The ASX sectors the fundies say could win in FY27 - and the stocks they're backing

FY26 was a tale of two stock markets for the ASX. Some sectors held their own, but one in particular (Materials) dominated and two others (Tech and Healthcare) totally bombed.

The outcome for individual investors would have varied wildly, depending almost entirely on which sector you were overweight. 

ASX sector 52-week performance

But will the next 12 months see the same, where the dispersion between sectors remains extreme? And if so, which is the sector worth backing? 

Can Materials back up its recent performance, or will one of the ASX's out-of-favour sectors come good? 

To get a sense of how the experts are seeing things, I asked Forager Funds' Alex Shevelev, Elston Asset Management's Bruce Williams and Wilson Asset Management's Shaun Weick for their pick for the ASX sector that could outperform in FY27, and the stocks in those sectors they think it's worth keeping an eye on.

1. Software - Alex Shevelev, Forager Funds

Software has been one of the market’s most-punished sectors, with many smaller software stocks sold down hard as investors worry about the “Saaspocalypse”. Some software businesses will be damaged by AI. 

But the market has been too quick to treat all of them the same. It now stands as one of the most attractive sectors in the market.

The better software businesses have products that cost very little relative to the value they provide, sit deep inside customer workflows with high switching costs and have moats beyond the software. AI can help these businesses too, by improving product functionality, lowering internal costs and creating new modules to sell to existing customers. 

The narrative has shifted quickly from the wonderful characteristics of many software businesses to software being obsolete. It can shift back just as quickly if the better businesses in the sector keep growing revenues and lifting margins.

The stocks he's backing in Tech

Catapult Group (ASX: CAT) is one stock worth watching. It provides wearables, video analysis and performance tools to professional sporting organisations around the world.

For elite clubs spending tens or hundreds of millions of dollars on players, Catapult’s average annual spend of roughly US$30,000 per team is tiny. If the product helps improve performance, reduce injuries or create even a small competitive edge, the value equation remains compelling.

Bravura (ASX: BVS) is another. Its software sits at the heart of wealth management, life insurance and funds administration businesses, where replacement would be expensive, risky and disruptive.

Recent earnings upgrades suggest customers are still spending money on existing Bravura systems through renewals and project work, not preparing to throw them out for cheaper AI-generated alternatives. Margins are rising quickly and cash generation is growing.  

2. Consumer Discretionary - Shaun Weick, WAM

I’ll take a contrarian stance: consumer discretionary. 

Near-term conditions remain tough — consumers are stretched by high rates and the Federal Budget has added pressure on housing, feeding negative wealth effects. August reporting season and AGM season will be ugly, so yes, this trade is early.

But we believe Australian rates have peaked, and the stocks will bottom well before the news flow does. With positioning close to washed out and analyst estimates rebasing, the setup into the back half of the year is compelling. 

The stocks he's backing in Consumer Discretionary

Eagers Automotive (ASX: APE) , Zip Co (ASX: ZIP), Skin Kandy (ASX: SK1), Lovisa (ASX: LOV) and Nick Scali (ASX: NCK) are well placed to benefit as domestic rates pivot to cuts in CY27.

Healthcare - Bruce Williams, Elston Asset Management

We believe Healthcare is well‑placed to outperform in FY27. The sector’s defensive characteristics, favourable demographic tailwinds, and undemanding valuations create a constructive backdrop. 

After a difficult FY26 — driven by company‑specific missteps and heightened concerns around industry structure and competitive intensity — multiples now sit well below long‑term averages. This provides a margin of safety heading into FY27.

The stocks he's backing in Healthcare

The ASX hosts several globally significant healthcare names. The ones we are watching closely are:

ResMed (ASX: RMD)

The market remains concerned about two factors:

• Philips’ re‑entry into the sleep‑apnoea market
• GLP‑1 drugs reducing obesity and therefore shrinking the addressable market

We think both concerns have merit, but they are only part of the picture. ResMed argues that GLP‑1 drugs are actually increasing diagnosis rates of sleep apnoea — a trend we believe is plausible given historically low penetration in a very large market. Operational execution has been excellent, reflected in strong margins and solid financial performance.

The share price weakness over the past year has largely been driven by a contraction in the terminal multiple due to perceived risk. At current levels, we see sufficient margin of safety and remain comfortable with the position.

CSL Limited (ASX: CSL)

CSL has endured a challenging 12 months, with both external industry headwinds and internal execution issues weighing on sentiment. Our discussions with competitors, former employees, and the company itself suggest that while shortcomings exist, CSL is further along in addressing them than the market appreciates.

The inventory adjustment announced in May was disappointing, but overshadowed the fact that underlying performance — particularly in Behring (Ig) — was meeting or exceeding expectations in 1H26. A turnaround will take time, but at today’s multiple we believe CSL offers good value.

Cochlear Limited (ASX: COH)

The main theme affecting the company is that its product and services are more discretionary than previously thought. The key debate centres on the discretionary nature of Cochlear’s products — not economically, but behaviourally. Rehabilitation after surgery is lengthy, and more patients have recently chosen to defer treatment. 

This has created uncertainty, leading to reduced revenue growth expectations and a material derating. From our conversations with the company, there is a disconnect between the market’s perception that consumer sentiment is the outright issue, instead of focusing on the patient journey. 

We believe the sell‑off is overdone. While growth may be below historical levels, upside remains, particularly if execution on the new Nexa platform is strong and reinvestment supports sales momentum.

What's your pick?

Which ASX sector do you think is best-positioned for a big FY27? Let us know in the comments below.