We’re less than a fortnight into a new year, and already BAE Systems (LSE: BA) shares have been turbocharged by extraordinary geopolitical developments. The FTSE 100 defence stock has gained 20% in January so far. It’s now on the cusp of reaching a new 52-week high.

After such an explosive start to the year, investors will be asking whether shares in Europe’s largest arms manufacturer still offer good value at a near-record valuation. Here’s where I think the BAE Systems share price could go in 2026.

An evolving world order

The world’s defence and security landscape is changing rapidly. In recent days, the US has captured Venezuelan President Nicolás Maduro, openly discussed a military takeover of Greenland, and proposed a 50% jump in its defence budget to $1.5trn for 2027. Moreover, Britain and France have committed to boots on the ground in Ukraine if a peace deal is reached with Russia.

Tragically, heightened global militarisation seems here to stay, and BAE Systems shares are thriving in this environment. The company manufactures military aircraft, warships, submarines, combat vehicles, drones, and electronic warfare capabilities. Given the nature of the beast, some investors will understandably have ethical concerns about investing in such a business.

Growth opportunities

However, the investment case for BAE Systems shares looks compelling to me and they have a presence in my own portfolio. Nearly half of the group’s revenue comes from the Pentagon. A recent $1.7bn contract to supply the US Navy with laser-guided rocket kits was an impressive achievement. The massive increase in US military expenditure proposed by President Trump could bring further opportunities for the firm.

Expansion opportunities are abundant in the UK and Europe too. As the US becomes more active in its own hemisphere and pressures European governments to take more responsibility for their defence, rearmament efforts have gained fresh impetus. The European Commission is seeking to mobilise €800bn for defence infrastructure by 2030.

There’s a risk BAE Systems could be sidelined by the initiative’s ‘buy European’ approach in a post-Brexit world. That said, its existing partnerships with German and Italian defence contractors Rheinmetall and Leonardo look set to deepen over the coming years, giving the firm a strong foothold on the continent.

A premium valuation

In my view, global market conditions look very favourable for the BAE Systems share price to continue rising this year and beyond. However, the forward price-to-earnings (P/E) ratio of nearly 24 is well above the stock’s historical average.

The high valuation can be justified by a huge £75.4bn order book, but investors shouldn’t overlook operational risks facing the company. Supply chain disruption is a major concern. China has tightened export controls on critical minerals and metals that are essential for semiconductors, radar, missiles, and aircraft components.

This could result in margin erosion and production delays. At today’s premium valuation, there’s not much of a safety buffer against sell-offs that could materialise as a result.

Too late to consider buying?

I already invest in BAE Systems shares, and I’ll be holding my position. In the current febrile geopolitical climate, I want exposure to the defence sector in my portfolio. This FTSE 100 firm is a very high-quality player in that arena.

Even at today’s level, the stock is still worth considering for new investors. But overvaluation risks are rising and should be monitored closely.

The post BAE Systems shares hit a mighty £61.9bn valuation — is it too late to buy? appeared first on The Twelfth Magpie.

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Charlie Carman has positions in BAE Systems The Motley Fool UK has recommended BAE Systems and Rheinmetall. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The S&P 500 is the most popular stock market index around the globe. Representing the 500 largest companies in the world’s largest economy, tracker funds following the leading US benchmark are staple investments in many British investors’ portfolios.

In eight out of the last 10 years, the S&P 500 produced a positive return. Last year was another success story, despite President Trump’s tariff measures and global conflicts. But are US stocks poised for a crash in 2026? Here’s my take.

Warning signs

Every year, scores of analysts and commentators prophesise about an imminent stock market crash. Equally, many counter the doomsayers with bullish forecasts of glorious gains. The truth is, nobody knows what will happen for sure.

However, we can compare where we are today with previous periods in history and draw inferences accordingly. Worryingly, there are some red flags for S&P 500 stocks as we enter the new year.

One is the Shiller price-to-earnings (P/E) ratio. This valuation metric divides the current S&P 500 price by the average of the last 10 years of inflation-adjusted earnings.

