Up 75% in a year: The ASX stocks this portfolio likes now

For many ASX investors, FY26 was a year to forget. 

While other global markets surged, the local market stuttered. Some of the biggest names may have delivered, but that simply masked a lot of weakness below the surface.

But it certainly wasn't a year to forget for some. 

Over the 12 months to 30 June, WAM Active (ASX: WAA) delivered a return of 75.5%, including a fully franked dividend yield of 8.6%, and a grossed-up dividend yield of 12.3%.

It's an exceptional result at a time when many other managers have struggled with the ASX's widespread dislocations and disruptions. 

I recently spoke to Wilson Asset Management Portfolio Manager Shaun Weick to see exactly how WAM Active managed it, and where it sees the opportunities in FY27.

What were the key drivers behind your FY26 results?

FY2026 was a year of rapidly changing market conditions, which rewarded a flexible investment approach. We adjusted the portfolio around two key developments. 

The first came in October, when expectations for lower interest rates gave way to concerns that rates could remain higher for longer. This led us to reduce exposure to some of the more interest rate-sensitive parts of the market, including small industrial and technology companies. 

The second was the rapid development of artificial intelligence during the December quarter. While we remain positive on the long-term opportunities AI presents, we believed it would create uncertainty for some software businesses and other companies whose competitive position could be challenged by these technological changes.

We saw this extend into other parts of the market as industry-specific tools were rolled out across industries such as travel and insurance broking, creating attractive investment opportunities. Identifying these changes early and repositioning the portfolio towards beneficiaries, including commodities, precious metals and companies exposed to AI-driven growth, were key drivers of returns. 

Maintaining conviction through periods of market uncertainty, including the Iran conflict, also contributed to performance and supported healthy dividends.

What 1 or 2 stocks were the star performers?

Lindian Resources (ASX: LIN) has been a standout. 

It owns a world-class, large-scale rare earths project in Malawi, is expected to enter production this quarter, and has a strong pipeline of near-term catalysts as it progresses offtake agreements, moves downstream and captures more of the value chain. We remain bullish on the opportunity.

EchoIQ (ASX: EIQ), an AI-based diagnostic platform for echocardiograms, recently secured financial and operational backing from listed peer Pro Medicus to accelerate its go-to-market strategy. 

With FDA approval for its heart failure algorithm imminent, tripling the Company's addressable market, a strong pipeline of additional disease applications, and the potential for partnerships or acquisitions to accelerate penetration of the US market, we view this as an emerging platform business with a strengthening growth outlook. The company is now fully funded following its recent capital raise.

What were the themes that drove outperformance, and how did you make the most of those opportunities?

With the rise of ETFs and the growing influence of retail investor flows, identifying themes and regime shifts early will remain a key driver of returns, though it is equally important not to get greedy as they mature. Four themes drove our outperformance in FY26, and we see each persisting into FY27.

The first is artificial intelligence — direct beneficiaries such as soon-to-be-listed neocloud business Firmus, Megaport (ASX: MP1) and FortifAI (ASX: FTI), as well as the "picks-and-shovels" plays including Maas Group (ASX: MGH), ALS (ASX: ALQ), Southern Cross Electrical (ASX: SXE) and DXN Limited (ASX: DXN) and technology companies leveraging AI to deliver improved hospital and patient outcomes such as Artrya (ASX: AYA) and EchoIQ (ASX: EIQ).

The second is critical minerals and supply chain diversification and resilience. We like the rare earths sector and view Lindian Resources (ASX: LIN) and Viridis Mining (ASX: VMM) as top quartile projects. Western economies are racing to loosen China's grip on more than 90% of global rare earths processing and build their own supply chains to support critical industries such as defence and technology. 

The lithium sector also delivered good returns, with geopolitical conflict driving an acceleration in electrification, and EV's and large-scale battery storage (BESS) projects remaining key drivers. Core Lithium (ASX: CXO) is our key exposure here.

