The industries poised to break out in 2026 and 16 stocks to play them

Other ways to listen

• Spotify
• Podbean

You can watch the video by clicking the player, listen to the podcast, or read an edited transcript below. These interviews were filmed on Tuesday, 9 December 2025.

Every year, markets have a habit of humbling consensus. Industries written off as “uninvestable” can quickly turn into the best-performing trades on the board, while last year’s darlings quietly fall out of favour. And 2025 was a textbook example.

Few investors began the year expecting gold, defence, critical minerals or uranium to deliver such standout returns – yet all surged as shifting geopolitics, energy security and supply-chain realities reshaped capital flows. Even more surprising was hydrogen’s sudden resurgence, catapulting the long-maligned sector onto the global leaderboard after years in the wilderness. At the same time, traditionally reliable areas like ASX technology and healthcare struggled to gain traction, reminding investors just how quickly market narratives can flip.

With 2026 now firmly in sight, the obvious question is: where will the next breakout come from?

To find out, we asked 10 experts to look ahead and identify the sector or industry they believe is poised for a breakout year in 2026 – and, crucially, the stocks they think best capture that opportunity. 

Our featured fund managers include (in order of appearance):

• Ben Griffiths - Eley Griffiths Group
• Tim Carleton - Auscap Asset Management
• James Abela - Fidelity International
• Matthew Booker - Spheria Asset Management
• Joel Fleming - Yarra Capital Management
• Alan Pullen - Magellan Investment Partners
• Steve Johnson - Forager Funds Management
• Anna Milne - Wilson Asset Management
• Arms Rosenberg - Minotaur Capital
• Dr David Allen - Plato Investment Management (written responses only - see below)

Note: We thank the fund managers listed above for sharing their top ideas for 2026 in the spirit of the Outlook Series. All fund managers featured in this series manage diversified portfolios and do not invest solely in the stocks listed below. This list is not, nor is it intended to be, a set of recommendations. Please do your own research and seek advice from a professional before making any investment decisions of your own. Past performance is not a reliable indicator of future returns.

Edited Transcript

#1 - Copper: Sandfire Resources (ASX: SFR)

Ben Griffiths: I think the copper industry is set for a strong year, a breakout year, if you like. Since 2021, there have been 57 different M&A cases. That's an extraordinary amount of consolidation. In today's paper, you can see this is the Australian Financial Review. We're now on mainstream paper, mainstream news, that the supply side of copper is contracting.

Essentially, there's consolidation occurring just as demand starts to tighten. Demand is strong for copper. Supply is contracting and we're therefore creating a deficit situation, so a deficit of supply situation. Demand is strong, obviously, with the whole energy transition process, and the DC - Data Centre - construction process, there's hoarding of copper going on. Meanwhile, the supply side tightens. So Citigroup are forecasting a 300,000 tonne deficit starting this year.

So I think copper is set to continue its rise. And I guess the stock that we would suggest is a great exposure, is a stock that recently struck an all-time high in that is Sandfire Resources, which is an international copper play. But importantly, it's growing its copper production. It'll be a 150,000 tonnes of copper production in short order. And we're excited about copper, and we're excited about the prospects for Sandfire.

#2 - Building: Reece Ltd (ASX: REH) 

Tim Carleton: We've picked an industry that's been facing a trifecta of headwinds for the last couple of years, being the building industry, particularly companies exposed to the US building industry.

So within this year, you've had a very, very difficult, broader housing market. And the main reason for that is that almost everyone with a home loan fixed their rate during the COVID years. And so a lot of those loans are fixed in the 3% to 4% range. Current mortgage rates are between 6 and 6.5. And so very few people want to extinguish their old mortgage and acquire a new one because of the cost of doing so. And that's leading to very, very low housing turnover in the US, which is obviously leading to a subdued environment for companies that are facing the housing market.

In addition to that, you've had the imposition of tariffs, which has negatively impacted costs of goods sold for a lot of those businesses. And there's been pretty stiff competition amongst the domestic market. So we think as the companies start to cycle that in 2026, it'll really come back to what the companies are doing themselves to improve earnings over time.

The company that we really like in this space is Reece. So they've faced the trifecta of issues in 2025. We think we've probably seen the earnings trough at the moment. The market will start to look ahead of that. And people have forgotten that the organic opportunity in the US, in what is an enormously fragmented domestic market, is simply enormous.

And we think that the company initiating first an off-market buyback at a significant premium to the share price, and now an on-market buyback that's due to commence shortly, is a pretty good indicator that they see a lot of value on a through-the-cycle basis. So we're pretty excited to see the operating leverage that we expect to come through in 2026 and beyond. And we think the market will probably start to price that a little ahead of time.

#3 - Technology: Life360 (ASX: 360) and Applovin (NASDAQ: APP) 

James Abela: I think technology is still the number one place you want to be. One stock in Australia I like is Life360 and in the global market, AppLovin, both of which we own. The two companies are exposed to very similar themes in technology. It's about productivity and efficiency. It's personal and it's corporate. There's a whole range of themes that are very common across those two ideas. But I do think technology as a group is probably the number one theme that will continue throughout 2026.

