My 2 Favorite Stocks to Buy Right Now

I've been wrong about plenty of stocks over the years, but I've also learned to trust my gut when conviction meets opportunity.

Today, I'm putting my money where my mouth is with two companies I know inside and out. I've been a loyal customer of the first one since Hurricane Irma in 2017 (paper towels, anyone?). For the other, I'm a curious user who's watched it transform from a quirky app into something much bigger.

These aren't momentum plays or meme stocks. They're businesses building lasting value in ways the market doesn't fully appreciate yet. Well, the market doesn't appreciate one of them. Some would say it loves the other one too much -- but it richly deserves the investor passion.

Image source: Getty Images.

Duolingo's stock is down for all the wrong reasons

Duolingo (NASDAQ: DUOL) is a tempting buy right now for patient long-term investors like yours truly. I'm a Duolingo shareholder since the summer of 2021, and my unbroken streak of daily language lessons goes back to June 2016. I have high hopes for this company's long-term growth plans, and every price dip looks like a buying window.

That's exactly what I see in Duolingo's stock on Dec. 4. Share prices reached an all-time high of $545 in May, but have backed down 66% from that peak.

I'll admit that the stock still doesn't look cheap by traditional value metrics, trading at 8.9 times sales at the moment. At the same time, the price-to-earnings ratio (P/E) is down to an all-time low of 23.6. That metric used to show triple-digit figures, averaging 157 over the last year and a half.

The company is knee-deep in an ambitious strategy shift. Duolingo used to focus on grabbing as many users as possible, as fast as possible. Everything else was an afterthought or a bonus.

Since the Q3 2025 report, Duolingo is officially optimizing its business for sustainable long-term success. User growth may slow down over the next couple of years, but that's OK as long as Duolingo's revenues and user counts are poised for long-term growth.

Duolingo was no slouch in terms of profitability before this management update, mind you. Q3 revenues rose 41%, daily active users (DAUs) grew 36% to 50.5 million, monthly active users (MAUs) are up to 135.3 million, and paid subscribers increased 34%. Still, the stock fell on slower bookings guidance.

The key to Duolingo's updated strategy is user satisfaction. If you build a great learning experience, the users and profits will come (to paraphrase the voices in Kevin Costner's head).

"If we develop an app that is more engaging than, and teaches as well as, a personal tutor across multiple subjects, we think we'll become a much bigger business in the long term," cofounder and CEO Luis von Ahn wrote in the Q3 report. "The opportunity ahead of us is to teach billions of people, and while we've made incredible progress, we know we're early in our journey."

I don't mind investing in that vision while Duolingo's stock is unusually cheap.

Costco's expensive stock is still a bargain

Costco (NASDAQ: COST) is a different story, but the investment opportunity is no less compelling than Duolingo's.

Shares of the massive discount retailer are not found in Wall Street's discount bins. Costco's stock trades at a lofty 49.0 times trailing earnings today, having gained a market-beating 500% over the last five years.

The thing is, Costco has earned its lofty valuation the hard and honest way.

The warehouse retailer's membership model is a profit-printing machine disguised as a bulk shopping club. In Q4 2025, membership fee income jumped 14% to $1.72 billion -- pure, high-margin revenue of the automatically recurring kind that drops straight to the bottom line. With membership renewal rates hovering around 92% to 93%, Costco has built one of the stickiest business models in retail. Those 81 million paid members aren't just customers; they're investors in their own shopping experience, paying up front for the privilege of saving money.

What separates Costco from other discount stores is its incredible discipline. Management famously caps product markups at 14%-15%, choosing customer loyalty over short-term profit maximization (and thanks to the lucrative membership model, the company still turns a massive profit).

This restraint has created a virtuous cycle: Happy members renew religiously, word-of-mouth drives new signups, and the growing member base gives Costco even more negotiating power with suppliers. The company's employee-first culture with industry-leading wages and benefits also translates into superior customer service and lower turnover. Rivals like Walmart (NYSE: WMT) and Target (NYSE: TGT) struggle to match these crucial metrics.

And the growth story is far from over. With 914 warehouses at fiscal year-end and accelerating international expansion, Costco has decades of untraveled runway ahead. E-commerce sales surged 13.6% last quarter, proving that the model translates digitally. Ancillary businesses like gas pumps, pharmacies, and optical centers deepen the moat by driving traffic and loyalty.

Yes, 49 times earnings is steep, but for patient investors, Costco offers something rare: a simple, predictable business that compounds wealth through good times and bad. The stock isn't cheap, but it really shouldn't be.

Anders Bylund has positions in Duolingo and Walmart. The Motley Fool has positions in and recommends Costco Wholesale, Duolingo, Target, and Walmart. The Motley Fool has a disclosure policy.