Currently, it’s at 40.74. To put that number in context, that’s the second-highest level in history, surpassed only by the dot-com bubble. Many fear that an artificial intelligence (AI) bubble is inflating in today’s stock market. When bubbles pop, the subsequent crash can be devastating.

Capital expenditure on AI by S&P 500 companies totalled around $400bn in 2025. This year’s estimates are over $500bn. If sentiment shifts, 2026 could prove to be very painful for investors in US shares.

Reasons to be optimistic

Drawing parallels with the late 90s is tempting, but there are crucial differences between the S&P 500 then and today. Back in the dot-com era, many tech stocks lacked profits and robust cash flows. The rapid share price increases were often driven by speculative frenzy.

Arguably, today’s mega-cap tech firms are in much better shape. They’re highly profitable businesses with strong fundamentals across a range of metrics.

AI potential might be driving share prices higher, but concrete earnings can justify the excitement. Those expecting an S&P 500 crash this year may well find their fears are unfounded.

An undervalued Magnificent 7 stock

A full-blown crash is a possibility, but I err on the side of optimism. After all, the great Benjamin Graham said: “To be an investor, you must be a believer in a better tomorrow“.

But, I’m conscious of overvaluation, too. That’s why I recently invested in Meta Platforms (NASDAQ:META), the owner of Facebook, Instagram, and WhatsApp.

With a forward P/E multiple around 22.2, Meta’s the cheapest of the Magnificent 7 club on this metric. I think the stock could shine this year, provided the whole market doesn’t crash.

Third-quarter earnings were impressive, with revenue rising 26% to $51bn and daily users increasing by 8% to 3.54bn. Precision-targeted advertising continues to be a cash machine for the company and the width of its moat in the social media world can’t be overstated.

Regulation is a growing risk for the company. Australia’s social media ban for under-16s could inspire other countries to follow suit, which could hurt the Meta share price.

Nonetheless, I think Mark Zuckerberg is one of the most talented and competitive S&P 500 CEOs. At today’s price, Meta could be a long-term outperformer.

The post Will the S&P 500 crash in 2026? appeared first on The Twelfth Magpie.

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Charlie Carman has positions in Meta Platforms. The Motley Fool UK has recommended Meta Platforms. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Most FTSE 100 stocks had a great year in 2025, and the index delivered one of its best annual returns since the aftermath of the financial crisis. However, dozens of Footsie shares also had negative returns.

One of last year’s FTSE 100 laggards was the London Stock Exchange Group (LSE:LSEG), which endured a nasty share price fall of more than 20%. Let’s explore why this stock tumbled and whether it can bounce back in 2026.

Competition risks are rising

Financial data and analytics are the lifeblood of this business, accounting for over two-thirds of the company’s revenue. New artificial intelligence (AI) models are disrupting the sector, posing a huge challenge for traditional data providers, including the London Stock Exchange Group.

There are challenges on multiple fronts. Start-ups providing AI-powered market intelligence are offering agile, cost-effective solutions. This has raised uncomfortable questions about the value of the London Stock Exchange Group’s proprietary datasets.

For access to tools like LSEG Workspace, customers can expect to pay from $20k to over $50k annually. At that price point, the group’s vulnerable to firms seeking to undercut with innovative technologies.

Other legacy giants are also keen to defend market share aggressively. Bloomberg is the leader in this industry, claiming around 33.4% of the market against the FTSE 100 company’s 19.6%.

The New York-based business launched new AI tools in 2025 for document insights and company news. It also developed advanced chatbots to encourage users to stay inside the Bloomberg ecosystem.

Granted, the London Stock Exchange Group entered into a 10-year strategic partnership with Microsoft back in 2022, so it’s taking on the competition. But investors are impatient for proof of AI-driven growth that has yet to materialise due to phased product rollouts, cloud migration, and data platform consolidation.

