In 2026, stay calm and buy what’s out-of-favour

As an investor, I don’t think too much about the year ahead. I just focus on buying good companies at attractive prices, preferably when they’re unpopular and a little beaten up.

But when you invest in a company, you are inherently optimistic about its prospects.

So in this outlook piece, I’m going to reveal some of the companies in the portfolio I’m bullish on for the year ahead. I’ll also tell you what I’m most concerned about for 2026.

For those not familiar, I run a model portfolio for members of my service, the Fat Tail Investment Advisory. It’s called the Permanent Capital Portfolio. As I explained to members:

I call it the Permanent Capital Portfolio to remind ourselves that we are investing in businesses, not stock prices. As such, we can afford to take a longer-term view, and not try to chase short-term moves.

Moreover, we don’t need to worry about doing something unpopular. We don’t need to worry about short-term benchmark performance. And we don’t need to worry about the opinions of others.

Unlike professional fund managers, you have ‘permanent capital’. No one is going to redeem and force you to sell at the bottom or pile in and force you to buy at the top.

Only you can do that. But if we manage our emotions, we can hopefully avoid these pressures.

The point is, having permanent capital is hugely valuable. If we recognise that and invest accordingly, we should do well over the long term.

So far, so good. The first-year performance for the Permanent Capital Portfolio was just under 24%. That compares to around 6.5% for the ASX200 Accumulation index.

The Permanent Capital mindset has paid off in the first year.

We go into the second year with an ongoing overweight energy position. This was a drag on performance in 2025, as energy was one of the few commodities that did not perform well.

But I think that changes in 2026. Oil, gas and coal stocks are set to play catch-up. If I’m right, that should give the portfolio a good boost as we have an allocation of more than 20% to the energy sector.

Energy prices across the board are not at a level that encourages future supply. And we’ll need a lot of new supply to fuel the AI revolution in the years ahead.

2025 saw billions invested in the data centre rollout. That will continue in the years ahead. As these data centres near completion and need access to energy, the market will turn to the problem of powering them.

In my view, this will spark a realisation that ALL forms of energy will be required to fuel the AI economy, as well as everything else.

Two companies to play this theme are Woodside Energy [ASX:WDS] and New Hope [ASX:NHC], a low-cost thermal coal producer.

I also like BHP [ASX:BHP] in 2026. Copper recently traded at all-time highs, and iron ore prices continue to hold up well. BHP is attractively priced given this outlook.

For this reason, I think it will attract a lot of superannuation funds switching from financials into resources. For years, these big-money players were overweight banks and underweight resources.

In 2026, I think that changes. You’re already starting to see the beginning of this trend shift. The chart below shows BHP’s share price relative to the share price of Commonwealth Bank [ASX:CBA].

It’s potentially in the early stages of a trend favouring BHP and resources more generally. That’s likely to continue in 2026.

BHP/CBA relative price

Source: Optuma

[Click to open in a new window]

The other stock in the Permanent Capital Portfolio worth looking at is GQG Capital Partners [ASX:GQG]. It’s a global fund manager with US$166 billion in funds under management (FUM).

It famously bet against the AI boom and has underperformed global benchmarks in a big way. Underperformance is kryptonite for a large fund manager, but so far, FUM has held up well.

There’s been some outflows in recent months, but investment performance is pushing overall FUM higher.

It has articulated its reasons for not investing in the AI boom, citing preservation of investor capital. As a value-based, contrarian fund manager, it’s exactly what you want to hear.

But its stance has hurt the share price. It’s down more than 40% since peaking in mid-2024.

The market is pricing it for a significant decline in FUM. It trades on a PE of 7.8x FY26 earnings forecasts, and a dividend yield of 11.9%.

If the AI bubble pops or gets wobbly next year, as I think it will, GQG should enjoy a share price re-rating.

In terms of the macro-outlook, I’m most worried about ongoing tensions between the US and China in 2026. The clumsy imposition of Trump’s tariffs characterised 2025. The idea behind the tariffs was to counter China’s export-dominated economy and get the US on the road to re-industrialisation.

But those tariffs have not had their intended effect. In the year to November, China’s goods trade surplus hit US$1.1 trillion. As the Wall Street Journal reported:

‘China’s exports through November were up 5.4% year over year, according to Chinese customs data, defying expectations of a slowdown when Trump returned to the White House and signaled his intention to raise tariffs on not just China but all other U.S. trading partners too.

‘The data show direct exports to the U.S. did take a hit from tariffs, falling about 19% over the same period. But the decline was more than made up for by sales to other regions, with exports to Southeast Asia up 14%, exports to the European Union up 8%, exports to Latin America up 7% and exports to Africa jumping by more than a quarter.’

China’s economic growth engine is manufacturing. The US cannot re-industrialise while China’s policy is directed towards manufacturing growth.

So the trade war isn’t over. Tariffs didn’t work. What will Trump try next?

I don’t know, but the major concern is that the next round of the US-China trade war will occur in 2026, potentially leading to further market volatility.

I know of no other way to protect yourself against unknowns like this than to buy out-of-favour companies at attractive prices.

The contrarian approach to investing has stood the test of time, from Graham, to Buffett and beyond. It helped the Permanent Capital Portfolio outperform massively in 2025, and I have no doubt the approach will continue to work in 2026.

If your portfolio could do with a tune up and you want to join me in this approach, I’d like to issue my final recommendation for 2025:

Take advantage of Fat Tail’s CHRISTMAS 50%-Off Deal and join my Fat Tail Investment Advisory for half-price

We have been running a special holiday deal that wipes 50% off selected advisories.

Mine is one of them. But it expires on 31 December.

If what I’ve been saying resonates with you… you aren’t already one of my members… and you sense that a slightly more value-orientated approach will pay off in the year ahead… then this is a good decision to make.

At just $499 per year, I don’t think The Fat Tail Investment Advisory is prohibitively expensive to start with.

But if you use the coupon code CHRISTMAS50 until midnight AEDT, 31 December…you can secure an annual subscription for just $249.

Half price.

Just remember to plug in the code CHRISTMAS50 in the coupon box on the order form and you’ll get the discount on your first year.

You can see exactly what you get with The Fat Tail Investment Advisory here.

You can go straight to the secure order page and enter your 50% discount code here.

I am confident in saying that for the quality of the analysis, you’ll be lucky to find a better offer than this anywhere in the market.

Honestly (and hopefully not egotistically!) I think what we’re doing at my advisory is well-worth $1,499-per-year rather than $499.

That’s backed up by the track record.

I think we’re moving into a phase in the markets where this kind of analysis becomes even more valuable… where we protect ourselves against unknowns by buying out-of-favour companies at attractive prices.

This is a chance to get onboard for 12 months at $249.

The contrarian approach to investing has stood the test of time, from Graham to Buffett and beyond. In 2026, it will continue to do so.

Learn more about The Fat Tail Investment Advisory before you take the 50% of deal here.

Or go straight to the order page here (coupon code: CHRISTMAS50).