Key Points

• Investors have every reason to smile, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite, respectively, climbing by 14% to 20% year-to-date.

• Unfortunately, historical headwinds are mounting for the stock market.

• Inexplicable valuation premiums, weakening growth prospects, and share-based dilution are just a few of the reasons these five beloved stocks can be avoided in 2026.

• 10 stocks we like better than Palantir Technologies ›

One week from today, we’ll be ringing in a new year — and investors are likely to be smiling from ear to ear. As of the closing bell on Dec. 19, the ageless Dow Jones Industrial Average, benchmark S&P 500, and growth-focused Nasdaq Composite had, respectively, climbed by 14%, 16%, and 20% year-to-date.

Although the stock market’s major indexes have an unblemished track record of rising over multidecade periods, history has shown that equities rarely, if ever, climb at a parabolic rate or advance in a straight line. In other words, when things seem too good to be true on Wall Street, they often are.

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We’re about to enter 2026 with the second priciest stock market dating back to January 1871 — and stock valuations aren’t the only headwinds investors will have to contend with in the new year.

If I were holding any of the following five beloved stocks (which I’m not), I’d ring the register and sell right now.

Image source: Getty Images.

Palantir Technologies

I’ve been an investor for 27 years, and I’ve never witnessed a megacap stock whose valuation makes less sense than that of artificial intelligence (AI) titan Palantir Technologies (NASDAQ: PLTR).

I’ll give Palantir and its CEO, Alex Karp, credit where credit is due. The company’s AI and machine learning-driven platforms, Gotham and Foundry, aren’t duplicable at scale. This ensures that the company’s double-digit growth rate and operating cash flow are both predictable and sustainable. But even though investors are more than willing to pay a premium for sustainable moats on Wall Street, Palantir’s premium is otherworldly.

Dating back to the proliferation of the internet in the mid-1990s, large public companies with price-to-sales (P/S) ratios above 30 have historically signaled the presence of a bubble. While the P/S ratio isn’t a useful timing tool, it does have a flawless track record of alerting investors to historically unsustainable valuations.

As of the closing bell on Dec. 19, Palantir was sporting a P/S ratio of almost 127. There isn’t a sales guide or earnings beat in 2026 that would be sufficient to support such an aggressive premium.

Beyond Meat

A second beloved stock that I’d send to the chopping block right now is plant-based meat company Beyond Meat (NASDAQ: BYND).

Wall Street’s newest meme stock made waves when its shares skyrocketed approximately 1,600% in less than four days in October. Investors were excited about the prospects of the company’s debt-for-equity exchange, which eliminated the bulk of its debt obligations. There was also a high level of short interest in Beyond Meat stock at the time, leading to the belief that a short squeeze would occur. This is where short-sellers (investors who wager on a stock’s share price to decline) all rush for the exit at once, leading to a brief but parabolic move higher in a company’s share price.

However, Beyond Meat’s debt-for-equity exchange, coupled with an at-the-market share offering announced with its third-quarter operating results, nearly sextupled the company’s outstanding shares and meaningfully increased its tradable shares (known as “float”). This means Beyond Meat’s short interest hasn’t been anywhere near as high as claimed on several social media platforms and investment boards, making its shares a poor candidate for a short squeeze.

Furthermore, Beyond Meat’s operating performance has fallen short of expectations. Sales in its U.S. retail channel plunged 18% in the third quarter compared to the prior-year period, with “higher trade discounts and price decreases of certain of our products” weighing on the company. Management is clearly telling investors that it lacks pricing power, which is a worrisome statement to make for a company with shrinking sales and ongoing cash burn.

Image source: Tesla.

Tesla

In 2025, sales for electric-vehicle (EV) manufacturer Tesla (NASDAQ: TSLA) are expected to fall by 3%, based on Wall Street’s consensus. Yet shares of the company hit a fresh all-time high last week and are up 19% year-to-date, as of this writing. This bifurcation makes Tesla perhaps the no-brainer stock to sell on this list.