IPO fundraising concerns

Another challenge facing the group is the slow death of UK stock market listings. In the first half of 2025, IPO activity for the London Stock Exchange sank to a 30-year low, although fundraising did pick up later in the year.

That said, a major overhaul to listing regulations by the Financial Conduct Authority in 2024 could start to yield positive results next year. Plus, in Rachel Reeves’ Budget, a three-year relief for stamp duty was introduced for newly-listed shares.

Time will tell whether these measures can revive the City’s status as a leading destination for global capital.

Where next for this FTSE 100 stock?

Despite the challenges facing the group, results have remained robust. In the third quarter, the firm delivered growth of 6.5% for combined subscriptions, a 6.4% increase in revenue, and it expects an EBITDA margin at the top of guidance for 2025. It also announced an additional £1bn share buyback.

The valuation has also become more attractive after last year’s share price fall. A forward price-to-earnings (P/E) ratio of 19.3 is below the 10-year historical average for this FTSE 100 stock.

Overall, there’s recovery potential for London Stock Exchange Group shares. They look undervalued to me, and I think they’re worth considering.

But potential investors should closely monitor cutthroat competition from rivals. This is a fast-moving space. The group will soon need to demonstrate that its products developed with Microsoft justify a premium pricing model.

The post This FTSE 100 stock tanked in 2025. Can it rebound in 2026? appeared first on The Twelfth Magpie.

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Charlie Carman has positions in Microsoft. The Motley Fool UK has recommended London Stock Exchange Group Plc and Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

No matter how convinced I am of the investment case for a particular growth stock, I’d never put 100% of my cash in just one share. Diversification is an essential pillar of my investing strategy, since it protects my portfolio against the possibility of a devastating company-specific event.

But what if I were limited to buying a single UK growth stock? With so many choices available for investors, it’s hard to choose one company above all others. I was curious to see if ChatGPT had a spectacular suggestion I might have missed.

Genetics for growth

The AI chatbot started with boilerplate wording cautioning against going all-in on one growth stock, describing it as “extremely risky“. I agree. But it played along with my crazy idea, selecting Oxford Biomedica (LSE:OXB) as the stand-out share to consider.

I must admit, I’d only come across this FTSE 250 gene and cell therapy business before in passing during the pandemic. Back in 2020, the firm signed a prominent manufacturing agreement with AstraZeneca to produce Covid-19 vaccines. Naturally, ChatGPT’s answer encouraged me to look deeper.

The company, which now trades as OXB, started life as a spin-out from the University of Oxford in 1995. Today, it’s a pure contract development and manufacturing organisation (CDMO).

This means OXB’s boffins handle complex lab work and large-scale production so its customers don’t have to. The firm serves major pharma companies, such as Novartis and Bristol Myers Squibb, by manufacturing viral vectors and gene therapy components.

Risk and reward

The biotech sector suffered in a post-pandemic world, and OXB was no exception. Its share price is still down nearly 40% over five years. But this year has been more promising with the shares rising from 420p in January to over 600p today.

Recent results show a positive trajectory. In the first half of FY25, revenue surged 44% to £73.2m, and the group’s order book skyrocketed 166% to £149m.

It’s still a loss-making company, which brings risks for investors considering the £728m valuation rests on the firm’s future potential. However, pre-tax losses have narrowed to £26m from £35.7m, so the direction of travel looks good.

Expanding production capacity is a major priority for OXB. Those ambitions were given a huge boost from a successful £60m fundraising earlier this year. In October, the company used some of those funds to acquire a commercial-scale, FDA-approved viral vector manufacturing site in North Carolina, which is expected to be fully operational in early 2026.

The investment opportunity in OXB shares needs to be weighed against a price-to-sales (P/S) ratio above 4 and a price-to-book (P/B) ratio above 22. While growth stocks in the biotech sector often have higher valuation multiples, I think these figures leave little room for error. Any clinical trial setbacks or the loss of a key customer could send the share price tumbling.

