The Market Is Selling Everything, but These 5 Stocks Aren't Breaking Down

Key Points

• Cloudflare, Datadog, and Palo Alto Networks are all outperforming a software sector weighed down by AI replacement fears, signaling competitive advantages the market hasn't fully priced in.
• Thermo Fisher Scientific is leveraging operational efficiency to convert modest sales growth into stronger earnings growth, making it a defensive pick trading at a multi-year discount.
• AT&T's nearly 4% dividend yield and 8.5% expected earnings growth give investors a recession-resistant way to stay in the market while collecting income.

The Iran conflict has given investors a reason to sell just about everything. The Dow is in correction territory. Oil prices have surged. Entire sectors are trading as if a recession is already here. But inside those beaten-down groups, a handful of stocks are quietly doing something different.

Joseph Hogue, CFA and host of the Let's Talk Money YouTube channel, says that divergence is worth paying attention to. Landmark research from UCLA has shown that stocks outperforming their peers over a three-to-12-month window tend to keep outperforming over the next three to 12 months. The reverse is also true. So instead of chasing discounts on broken stocks, Hogue is focused on the names showing relative strength inside the weakest corners of the market.

Cloudflare: Edge Computing's Quiet Winner

Software stocks have been punished by the narrative that AI will replace traditional software companies entirely. The software industry is down almost 15% over the past year. Cloudflare NYSE: NET is doing the opposite: up almost 70% over the past year.

What's driving the separation? Cloudflare's delivery network sits in front of roughly 20% of the global internet, giving it a massive cross-selling runway for security tools, performance products, and developer services. The company has also moved aggressively into edge computing, positioning its global server infrastructure as a natural home for AI inference workloads that need to run close to end users.

Revenue grew nearly 34% year over year in Q4 2025 to $614.5 million, beating estimates.

The company still operates at a slight loss on a GAAP basis, but free cash flow margin hit 16.2% last quarter, a sign the business model is scaling.

Datadog Could Be the Next Platform Story

Also outperforming the struggling software space is Datadog NASDAQ: DDOG, up almost 15% for the year while its industry peers sink. Hogue sees it as a potential platform play on the scale of Palantir NASDAQ: PLTR, and the foundation for that comparison starts with data.

Datadog's observability and security platform helps enterprises monitor everything from cloud infrastructure to application performance. Q4 2025 revenue hit $953 million, up 29% year over year, and the company now counts 603 customers paying more than $1 million in annual recurring revenue.

For 2026, management guided revenue to $4.06 billion to $4.1 billion. The earnings trajectory is where it gets interesting: after modest near-term growth as the company invests heavily in R&D and AI capabilities, including a recent partnership with Sakana AI, consensus estimates call for roughly 21% earnings growth the following year as operational leverage kicks in.

Palo Alto Networks: Cybersecurity's Pricing Opportunity

The fear that AI would eat cybersecurity has hammered the sector. But Hogue argues the opposite is happening: AI is expanding the attack surface, and enterprises are spending more, not less, to defend against it. Palo Alto Networks NASDAQ: PANW is the largest pure-play cybersecurity company, and its stock has held up far better than peers, up slightly over the past month while the broader cybersecurity group has sold off.

The numbers back the resilience. Fiscal Q2 2026 revenue grew 15% year over year to $2.6 billion, with non-GAAP operating margins expanding to 30.3%.

That profitability is rare in cybersecurity, where most competitors are still burning cash on customer acquisition.

Palo Alto leads in some of the fastest-growing segments of the market: cloud security, SASE, and the emerging agentic AI security category. Its recent acquisitions of CyberArk and Chronosphere broaden the platform further.

On valuation, Hogue notes this stock is at one of the cheapest levels it has been in five years, in terms of its price relative to sales.

Thermo Fisher: Operational Leverage in a Defensive Wrapper

For investors who want to stay in the market but sleep at night, Hogue pivots to healthcare. The healthcare equipment industry is down 6% over the past month and 13% over the year. Thermo Fisher Scientific NYSE: TMO is only down about 2% over that same month, outperforming the group by four percentage points.

At roughly $185 billion in market cap and $44.6 billion in annual revenue, Thermo Fisher is a giant in life sciences instruments and diagnostics. The operational story is what separates it: management's 2026 guidance implies approximately 5.2% revenue growth translating into 7.3% earnings growth, a sign of real discipline on costs.

Adjusted earnings per share (EPS) is expected to be near $24.50 this year. On a price-to-sales basis, the stock trades at about 4X, a discount to its five-year average of 5.2X. That kind of discount on a market leader with improving earnings leverage doesn't happen often.

AT&T: Getting Paid to Wait

The final name on the list sticks with the safety theme. Nobody cancels their cell phone plan because of a recession, and that makes AT&T NYSE: T a dependable place to park capital while the macro picture sorts itself out. The telecom sector is down about 3% over the past month; until a recent dip, AT&T was up 1%.

AT&T's dividend yield is approximately 4%, and the payout ratio sits around 36%, meaning the dividend is well covered by earnings.

AT&T delivered nearly 9% adjusted EPS growth last year to $2.12, and the company is guiding for $18 billion-plus in free cash flow for 2026.

Hogue highlights that AT&T is leveraging modest 2.3% revenue growth into roughly 8.5% earnings growth, a four-to-one ratio that suggests the company is running a tighter operation even if the top line isn't explosive. In an oligopoly market shared with Verizon and T-Mobile, there's no existential competitive threat.

The stock isn't going to make anyone rich overnight, but an 8% earnings growth rate plus a 4% dividend yield is a compelling total return in a market where safety is scarce.

The Thread: Relative Strength With Real Fundamentals

These five names span different sectors and risk profiles, but the logic connecting them is the same. Each one is outperforming a weak peer group, and each has the fundamentals to explain why. In a market driven by fear and headline risk, that combination of relative strength and earnings quality is exactly where momentum investors tend to find their best entries.