(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — Sean took a look back at some of the year’s biggest winners we’ve written up for you as part of our Best Stocks in the Market coverage. Lam Research (LRCX) and KLA Corp (KLAC) were the numbers one and four out of all of our columns. I want to point out that neither of these stocks were conventionally cheap at the time we alerted you to their breakouts. Neither were selling at absolute or even relative discounts to their sector. I bring this up because I want to highlight the fact that valuation on either trailing or forward-looking numbers does not enter into our process at all. We’re curious enough to look at the valuations of the stocks we’re writing up and, yes, occasionally we have some cheap earnings multiples amongst our Best Stocks universe, but this is entirely incidental. Because we know a very big thing: Trend beats valuation in the short-term. It sometimes wins in the intermediate term as well. In the long-term, the starting valuation you pay will probably matter a lot more, but not always. Because there are two ways for a stock to grow into a high valuation. The first is the one everyone is always vigilant about: An expensive stock becomes less expensive because it falls a lot in price. But the second way is also a possibility: An expensive stock puts up such gigantic earnings growth that it goes from being expensive to reasonably priced to potentially even cheap. Nvidia has just spent the last five years accomplishing this feat. As much as its share price rose, its earnings per share rose even faster resulting in a moderating of its multiple without a requisite decline in price. Magic! Lam and KLA are operating in one of the best positioned spaces within the semiconductor industry – capital equipment. Are they cheap? No. Could they end up being cheap through something other than a share price drop? Like Nvidia and many other once costly technology stocks, I would say it is absolutely possible. As JPMorgan’s Michael Cembalest pointed out over the weekend, “tech sector capital spending contributed 40%-45% of US GDP growth over the last three quarters, up from less than 5% in the first three quarters of 2023.” Well, many of the stocks we’ve been writing about this year are among the recipients of all that tech spending. There are a limited number of players with the expertise, scale and reliability to enable the chip renaissance we’re currently undergoing. These two companies fit the bill and their order books are exploding. You can’t simply call up Nvidia or Alphabet, AMD, Broadcom or Taiwan Semi and say “Hi, I’d like to help you with advanced lithography!” Lam, KLA, Applied Materials (AMAT) and a few others have the global supply chain for semis on smash. Chip designers and fabricators cannot work around them. The stakes are too high and the need for increased yields and speed to market have never been important. So that’s how these stocks joined and remained on the Best Stocks list in ’25. Let’s talk about 2026… Lam is getting awfully close to a retest of its rising 50-day moving average. As you can see above, this has been a reliable area of support since the stock broke out in May. I probably wouldn’t automate this one given the potential for a false breakdown and then whipsaw higher. I’d probably eyeball it and check in every Friday toward the close for a meaningful violation. I make that level at about $159. If there are some people who rode the stock to big gains last year who are now using the fresh calendar as an opportunity to lock in gains that won’t be taxed until 2027, you may see it under more pressure. Longer-term oriented investors should shorten up the moving average from a 200-day to a 100-day (shown above) and watch for orderly pullbacks to get in. One thing worth mentioning, which can also be seen on the chart above (bottom pane), is that momentum for this name has been steadily cooling since it peaked last October. This is in-line with what we saw across the AI ecosystem. Lam kept making new highs while RSI diverged lower. In that context, the recent mild rollover is perfectly natural. We don’t want to see that divergence increase from here, however, so that’s another thing for longs to keep their eye on. Let’s look at a one-year chart of KLA Corp. JPMorgan’s semiconductor analyst Harlan Sur raised his price target on this stock by 40% to $1485 this past October and the firm recently placed it on their top stocks for 2026 list. Sounds great, but we still have to focus on risk management. This one is a better set-up than LRCX because the stop is obvious. KLA remains in a clear long-term uptrend. Price is well above the rising 200-day moving average ($942), which is classic “trend intact” behavior. The buyers ran out of ammunition above $1250 so that’s your new overhead resistance. A violation of the rising 50-day, which looks like it’s about to face its next test, is an obvious place for traders to cut their losses. Investors can ignore that short-term noise and begin accumulating now. I would remain a buyer so long as it stays above $950. A break below would be an obvious end to the current uptrend and tell you something materially has changed in the sentiment around this group. $950 is a big fall from here – about 22% – so the key thing with KLA is position sizing. Own it small and use dips to add. You should be able to lower your average cost over time with the risk being a fresh breakout above $1200 before you’ve had a chance to add. That’s not the end of the world. Now here’s Sean with some fundamentals… Best stock spotlight: Lam Research and KLA Sean — Semis had another banner year with the SMH up 49% in 2025. Lost in translation are the companies enabling the NVDAs of the world to reach $4T in market cap. As Josh mentioned, LRCX and KLAC were our best and fourth best stocks since we wrote about these two on Aug. 11 and Oct. 6 . The stocks are up 68% and 34% respectively since August and 15% and 7% since October . Both of these stocks trade at a forward 30x earnings while expecting 17%-18% EPS growth in 2026. You can see Lam Research Corp. (LRCX) has had an incredible bounce post Liberation Day. The fundamentals of this company have matched its impressive performance the past few years. Revenue troughed at $3.21 billion in Q4 FY23, down 17% year over year, before rebounding with five consecutive quarters of growth. By Q1 FY26, revenue reached a record $5.32 billion, up 28% year over year, while full-year FY25 revenue climbed to $18.4 billion, a 24% increase from FY24. This top-line recovery has been accompanied by margin expansion: gross margin rose from 44.8% at the trough to 50.6% in Q1 FY26, while operating margin expanded to roughly 35% from the high-20s. Looking forward, management expects roughly $2.5 trillion in cumulative data-center capex over the next five years to translate into about $200 billion of wafer-fab equipment spending, with industry forecasts rising to $105+ billion in 2025. (data according to Quartr) Growth is being fueled by AI-driven investments in high-bandwidth memory, advanced packaging, and hardware upgrades, with advanced packaging revenue more than doubling year over year in FY24. The company laid out ambitious 2028 targets, calling for $25–27 billion in revenue, gross margins above 50%, and $6–7 in EPS, with a longer-term view toward $30+ billion in revenue and $8+ EPS. Looking at KLA Corp. (KLAC) now, this stock has also had an incredible move higher with fundamentals that back it up: KLA is a prime beneficiary of the AI and advanced-packaging boom like LRCX, with advanced-packaging revenue rising from roughly $300 million in 2023 to $500 million in 2024 and projected to exceed $925 million through the end of 2025 — nearly 70% year-over-year growth driven by AI infrastructure buildouts, high-bandwidth memory, and increasingly complex chip designs. KLA has seen meaningful margin expansion, with non-GAAP gross margins in the 63% range, operating margins above 44%, and free cash flow surpassing $1 billion per quarter for the first time. KLA’s services business, now about 23% of revenue, has delivered 53 consecutive quarters of year-over-year growth, adding a more predictable recurring revenue stream to what is a cyclical semiconductor-focused business. Capital allocation is firing on all cylinders too, with 16 straight years of dividend increases, a new $5 billion buyback authorization, and a commitment to return more than 85% of free cash flow to shareholders while maintaining investment-grade balance-sheet strength. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. 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