to save your deal on Spasim.de.

8:44You went with Duolingo, John. What's going on with Duolingo? Yeah, so Duolingo, ticker symbol D-U-O-L. The stock was down 46 % in 2025, Rick, and down 67 % from its highs in 2025, so losing two-thirds of its value. And some variety of factors going on, but one of the big headline-grabbing things was when ChatGPT did a demonstration where essentially a homegrown version of Duolingo could be just created with some prompts in the app. And I think that that caused investors to say, does this company have a durable competitive advantage? Or am I just going to learn a new language from something that I create on my own in a chatbot with using generative AI?

9:30And so, we see the stock price pulling way, way back. The CEO of this company, Luis von Ahn, he would say, take the long view. And I think that that's right. And so, there's many reasons why I think that this can bounce back in 2026. Yeah, and especially, I mean, it's been just such a big winner before this year, this past year, 2025. And then clearly, a stock that had a lot of momentum, a business that's still growing. So, I'm with you on Duolingo. But I went with Lululemon. So, Lululemon has had a very rough downward-facing dog kind of year in 2025. Basically, all you have to do is follow the sales.

10:06This company in the athleisure market and the upscale yoga wear market was doing so well for a long time and then just basically stumbled. And over the past couple of quarters, comps in the U.S. rather, had been negative. A company that's been traditionally growing, and while it's doing well internationally and in other markets like Canada in the U.S. is struggling, which is still its largest market. But I do like it here. I was at FoolFest 25 a few months ago wearing Lululemon pants that I'd gotten from my American Express Platinum card because they are now having a free$75 credit you can use every quarter.

10:39And I did it to mock Lululemon. At the time, I was bearish when I was making that presentation. I'm saying, look at this 50-something old guy wearing Lululemon pants on camera, probably hurting the brand by doing this. But in the process, I had a very comfortable pair of pants on that evening. And since then, I used my December credit. I have some friends that are Lululemon fans and didn't know about the credit. Now they're using it. So to me, my mind has sort of done a full 180 on this where I thought, when American Express, when their platinum card has a credit, like$50 Saks credit every six months, you can expect bad news.

11:14As you see, Saks is now almost struggling financially right now. But in this case, even though it may seem desperate for Lululemon to reach for something like this, for this kind of big discount being offered, I think it could help. So I am with Lululemon, and activism is happening, but I think organically it'll be able to fix itself in 2026, very attractively priced after the markdown. So, yes, stock that I think will bounce back. And Rick, I love the point that you're making here, because I think that with a brand like Lululemon, the argument is against it that maybe it's losing its brand power, Maybe it's losing its luster.

11:48But you look at the numbers, revenue is still at an all-time high, and its operating margin at 22%. To me, this is not indicative of a business that is losing that brand power in a material way, at least not right now. It hasn't manifested yet. So I think that it is overblown, the concerns that it has. Yes, a slowdown. Yes, a headwind here and there. But I think you're right. I think this is a stock that is poised to bounce back in the coming year. Yeah, and doing really well internationally. I keep thinking to like Crocs, which has been a disappointing stock lately. But there were times in the U.S., everyone just figured, oh, Crocs are done.

12:22And internationally started to take off. And then celebrities started to hop on Crocs. And then it happens. It bounced back for a while. But that's it for that. Coming up next, it's a small world after all. Let's take a look at some predictions for Disney in 2026. In January of 1915, Ernest Shackleton's ship, Endurance, became encased in the ice in the Weddell Sea. Through determination, grit, and savvy, Shackleton would lead his men through a brutal winter, then over hundreds of miles of Antarctic ice, followed by 800 miles across some of the roughest waters in the world. It is one of the most extraordinary and inspirational journeys in the history of exploration.

12:57Find this story and many others at The Explorers Podcast, available wherever you get your podcasts or at explorerspodcast.com. So Disney World did not have a very good year last year. The stock was up 3%, losing to the market in 2025. It's had a few rough years. I was covering the company earlier this week. Well, I know it's Monday, but earlier over the weekend and published earlier on Monday. And I had four Disney predictions. And John, I know you and I, we follow these Florida companies, so we know Disney. And Nick, if you have some thoughts, go ahead and share them. But I want to quickly go over these four predictions that I have.

13:31And you guys tell me if you think yes or no, if you think it'll happen. So the first is, Disney will announce an internal CEO this year. And my argument for that is that this is a company that Bob Iger has said he's going to step down at the end of this year. The board has already said they're going to announce the next successor early in 2026 to avoid what happened back in 2020 during the Bob Chapek handoff. But I do think that Disney will announce an internal CEO, even though the stock has failed to beat the market in four of the last five years, because the company's still doing well. It's a very complicated company with a lot of moving parts.