#4 - Pathology: Healius (ASX: HLS) 

Matthew Booker: Well, I'm going to push our own barrow, but I think pathology is showing some signs of a turnaround. And pathology has been in the doldrums since COVID. Obviously, there was a lot of PCR testing at the time, and that drove strong volume growth for the pathology operators. And since that time, you've seen funding cuts from the government, and that's the one problem with the industry, is the government is their biggest customer, they're the majority of revenue, and they've cut revenue. And they did budget for more cuts this year. So they've cut the B12 test and the urine test, which has been another headwind for the pathology industry.

But what we saw in the first quarter of the year is actually positive trends from two of the companies, in that ACL came out and said that their first quarter is flat in terms of revenue, despite that 3% headwind from those testing cuts. And Healius, which we own, came out and said they had 3.9% growth in the quarter. So some signs that they're actually overcoming those challenges in terms of pathology growth and funding cuts. And we think that all goes well for the industry.

So we're invested in Healius. We think there's a good turnaround story there. The management seems to be making some inroads. That top-line growth is an indicator that they're getting on top of some of the challenges, but it's not without risk. I think the first half result is going to be pretty weak, but we can see long-term that the company can produce better earnings than they're currently making now.

#5 - Resources: Metals X (ASX: MLX), Aurelia (ASX: AMI) and Polymetals (ASX: POL)  

Joel Fleming: Resources. For us, it's an area we've always been able to play in, but we think the environment's looking fantastic. So we can look at gold and silver this year and everyone's seen the fantastic performance of that area.

We think it starts to broaden out. The world is becoming more commodity-intensive. There just hasn't been that investment. The good deposits are getting deeper, harder. All of those kinds of things mean that we think that there's a step out in resources over the next couple of years.

Both supply and demand side look fantastic. And if we can find some commodities where that price signal is sending us the right message, it's a good orebody, they can dig it out of the ground at the right price, that's a fantastic outcome. So we really like tin through Metals X. We like the base metals through Aurelia and Poly. There's a whole group of stocks there to play, but we think that base metals commodity sector is going to be a really, really good performer this year.

#6 - Healthcare: Medtronic (NYSE: MDT) and UnitedHealth (NYSE: UNH) 

Alan Pullen: I'm going to pick healthcare here. Healthcare actually had a pretty tough 2025. There are a lot of regulatory concerns in the US with differing rules from the Trump administration, and how they're going to pay for drugs and so on. But those have started to ease off towards the end of the year. We're getting more certainty there. And we know it has some nice underlying demographic drivers, the ageing of the population. So it's really poised for a much better year in 2026.

Medtronic is a good example of that. They're a really solid, high-quality company. I've got a couple of new products that could drive revenue growth as well. UnitedHealth had a particularly tough year in 2025, but it's poised to recover in 2026 as well. So a couple of good options there.

#7 - Tourism: Tourism Holdings (ASX: THL) 

Steve Johnson: I'm a broken record on this, so that's a big caveat upfront. But I think 2026 will be the year that inbound tourism into Australia really gets back to where it was pre-COVID. It has been painfully slow to recover from pre-COVID. This year, 2025, we'll still only have 90% of the inbound tourists arrive that we had in 2019, and I would've expected that to be above 2019 levels by now. But we are seeing the trends head in the right direction. We've got the Barmy Army out here for the cricket this year, sending photos home. We had a hugely successful Sydney Marathon last year, photos beamed all around the world. You can see the numbers marching up every month.

So one stock in our portfolio that's exposed to that is Tourism Holdings. It's been a painful couple of years for this stock and business, and I think 2026 will be one where it gets a little bit friendlier for them.

#8 - Resources: Rio Tinto (ASX: RIO) 

Anna Milne: We believe the stars are aligned for resources. When we combine the positive outlook for cyclical and value, and the outlook for global growth, they really are in the sweet spot. Now, it's not necessarily a breakout. I'd say materials was the best performing sector in 2025 with returns of, I think, around 20%, but we believe it has further to run.

Our preferred exposure is Rio Tinto, the ticker is RIO. And that is because if you look at where the spot prices are, there is around 30% upside to their earnings. They have a cost-out programme underway to the tune of a couple of billion dollars. They have 5 to $10 billion of asset sales underway that will release cash. And overall, we're just really pleased with the strategic direction that the company is taking. So when we combine the earnings upside with the valuation, we think there's further valuation in it too, we see Rio as our preferred play.

#9 - European banks: UniCredit (BIT: UCG)

Armina Rosenberg: I think the top industry to experience a breakout next year is actually European banks. So European banks have experienced a bit of a winter over the last decade, particularly from 2010 to 2021. After the GFC, they were doing things like shoring up their balance sheets, making sure Tier One Capital was nice and strong. And they didn't really grow during that time. Now they're actually emerging from that winter and experiencing this period of growth.

We think the best stock to ride that wave is UniCredit. UniCredit has an exceptional cost-to-income ratio of 38%. It's got strong growth coming through. You've seen their CEO talk about the credit boom coming again in Europe. And I think that you'll see that play out in 2026.

#10 - European defence: Rolls-Royce (LON: RR), Safran (EPA: SAF) and Rheinmetall (ETR: RHM)

Dr David Allen: We believe European defence is exceptionally well-positioned for 2026 and beyond. As the United States pivots its strategic focus toward China, European nations are materially increasing defence spending — moving from sub-2% of GDP toward 3.5% or higher. This represents a powerful multi-year structural tailwind for the sector.

Companies such as Rolls-Royce, Safran, and Rheinmetall stand to benefit disproportionately from this shift, given their scale, technological depth, and entrenched roles in European defence supply chains.