Where Ace Stock Picker John Buckingham Is Investing for 2026 and Beyond

He is focusing on seven investing themes that provide opportunities in the next 12 months and beyond. In the interview, he discusses all seven and, within each, specific equities he favors.

Buckingham has been managing the Al Frank Fund (VALAX) since its 1998 inception. The fund's shares are up 5% year to date through Jan. 26, 23% from a year ago and 11% annualized since inception. These compare to the Russell 3000 Value Index, which has notched, respectively, 4%, 15% and 8%.

Here are excerpts from our conversation:

THINKADVISOR: You usually have a bullish outlook for the stock market. How about this year?

JOHN BUCKINGHAM: I'm optimistic. I think value stocks are going to continue their outperformance since the end of last year's third quarter. This year, value has so far outperformed growth by a significant margin. So we're off to a good start.

Corporate profits are the driver of long-term stock prices, and they're likely to grow this year.

The negatives, of course, are the uncertainties related to tariff policy and geopolitical events.

We never know what's going to happen, especially with this administration. So we're always braced for volatility.

THINKADVISOR: Which stocks do you like for 2026?

BUCKINGHAM: We've identified seven themes likely to influence portfolios over the next 12 months and beyond. They are: Fond of financials; "Make America healthy again," relating to the Trump administration's initiative; Intelligent ways to play AI; Small company, big potential; Bargain hunting bonanza; Reversion to the mean and Dividend growers.

THINKADVISOR: Let's talk about them. First, financials.

BUCKINGHAM: We think the yield curve will likely expand. So we like Wall Street firms such as Citigroup (C), Bank of America (BAC) and JPMorgan (JPM). Also, the regional banks are attractive, like PNC Financial (PNC) — which has lagged many of its peers — as well as PayPal (PYPL), a hybrid tech-financial company. It's trading at a very inexpensive valuation and has significant growth potential over the long haul.

It's classified as a financial stock even though many call it tech. So you have a few ways to play it.

THINKADVISOR: What about the health care category?

BUCKINGHAM: One of the stocks we like is Novo Nordisk (NVO), the maker of the [drugs Ozempic for Type 2 diabetes and Wegovy for weight loss]. The company just got approval for an oral version [of Wegovy], rather than needing to stab yourself [by injection].

Under this theme, we also like Fresh Del Monte (FDP), a produce maker.

Big pharma has been hit hard, and the stocks are trading at very low valuations, especially Pfizer (PFE) and Bristol-Myers Squibb (BMY) because of concerns about patent expirations on many of their popular drugs and pricing pressure from Washington. We think that the problems and concerns are already well discounted in their stock prices.

So there can be a bounce in some of those battered names, which are reasonably priced, trading at single-digit [price-to-earnings] ratios and have big dividend yields.

THINKADVISOR: Artificial intelligence is of course among your themes. Please discuss.

BUCKINGHAM: We have a significant exposure to technology. We've done extraordinarily well of late with anything related to AI.

We like to focus on the picks and shovels: suppliers, makers of the equipment, whether semiconductors or anything needed for [AI] data centers.

We expect solid returns out of tech. However, when value outperforms, tech may underperform. So you need to be selective when it comes to tech. Do I think value will do better than tech this year? Yes.

THINKADVISOR: What else about AI?

BUCKINGHAM: I might focus on Microsoft (MSFT) and Oracle (ORCL). Microsoft has, kind of, lagged of late. And Oracle had a meteoric advance last year and then crashed. So it's trading at a very reasonable valuation and is still a beneficiary of AI.

We continue to own Broadcom (AVGO), Seagate Technology (STX) and Corning (GLW). I like Lumentum (LITE). I also like Digital Realty Trust (DLR), a REIT. They're an owner of data centers, which people are building. There's a great demand for these as the AI build-out grows.

THINKADVISOR: Next: small-cap stocks.

BUCKINGHAM: Small-caps came to life this year and late last year. Small-caps, generally cheaper than large-caps, are where investors should put some money today, especially because mega-stocks are expensive.

One of the small caps we like is Civitas Resources (CIVI), an oil and gas producer.

THINKADVISOR: What other small-caps?

BUCKINGHAM: Home builders have been under pressure with concerns about people buying new homes. So Meritage Homes (MTH), which caters to first-time home buyers, is attractive.

We like to buy things that have been battered and bruised [such as] Wendy's (WEN), the hamburger maker, which has a nice dividend yield and a very reasonable single-digit P/E ratio.

THINKADVISOR: Another of your themes is bargains abound.

BUCKINGHAM: Many stocks aren't expensive relative to where they historically trade: Dick's Sporting Goods (DKS) has performed very well, though it's been struggling with tariff worries.

The stock price of Decker's Outdoor (DECK), maker of Ugg and Hoka footwear, has cratered significantly.

Salesforce (CRM), a leader in customer relationship management software, has been in the doghouse, being unfairly punished for the advances in AI.

But it has a great balance sheet and is still likely to grow earnings by double-digit percentages over the next three to five years at 11% to 15% per year.

THINKADVISOR: Another category is reversion to the mean.

BUCKINGHAM: We like to buy stocks when they're trading on the low end of the historical spectrum, thinking that we'll get a rebound to where the multiple may go back to where it was.

Names here would be Molson Coors (TAP), a brewing company. And we like FedEx (FDX) and United Parcel Service (UPS), both of which are trading well below where they have historically.

THINKADVISOR: And the seventh area: dividend growers.

BUCKINGHAM: Historically, dividend-paying stocks have outperformed non-dividend-paying stocks and have done so with lower volatility.

With dividend payers, you get high returns and lower risk; for example, Abbott Laboratories (ABT), which has been whacked the last couple of days, or Chevron (CVX), which is attractive. Its dividend is likely to grow.

We recently bought Kimberly-Clark (KMB), a paper products maker. If you want something more stable and less economically sensitive, Kimberly Clark is attractive.

THINKADVISOR:  Do you ever lie awake at night worrying about your holdings?

BUCKINGHAM: The stocks I worry about are the ones that have done really well. We recently sold some Seagate, some Micron, some Intel (INTC) and some Albemarle (ALB) because the stocks have done extraordinarily well.

The things that concern me are stocks that have appreciated significantly because now they're a bigger weight in the portfolio, and there would be much bigger impact if they pulled back.