Similar to Palantir, Tesla has identifiable catalysts that help explain why investors adore it. It’s retained some of its first-mover advantages in the EV space and is pushing to advance its robotaxi program. Furthermore, Elon Musk is spearheading Tesla’s push into energy generation and storage, as well as the development of autonomous robots (known as Optimus) that can be used for repetitive tasks.

Although Tesla is a compelling story stock, Musk and his team have continually failed to deliver on the overwhelming majority of their promises. Musk’s annual claim of Level 5 autonomy being “one year away” has surpassed the decade mark. Meanwhile, Optimus doesn’t appear to be remotely close to commercialization. If these promises were removed from Tesla’s valuation, the company’s shares would likely deflate in a big way.

Additionally, Tesla has been increasingly reliant on unsustainable sources of income. Anywhere from 40% to 50% or more of the company’s quarterly pre-tax income has originated from automotive regulatory credits and net interest income on its cash. A company valued at 215 times forward-year earnings shouldn’t be relying so heavily on unsustainable income sources.

Apple

Sometimes the valuations of rock-solid businesses don’t make sense, and that’s precisely the case with tech innovator Apple (NASDAQ: AAPL).

As a company, Apple checks off a lot of the right boxes. For instance, iPhone is the top-selling smartphone in the U.S., and the company’s services segment continues to grow at a high single-digit or low double-digit pace. This subscription-driven platform should improve Apple’s operating margin over time and lessen the revenue peaks and valleys that often accompany major iPhone upgrade cycles. Long story short, there’s a reason Apple has been Warren Buffett’s No. 1 holding at Berkshire Hathaway for years.

However, Apple’s true operating performance has been masked by the world’s largest share-repurchase program. Since initiating buybacks in 2013, Apple has spent more than $816 billion to repurchase nearly 44% of its outstanding shares. While this has been undeniably beneficial to its earnings per share, it has no impact on raw net income data.

Between the end of fiscal 2022 and fiscal 2025 (Apple’s fiscal year ends in late September), the company’s net income rose by just 12% to $112 billion. Apple’s once-mighty growth engine has somewhat stalled, aside from its services segment, which makes its estimated price-to-earnings ratio of 33 in fiscal 2026 highly unappealing.

Strategy

Last but certainly not least, I’d sell shares of Strategy (NASDAQ: MSTR), the beloved Bitcoin (CRYPTO: BTC) treasury company. Even though shares of the company have tumbled 43% year-to-date, the prospects for Strategy and Bitcoin don’t appear particularly promising for 2026.

On a macro basis, I’m not a fan of Bitcoin. Its blockchain network isn’t the fastest nor the cheapest, and its real-world utility test didn’t go very well in El Salvador. What’s more, its scarcity is tied to lines of computer code that can be changed with consensus (which is unlikely but not impossible). With no halving events on the horizon and Trump’s election in the rearview mirror, Bitcoin is likely to struggle for material catalysts in 2026.

Strategy holds more of the world’s largest cryptocurrency than any other business. As of Dec. 15, it held 671,268 Bitcoin, or nearly 3.2% of all tokens that’ll ever be mined. The problem is that Strategy has issued five preferred stocks to raise capital, each with its own unique dividend rate and structure. Since Strategy’s only operating segment (enterprise analytics software) generates little or no positive operating cash flow, the only way it can pay dividends on its preferred stock is by issuing shares of its common stock.

Over the trailing three years, Strategy’s outstanding share count has ballooned by 149%. This is just the start of what’s to come in order for the company to satisfy its preferred stock dividends and eventually repay its outstanding convertible debt.

If you want to own Bitcoin, it’s easier than ever to purchase through an exchange-traded fund (ETF) or directly on a crypto exchange. Buying into Strategy’s seemingly broken operating model makes no sense.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, Beyond Meat, Bitcoin, Palantir Technologies, and Tesla. The Motley Fool has a disclosure policy.