My view

ChatGPT’s growth stock champion was an interesting choice, but it wouldn’t be my number one pick. In any event, I already invest in AstraZeneca, so I won’t be buying OXB shares today. Diversification matters and I don’t want too much biotech exposure in my portfolio. But I’ll keep a close eye on this company to see if it can realise its potential.

The post I asked ChatGPT to pick 1 growth stock to put 100% of my money into, and it chose… appeared first on The Twelfth Magpie.

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Charlie Carman has positions in AstraZeneca Plc. The Motley Fool UK has recommended AstraZeneca Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I’m very grateful to be an investor in Rolls-Royce (LSE:RR.) shares. They’ve done tremendously well in recent years, and I’m a huge admirer of CEO Tufan Erginbilgiç, who has spearheaded the company’s turnaround from its pandemic lows.

But they say all good things come to an end. Will 2026 be the year that the party stops for Rolls-Royce shareholders like me? I had a close look at what the leading City analysts think about the FTSE 100 company’s prospects for next year. Let’s dig into the detail.

A conservative consensus

I find it useful to look at broker forecasts every so often. They don’t play a huge role in my investment decisions, since nobody has a crystal ball, so I prefer to rely on my own convictions and independent analysis. Nonetheless, it’s always a good idea to canvass external opinions.

Among the leading analysts covering Rolls-Royce shares, I’m pleased to say the recommendations are broadly positive.

Although none of the leading brokers are bearish enough to give Rolls-Royce a ‘Sell’ or ‘Strong sell’ rating, the consensus 12-month share price target of 1,250p is only a little bit higher than where the stock trades today. Considering Rolls-Royce shares almost doubled in value this year, that would be a significant slowdown in growth.

While I wouldn’t say it’s an expert stock picker, I was also curious to get the thoughts of ChatGPT. After all, AI is playing an ever-growing role in our lives. The chatbot was even more cautious, predicting the share price would finish next year at 1,200p. Well, it turns out that I’m a bit more optimistic than most analysts, both robots and humans!

My view

Rolls-Royce shares used to be a turbulent ride, with the firm almost going bankrupt when Covid-19 struck. But the route to recovery, and then unprecedented highs, has been remarkably smooth. There’s not much in recent financial updates to suggest the company can’t continue to outperform next year, in my view.

Rolls-Royce recently reaffirmed its guidance for FY25, with results due on 26 February 2026. That means investors can expect underlying operating profit between £3.1bn and £3.2bn, and free cash flow between £3bn and £3.1bn.

Large-engine flying hours for civil aerospace comfortably surpassed pre-pandemic levels this year marking a crucial milestone for the group’s largest division. And in today’s uncertain world, the defence business goes from strength to strength. The latest highlight is a deal for the UK to export 20 Eurofighter Typhoon aircraft to Türkiye, powered by Rolls-Royce’s EJ200 engines.

That said, I can see why excitement for Rolls-Royce shares is cooling among institutional analysts. Trading at a forward price-to-earnings (P/E) ratio above 37 and a price-to-sales (P/S) ratio above five, there’s little room for error in today’s valuation. A disappointing set of results could deal a nasty blow to the share price, especially after such astronomic gains in recent years.

I’ve prepared for that eventuality by diversifying my portfolio across multiple companies in different sectors. But, I’ll be keeping Rolls-Royce in there for now, and I reckon it could beat the consensus view once again in 2026.

The post Where will Rolls-Royce shares go in 2026? Here’s what the experts say! appeared first on The Twelfth Magpie.

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Charlie Carman has positions in Rolls-Royce Plc. The Motley Fool UK has recommended Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Tesla (NASDAQ:TSLA) is one of those companies that grabs headlines, but one under-the-radar FTSE 100 stock deserves more coverage than it gets. Engineering and defence specialist Babcock International Group (LSE:BAB) has delivered stunning share price gains over the past five years.

Although investors in Tesla stock would have enjoyed a very handsome return, those who opted for Babcock shares instead could have made more than twice as much! Let’s take a closer look at both businesses and where they could go next.

