São Paulo-based XP Investimentos is offering investors a data-driven outlook for 2026, highlighting factor investing as a strategy to navigate ongoing market uncertainty. The firm’s recent analysis of six key factors – Value, Quality, Momentum, Risk, Sell-Side Revision, and Low Risk – reveals a mixed performance in December, with low-risk stocks gaining favor amid broader market volatility.While Value experienced a correction following a strong 2025, XP remains optimistic about diversified factor allocation heading into the new year, and has released a list of its top and bottom stock picks based on its multifactor model.
XP Investimentos’ strategy team is highlighting factor investing as a key approach for navigating the current market landscape. This data-driven strategy involves selecting assets based on systematic drivers of stock returns, offering investors a way to potentially outperform the broader market.
Factor investing centers around identifying characteristics that explain why certain stocks move in tandem or deliver higher-than-average returns. Established factors include Value, Quality, Momentum, and Risk – with exposure to these factors historically correlating with stock performance. The firm anticipates that companies demonstrating strong characteristics in these areas will likely see positive results.
A recent report from XP Investimentos indicates a significant divergence in factor performance during December, with gains largely concentrated in Low Risk and Sell-Side Revision strategies. This suggests investors favored less volatile stocks and those benefiting from positive analyst revisions.
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Conversely, Value, Momentum, Quality, and Short Interest all experienced declines in December. Despite this recent pullback, XP Investimentos maintains a positive outlook for all factors heading into 2026, anticipating a potential rebound in Momentum driven by improving macroeconomic conditions. The firm’s analysis provides insight into how different investment styles are positioned for the year ahead.
The Low Risk factor rose 0.8% in December, benefiting from the outperformance of its long positions relative to short positions. Sell-Side Revisions increased 0.5%, largely due to the sharper decline in stocks facing negative earnings revisions.
The Value factor saw a notable correction of 4.0% in the month, following a strong year. However, it remained the top performer of 2025, with a cumulative gain of 48.7%. XP Investimentos notes that “cheap” stocks appreciated by 75.7% during the period, significantly outpacing the 34.0% advance of the Ibovespa index.
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Momentum continued to be a key area of concern, with a 2.3% decline in “winning” stocks and weak performance throughout the year, particularly after a sharp correction in March. Quality and Short Interest also closed December in negative territory, falling 1.9% and 1.3%, respectively.
Despite this uneven short-term performance, XP Investimentos observed positive returns across all six factors analyzed in 2025. Value, Quality, and Short Interest also stood out, while Momentum lagged behind. Looking ahead to 2026, the firm’s regime monitor suggests a potentially more favorable environment for Momentum strategies, reinforcing the importance of diversified factor allocation to mitigate risk.
Based on its proprietary multifactor model, XP Investimentos has updated its lists of top-ranked and worst-ranked stocks. The model identifies Lavvi (LAVV3), JHSF (JHSF3), Mills (MILS3), Ultrapar (UGPA3), Vulcabras (VULC3), Itaúsa (ITSA4), Allos (ALOS3), Grendene (GRND3), Cogna (COGN3), and Bemobi (BMOB3) as its top ten picks.
The ten stocks to avoid, according to the model, are Braskem (BRKM5), Raízen (RAIZ4), Oncoclínicas (ONCO3), Tupy (TUPY3), Auren Energia (AURE3), Gafisa (GFSA3), Vibra Energia (VVEO3), Grupo Casas Bahia (BHIA3), Hapvida (HAPV3), and Cosan (CSAN3).
XP Investimentos emphasizes that multifactor analysis aims to capture diverse sources of return in the stock market and that a balanced combination of styles remains a central tool for navigating periods of increased volatility and changing economic conditions.