The third is electrification and grid infrastructure expansion, which is linked to the previous points. Within this, we like copper, which has proved quite resilient in the context of broader volatility and reflects market tightness, as supply-side constraints and structural demand drivers continue to play out. Emerging plays such as Cobre (ASX: CBE) and Hot Chilli (ASX: HCH) have compelling near-term catalysts, while GenusPlus (ASX: GNP) continues to see significant tailwinds from the electrical infrastructure build-out.

The fourth is gold, which was a strong contributor to performance. While it faces some near-term headwinds, we think the structural drivers remain intact for the bull market in gold to resume. Forrestania Resources (ASX: FRS) is the standout here — significantly undervalued relative to peers as it approaches its 120koz production re-rate in the December quarter of 2026 and a doubling into 1H2027 as the recently acquired Edna May mill comes onstream.

You were highly active in your cash management. Can you explain some of the reasons for that and some of the key moments where that allowed you to capitalise?

The fund has a flexible mandate with no limits on cash levels, the only real constraint is the liquidity of the underlying positions. In periods where we believed the market had run too hard, or volatility was rising, such as during the Iran conflict or the tariff episode last year, cash reached as high as 40%. 

That gave us downside protection and, just as importantly, the dry powder to rotate the portfolio into better opportunities as they emerged.

It’s been a challenging time for Australian equities, especially for small caps and small-cap managers. What's your outlook going forward?

Small-cap companies have faced cyclical pressure from higher interest rates. Combined with elevated market volatility, this has typically driven investors towards larger, more liquid companies and away from small-cap industrials. 

Looking ahead, we believe interest rates have peaked in Australia, which should provide a more constructive backdrop in the second half of the financial year. 

However, we remain mindful that elevated government spending continues to place upward pressure on inflation, despite signs of weakness in the housing market. In this environment, maintaining flexibility in portfolio construction remains critical, and we expect that disciplined positioning will continue to be an important driver of returns.

The more worrying trend for small-cap managers is somewhat structural: the distortion created by the industry superannuation fund performance tests. These have driven increasing internalisation of capital, seen managers fall by the wayside, and pushed the industry toward index-hugging — creating a benchmark that distorts the market and starves smaller Australian businesses of growth capital. 

We are hopeful we are approaching a peak in this dynamic, which would encourage emerging companies to come to the ASX and allow investors to support innovation and business building here in Australia. After all, we all want the next REA Group or CSL to list here!

Which stocks are you backing now?

1. Maas Group (ASX: MGH). Following the $1.7bn sale of the Construction Materials business, we think the market has significantly under-appreciated the strategic optionality this has created and the potential earnings uplift. 

With the share register now stabilised, we think the set-up is much cleaner with MGH's Firmus stake worth >$1/ps, whilst the operating business is materially undervalued (trading at less than half of peer multiples) in the context of an implied multi-billion dollar revenue pipeline for the Firmus build out over the next 3+ years, with potential for additional customer wins over time. 

Shares are trading below the transaction price, and management is aggressively buying back stock, which sends a strong message to the market. We think the shares can double.

2. Forrestania Resources (ASX: FRS) is a WA gold company run by a highly credentialed executive. Whilst gold has run into some macro headwinds near term (which we think will reverse over the course of 2HCY26), we don't think the thesis is reliant on the gold price to make strong returns from here. 

The recent acquisition of the Edna May Mill is transformational, and we see a pathway to >220kozpa production within 12 months; at ~$630m equity value, the stock is trading at less than half of its peers. We think the market will get increasingly confident in a 6Moz+ resource base over the coming 12 months, and execution of production ramp-up will see a substantial valuation re-rating.

3. EchoIQ (ASX: EIQ) is an AI-based diagnostic medical software company focused on the US healthcare market. The company has FDA clearance for the Aortic Stenosis module, with clearance for the Heart Failure module imminent, which will 3x the TAM. 

Further disease modalities are actively in R&D and we see it evolving into a broad platform offering over time. Industry leader Pro Medicus (ASX:PME) recently signed an agreement to invest in the company and accelerate go-to-market with the EchoSolve platform to be provided directly through the Visage platform at the click of a button. 

Post the recent capital raise, the company is now fully funded to accelerate growth with FDA clearance, funding code upgrades and further strategic partnerships and M&A key near-term catalysts.