Tesla’s triumphs

Elon Musk’s electric vehicle giant has been on a volatile ride, but this month it revved up to an all-time high. With a market cap north of $1.5trn, it’s easily the world’s most valuable carmaker. Remarkably, Tesla’s value is almost half that of the FTSE 100’s as a whole.

Robotaxi momentum is the latest development driving the Tesla share price higher. The company’s currently conducting autonomous vehicle tests in Austin, Texas. These trials have progressed to a stage where human supervisors aren’t present, suggesting commercial viability may not be far away. Some noteworthy analysts share this view.

Morgan Stanley predicts there will be a million Tesla robotaxis on the road by 2035, which would be a huge milestone for the business. However, the investment bank recently downgraded its share price forecast to $425 as it believes much of the growth potential is already priced in.

That points to one of the most pressing issues facing the stock — an eye-watering valuation. With a forward price-to-earnings (P/E) ratio above 212, this company’s anything but cheap. The gap between current earnings and future promises raises significant risks for investors. Time will tell whether such a lofty P/E multiple is justified.

I think it’s still a stock worth considering, but investors should tread cautiously. Diversifying with value shares could complement a potential investment in Tesla nicely.

A FTSE 100 gem

Babcock trades at a forward P/E multiple around 21, meaning it’s a lot cheaper than Tesla on this metric. The question is whether its unprecedented share price rally can continue, having risen significantly over 300% in five years.

Babcock’s business spans the military and civilian worlds. Its core operations include maintenance, upgrades, and training for naval vessels, land vehicles, and aviation systems.

Nuclear is the firm’s biggest division. This unit supports submarine fleets and provides construction and decommissioning services for nuclear power stations. Babcock plays a key role in the UK’s Trident deterrent programme and the Hinkley Point C project.

Recent results have been stellar. In first-half results for FY26, revenue increased 7% to £2.54bn, basic earnings per share rose from 25.7p to 33.7p, the interim dividend increased 25% to 2.5p, and a £200m share buyback programme is being executed.

Looking ahead, increased global defence expenditure and Britain’s pledge to boost national security spending to 5% of GDP by 2035 suggest a rosy future for Babcock shares. However, a big reliance on government contracts also entails risks. Political priorities can change.

Challenges also come with the long-term, complex projects that Babcock undertakes. Cost overruns, delays, or performance issues could hurt the group’s bottom line and, in turn, the share price. However, these risks shouldn’t take the spotlight away from Babcock’s undeniable successes. There are many good reasons to consider buying this FTSE 100 outperformer.

The post This overlooked FTSE 100 share massively outperformed Tesla over 5 years! appeared first on The Twelfth Magpie.

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Charlie Carman has positions in Tesla. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Nvidia (NASDAQ:NVDA) shares have risen by more than 1,000% in just two years. This incredible rally propelled the company to a valuation over $5trn a few months ago — a feat no other business has ever achieved.

As debate rages over whether we’re in a sustainable AI boom or a bubble ready to burst, this is a good time to evaluate the firm’s prospects for next year and beyond. Here’s what I think the future might hold for Nvidia shares.

The king of AI chips

Nvidia’s tremendous success is due to its current stranglehold on graphics processing units (GPUs). According to some estimates, the company controls up to 90% of the market. This near-monopoly is secured by the group’s parallel computing platform, CUDA, which allows developers to accelerate computationally intensive tasks, provided they stay within the Nvidia ecosystem.

GPUs are electronic circuits that are powering the AI revolution, significantly speeding up machine learning and deep learning models. Demand has skyrocketed as the world’s largest technology firms pour billions of dollars into AI infrastructure.

Recently, CEO Jensen Huang revealed an astonishing $500bn order book for Nvidia’s Blackwell and upcoming Rubin chips through to the end of 2026. For any investors thinking of betting against Nvidia stock, this figure alone should give them pause for thought.

What’s more, the business is at the forefront of technological developments in the fields of robotics and autonomous vehicles. Huang has described this as a “multitrillion-dollar growth opportunity.” If true, the future for Nvidia shares looks very bright indeed.

