Top Stock Picks for 2026: Biotech, AI Storage, and Industrial Turnarounds
- Only 31% of active funds beat the market in 2025, largely due to the dominance of mega-cap tech stocks.
- Tanaka Growth (up 50%) is betting big on Corcept Therapeutics (biotech) and U.S. Antimony (defense supply chain) to drive future gains.
- Alger Focus Equity (up 40%) is leveraging the AI data boom through Western Digital and ad-tech growth via AppLovin.
In 2025, the stock market remains a difficult beast to tame. While the S&P 500 has climbed an impressive 16%, sticking with the index has often been the safer bet. According to Morningstar, only 31% of active U.S. stock funds managed to outperform their benchmarks over the past year a significant drop from 44% previously. The difficulty stems largely from the market being top heavy; if a fund didnt hold massive positions in tech leaders like Nvidia, Broadcom, or Alphabet, keeping pace was nearly impossible. However, a select group of managers bucked the trend by finding value in overlooked sectors like industrials, biotech, and recovering financials.
1. Tanaka Growth: The Concentrated "Hidden Gem" Strategy
Flying under the radar with just $31 million in assets, Tanaka Growth has delivered a staggering 50% return this year. Managers Graham Tanaka and Benjamin Bratt utilize a high risk, high reward strategy involving a hyper concentrated portfolio of only two dozen stocks, leaning heavily into small and mid cap companies (average market cap $32 billion). Unlike peers who hug the index, Tanaka takes massive swings at companies he believes have a distinct competitive edge.
His top conviction plays for 2026 include:
- Corcept Therapeutics: Comprising 15% of the portfolio, this biotech firm treats Cushings syndrome. Tanaka sees "10 years of growth" ahead as the company leverages its cortisol modulation expertise to target ovarian cancer and ALS. Despite a high valuation, he predicts the stock could more than double from $82 to over $180 by 2027.
- United States Antimony: A critical defense play, this mining firm is the sole U.S. producer of antimony, a material essential for military ordnance and batteries. With China restricting exports, U.S. Antimony recently secured a $245 million Pentagon deal. Revenue is projected to triple by 2026.
2. Alger Focus Equity: Riding the Innovation Wave
Managing $4.5 billion, the Alger Focus Equity fund has returned 40% this year by doubling down on technology and innovation. Managers Patrick Kelly and Ankur Crawford hold a portfolio where two thirds of assets are in tech significantly higher than the S&P 500s 46% weighting. Their strategy focuses on identifying companies disrupting traditional business models.
Their standout picks rely on second order AI effects and aggressive scaling:
- Western Digital: Up 255% this year, this hard drive maker is transforming due to the explosion of data required by AI. Kelly argues the stock is still cheap at 21 times estimated 2026 earnings because the market mistakenly views it as a cyclical commodity business rather than a critical AI infrastructure play.
- AppLovin: This stock has nearly doubled in 2025. Kelly believes Wall Street is underestimating its earnings potential as it expands its ad platform internationally and pushes into e commerce.
- QXO: A bet on serial entrepreneur Brad Jacobs, who intends to roll up the building supply industry. Following an $11 billion acquisition of Beacon Roofing Supply, QXO aims to hit $50 billion in revenue by 2035.
3. Fidelity Large Cap Stock: The Contrarian Value Approach
While others chase tech, Matthew Fruhan of the Fidelity Large Cap Stock fund has beaten 97% of his rivals with a portfolio that is only 26% technology. His strategy revolves around patience and value, targeting cyclical stocks that the market has temporarily discarded. With low turnover (just 17% annually), Fruhan holds steady through volatility.
His thesis relies on corporate turnarounds and "normalization":
- Boeing: Despite years of safety crises, Fruhan sees value in the aerospace giant as it ramps up production. Regulators recently cleared Boeing to produce 42 737 MAX planes a month. Fruhan argues that looking at current depressed earnings is misleading; normalized production suggests the stock is reasonably priced for 2028.
- Wells Fargo: Viewing the bank as a recovery story under CEO Charles Scharf, Fruhan notes that the Fed recently lifted longstanding growth restrictions. He believes Wells Fargos profitability will eventually catch up to leaders like JPMorgan Chase, aided by the massive scale advantage big banks possess in implementing AI technology.