14:03So I think they will hire internally. I don't know who it'll be, but I don't think they're going to seek an outside CEO. Any thoughts? Yeah. I mean, the rumors are that the head of the Parks division seems to be in pole position to win that job. Obviously, there's been three names kicked around. you know, the parks really are a, you know, trophy asset. Still took, you mentioned the parks had a tough year in 2025, still was able to take up price in the fall. And it's an example of a company that really has almost infinite pricing power. I mean, if you told folks five years ago that the Disney World prices would be where they are today and that the lines would still be out the door to get in, this is an example of a company that can just take up price whenever they want to, and their willingness to do so, I think, reflects that they know that their asset is one that is globally, people are willing to pay whatever it takes to be a part of that park.

15:01Thank you, Nick. So, my second prediction for John Nick, anyone who has thoughts, it will stay out of the media buying frenzy. So, it did that in 2025. We saw Paramount get bought up in the summer. Obviously, the year ended with Warner Brothers Discovery and a bidding war eventually go to Netflix. I think they're just going to continue. They were not an active bidder, at least not a prominent bidder. I think they're going to continue to stay out of buying assets. They already have enough stuff in their arsenal. Thoughts on that? Yeah, I couldn't agree more with you, Rick, because what more does Disney really need?

15:32I mean, the intellectual property library that it has at its disposal, there's so many options that it has just because of how vast it already is. Plus, at its size, what are you going to acquire that's going to materially move the needle. It's going to be a lot of money. I don't think that that's the path that Disney wants to go. Definitely, it's in the mode of, let's do a lot with what we already have. I think that The Mandalorian is a great example of what it can do with a franchise when it has a really good story to tell. I think it's going to run that playbook. Yeah. If anything, I would expect Disney to be a seller of assets.

16:08We were talking about before we hopped on on the call. Would not be surprised to see ESPN spun out of Disney, whether it's next year or a few years down the road. The head of ESPN, Jimmy Pataro, was one of the names kicked around as potential Disney CEO. While again, we haven't had the final CEO announced, looks like he's not going to be going to be the choice. They have been expanding their assets back in this fall when they took over NFL Network. There's been all this conversation of what's next for ESPN, And I think what could be next for ESPN is a life as an independent company. My third prediction was Disney will have this year's biggest movie.

16:43And this is almost cheating, but it really wasn't when I look back. So Disney had the three highest grossing movies worldwide in 2024. It had three of four in 2025. The other one was a Chinese movie. So out of the U.S. studios, there's only been six movies that have grossed more than a billion dollars in tickets in 2024 and 2025. Disney put out all of them. So I'm basically saying, as any Marvel fan knows, Avengers Doomsday comes out in December of this year. And I think it's pretty much a lot, just like Avatar this year in 2025. I think it's pretty much a lot to be the biggest movie. I don't know if you guys have any thoughts on that.

17:16If not, we can move on to the fourth prediction. I mean, there weren't many movies that came up on the slate that even could give it a run for its money, really. I mean, Christopher Nolan is going to have The Odyssey coming out later this year. But you know what? The trailer wasn't great. I don't see a lot of buzz for it. The Hunger Games come out, Dune, but really, I don't see anything that can. Those are the only ones I see that could potentially challenge the crown, but I don't think that they will succeed. I think you're right. Disney gets it. My fourth one is Disney will beat the market in 2026.

17:46Again, this is a stock that has actually lost to the market in four of the last five years. Very disappointing. 3 % gain last year in a year when media stocks were soaring on takeover news. But I do think the stock is attractively priced, a forward earnings multiple in the mid-teens. It is predicted to grow its earnings at a double-digit pace, all since its streaming business turned profitable in fiscal 2024. Revenue growth is still slow, but I think just the more efficient Disney that we're going to be seeing in the next few years is enough to get investors excited in the company again. Thoughts on that?

18:16It's not unprecedented, Rick. That's for sure. You can have a low-growth company that turns it around on the margin profile and does well as a stock. One example I'll give from 2025 is Dollar General. It didn't put up much top-line growth, but it had the profit margin improvement and was a solid, solid performing stock in 2025. Now, I'm personally pretty lukewarm when it comes to Disney stock outlook, but I see your point, that it doesn't have to put up a ton of top-line growth in order to be a good stock for the coming year and beyond. Toy Story 5 is coming out, so to infinity and beyond. We'll close on that, John.

18:51Well done, John and Nick. Thank you for indulging me today. As always, people on the program may have an interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosures, please check our show notes. For John Quast, Nick Seiple, and the entire Motley Fool money team, I'm Rick Minars.

19:21May your days be sunny and your life Motley Fool Money.