Threats to Nvidia’s dominance

Maintaining a market-leading position is a challenge for any business. That’s especially true for a company in a sector as fast-paced as the semiconductor and computing industry. China’s rapidly cementing its position as a major player in the AI arms race, and it could soon prove to be a significant commercial threat to Nvidia.

This year, Beijing banned domestic technology companies like ByteDance (the owner of Tiktok) and Alibaba from using the US firm’s RTX Pro 6000D AI chips. These were specifically designed for the Chinese market. Major players like Huawei and a variety of start-ups are working at speed to develop homegrown alternatives to rival Nvidia’s high-end chips.

Some analysts believe a significant manufacturing gap persists between Chinese companies and Nvidia. However, Jensen Huang has said the country’s only “nanoseconds behind” the US in its capabilities.

Back in January, the launch of DeepSeek — an AI model like ChatGPT — sparked a broad sell-off in US shares. There’s a risk that the emergence of a serious Chinese competitor to Nvidia in 2026 could prompt a crisis of confidence.

A lower valuation

These risks seem to be priced in at today’s valuation. Nvidia stock trades at a forward price-to-earnings (P/E) ratio below 24. That’s pretty low compared to where the shares have been historically.

At this relatively low valuation, I think Nvidia shares are still worth considering for their significant growth potential. I’ll continue to hold my position. I wouldn’t be surprised if the share price continues to climb next year and beyond.

Even if growth slows, there’s a strong chance the world’s biggest company can continue to outpace the returns of the S&P 500 and FTSE 100. But investors would be wise to monitor developments in China closely.

The post Will Nvidia shares continue their epic run into 2026 and beyond? appeared first on The Twelfth Magpie.

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Charlie Carman has positions in Nvidia and Alibaba Group. The Motley Fool UK has recommended Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

If there’s one gift investors should think about giving themselves this Christmas, it’s a Stocks and Shares ISA that produces bountiful passive income. So, which stocking-stuffers could deliver pure dividend gold next year?

I put ChatGPT to the test to see if it can design a credible dividend portfolio. The AI chatbot gave me solid stock picks to consider, but I’m not convinced about the logic behind others. Let’s unwrap its passive income ideas for 2026.

A feast of ISA income

ChatGPT divided its choices into two categories. First, it selected “dividend growth shares”, defining them as companies with strong pricing power, regular dividend hikes, and robust cash flows.

Three FTSE 100 stocks — Diageo, Unilever, and London Stock Exchange Group — made the cut. Curiously, every member of this trio has endured a share price decline this year. That’s a little odd for hand-picked suggestions for growth, but maybe the robo-researcher sees potential for rebounds in 2026. In fairness, they boast good dividend growth streaks, so I see the case for including them.

Next, the virtual stock selector presented “high-quality income shares”. ChatGPT assured me that these firms have higher yields, healthy balance sheets, and sensible payout ratios.

This time, I was guided towards considering Legal & General, National Grid, and HSBC. Their yields range between 4% and over 8%, packing a powerful passive income punch. They seem perfectly rational choices to me, and it’s good to see diversification across different sectors in the portfolio. However, dividends are never guaranteed, and the risk of cuts can be greater with high-yield stocks.

Nice stocks, wrong stocking

So far, I think ChatGPT has done a reasonable job. But I raised an eyebrow at its next proposals. It cited Microsoft and Apple as US stocks worth considering for next year’s ultimate passive income ISA.

Now, these are great companies that will feature in many British investors’ portfolios. Both are members of the prestigious ‘Magnificent 7’ club, which doesn’t happen by accident. However, I query their inclusion in a ‘best’ passive income portfolio. Their dividend yields are just 0.8% and 0.4% respectively. A handy bonus for shareholders, but hardly the main reason to consider owning them.

This is a great example of AI chatbots’ deficiencies, and it’s why I’d never blindly rely on their recommendations. ChatGPT’s a poor substitute for thorough, independent analysis or the considered thoughts of a well-informed human source.

A dividend cracker

One passive income heavyweight that didn’t feature in ChatGPT’s selections is British American Tobacco (LSE:BATS). But this stock deserves serious consideration, not least for its chunky 5.7% yield.

The tobacco giant delivered a strong share price gain in 2025, and I think it could repeat the feat next year. Operating margins over 40% are impressive, and the recent announcement of a £1.3bn share buyback programme adds further weight to the investment case.

That said, declining cigarette consumption’s a major challenge for the business. There are pressing questions about the company’s long-term future, which it’s seeking to answer with a range of alternative nicotine products, like vapes, heated tobacco, and oral pouches.

Nevertheless, an attractive valuation with a forward price-to-earnings (P/E) ratio of just 11.4 and consistently high cash flows make those risks tolerable in my view. That’s why I’m a shareholder!

The post I asked ChatGPT to build the best passive income ISA portfolio for 2026. Here’s what it said! appeared first on The Twelfth Magpie.

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HSBC Holdings is an advertising partner of Motley Fool Money. Charlie Carman has positions in British American Tobacco P.l.c, Diageo Plc, Legal & General Group Plc, and Microsoft. The Motley Fool UK has recommended Apple, British American Tobacco P.l.c., Diageo Plc, HSBC Holdings, London Stock Exchange Group Plc, Microsoft, National Grid Plc, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Investing in the stock market is a powerful way to build long-term wealth. But in the UK, we don’t do enough of it. Only 23% of Brits invest in shares (outside of their pensions), compared to 61% of Americans. That’s a depressing transatlantic divide.

It’s brilliant to see that stocks were recently covered in The Martin Lewis Money Show for the first time. The personal finance guru is performing an important public service by raising awareness about the compound returns the stock market can deliver.

Martin Lewis focused on index funds that track the likes of the FTSE 100, FTSE 250, and S&P 500. It’s a good place to start, but investors with sufficient risk tolerance could consider going further by adopting a Foolish approach.

The merits of index funds

Investing in tracker funds has a strong appeal. It’s a passive way to diversify across businesses in different sectors.

The case for long-term stock market exposure is compelling. As Martin Lewis highlighted, over time, cash loses its real value to the corrosive effects of inflation. Over the past 10 years, that’s true even for those who chased the highest interest rates on savings accounts, switching between banks regularly.

Conversely, index funds tend to grow in real terms over long time periods. In the past decade, the FTSE 100 delivered a 6% annualised return. For the S&P 500, it’s a remarkable 13.6%. Both comfortably beat UK inflation, delivering real growth.

That’s not to say there aren’t risks. Stock market volatility means index funds aren’t suitable investments for short-term goals or rainy-day savings. And crashes can be brutal, as the −44.8% return for the FTSE 100 in 2008 shows.

But for patient investors with long-term objectives and the steely resolve required to avoid selling during difficult times, I think the stock market has a lot to offer.

Furthermore, the Cash ISA allowance is being reduced to £12,000 for under-65s, but the Stocks and Shares ISA limit will remain at £20,000. For those with sizeable savings, that’s another good reason to consider stocks.

Turbocharging a stock market portfolio

Buying individual shares is something Martin Lewis didn’t touch on. This requires more research than index fund investing, and it’s undoubtedly a riskier strategy.

However, fortune often favours the brave. Take the example of Rolls-Royce (LSE:RR.) — a FTSE 100 stock I own.

Rolls-Royce shares have surged 861% over five years, delivering the sort of return that no index fund can. And I don’t think it’s too late to consider buying the stock today either.

The civil aerospace division — the company’s largest — is firing on all cylinders. A strong post-Covid recovery in international travel and a new joint venture with Air China in Beijing suggest 2026 could bring further success.

NATO’s militarisation drive in the face of Russian aggression bodes well for the defence business. Rolls-Royce has signed lucrative contracts in recent months to deliver engines for Leopard 2 battle tanks and Eurofighter Typhoon aircraft.

And the group’s small modular nuclear reactors also show tremendous potential. Rolls-Royce is well-positioned to capitalise on growing demand for reliable power for datacentres and critical infrastructure.

Granted, a forward price-to-earnings (P/E) ratio above 35 means the stock isn’t cheap, raising the risks of potential sell-offs. But I’m optimistic Rolls-Royce can continue to supercharge my portfolio’s performance next year and beyond.

The post New to investing in the stock market? Here’s how to try to beat the Martin Lewis method! appeared first on The Twelfth Magpie.

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Charlie Carman has positions in Rolls-Royce Plc. The Motley Fool UK has recommended Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The UK economy’s in the doldrums, but the FTSE 100 has enjoyed a fantastic 2025. Britain’s blue-chip benchmark has soared 18% since January, and at one stage it almost broke the 10,000-point barrier. This may still happen before the New Year.

Which stocks have been the Footsie’s standout performers this year? What’s fuelled their success? And can these companies sustain their winning streaks in the coming year? Let’s explore.

The FTSE 100’s terrific 10

Here’s the leading line-up for 2025. This year’s top companies come from industries spanning mining, defence, banking, telecoms, and insurance.

Why did these shares outperform?

Starting with the miners, gold and silver prices have soared, lifting the fortunes of precious metal producers like Fresnillo and Endeavour Mining. Copper prices have surged, too, thanks to the clean energy transition. As one of the world’s largest producers, Antofagasta has benefitted.

Turning to the financial sector, interest rates have remained high enough, boosting Lloyds, Standard Chartered, and Barclays. Their net interest margins and wealth management divisions have thrived in this environment, supporting sustained revenue growth. Furthermore, insurance giant Prudential has experienced strong demand for its products in Asia.

Finally, an ongoing civil aviation recovery and increased government defence spending have been tailwinds for Babcock and Rolls-Royce. Elsewhere, strategic investments in Africa’s mobile money market are bearing fruit for Airtel Africa.

Looking ahead to 2026

Regarding the FTSE 100 miners, there are good reasons for optimism next year. Central banks are accelerating gold purchases, and supply deficits persist in silver and copper. However, commodity prices are notoriously volatile, so share price pullbacks can’t be ruled out.

Banks could also continue to outperform, considering their valuations still appear fairly undemanding. That said, interest rate cuts could hurt profitability. Prudential seems well-placed to build on 2025’s success, but competition’s expected to intensify.

A deteriorating global security environment and higher NATO spending targets point to a supportive environment for defence stocks, but this sector’s been booming for a while, so investors should prepare for potential sell-offs.

Airtel Africa remains an exciting play for investors who want emerging markets exposure, but currency volatility could produce some challenges.

The Midas touch

Fresnillo was the undisputed FTSE 100 champion this year. It’s the world’s largest primary silver producer, and Mexico’s biggest gold producer.

The silver price has doubled in 2025 to over $60 per ounce, boosted by surging demand for investment and the metal’s applications in solar panels, electric vehicles, and military equipment. In this benign climate, the Fresnillo share price has more than trebled.

Crucial to the company’s success has been its ability to maintain All-In Sustaining Cost (AISC) for silver mining around $17 per ounce. That’s translated into epic profit margins. The group’s EBITDA skyrocketed nearly 103% to over $1.1bn in the first half.

Although gold production remains robust, one cause for concern is the 6.6% decline in Fresnillo’s Q3 silver output to 11.7m ounces. Lower ore grades and reduced processing volumes at key mines are operational risks investors should bear in mind.

Nonetheless, for those who want precious metals exposure, Fresnillo shares are well worth considering for 2026 and beyond.

The post Revealed! The 10 best-performing FTSE 100 shares in 2025 appeared first on The Twelfth Magpie.

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Charlie Carman has positions in Lloyds Banking Group Plc and Rolls-Royce Plc. The Motley Fool UK has recommended Airtel Africa Plc, Barclays Plc, Fresnillo Plc, Lloyds Banking Group Plc, Prudential Plc, Rolls-Royce Plc, and Standard Chartered Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.