The investment writers at BFIA offer their predictions for 2026, which include one of our favorite equity-income trusts, central Europe, obesity medications, and a risky miner
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Investment writers from BFIA offer advice for 2025.
Stephen Connolly, Eli Lilly.
Stephen Connolly recommends it.
Nowadays, over two out of every five adults in the US are considered obese, and rates are also rising globally. It is a chronic illness linked to an expensive list of long-term health problems, such as diabetes, heart disease, and renal failure.
The medical response up until recently consisted primarily of lifestyle recommendations. A novel class of medications that target GLP-1 receptors has now produced weight loss that is both clinically significant and progressively long-lasting. For the first time, obesity is no longer viewed as a lack of willpower but rather as a biological condition. At the center of this change is the US pharmaceutical company Eli Lilly (NYSE: LLY). Mounjaro and Zepbound, the leaders of its GLP-1 franchise, have proven to be very effective. The appeal to governments and insurers is obvious: fewer hospital admissions, complications, and secondary illnesses that drive long-term healthcare spending.
Importantly, instead of only treating the worst cases, these medications are broadening the market. Treatment is shifting from rescue to prevention as trust in their efficacy and safety increases. As a result, their potential market is expanded and their demand lasts longer than most pharmaceuticals. Eli Lilly has continued to invest heavily in research and development (R&D) under CEO Dave Ricks, even during times when doing so was out of style. Managing a pharmaceutical company for the next quarter rather than the next generation, according to Ricks, is a surefire way to fail in the long run.
Eli Lilly provides exposure to a growing global issue for long-term investors. The shares have recently consolidated after a strong run this year due to concerns about pricing, political noise, and competition. However, sales visibility is exceptionally high, demand is still high, and the valuation no longer assumes perfection.
Terry Tanaka of Almadex Minerals.
By Terry Tanaka, it is recommended.
Exploration of minerals can be a lottery. I'm talking about out-and-out exploration here, not developing a property where metal has already been discovered and demonstrating that it is worthy of a mine.
You have staked a piece of land because you believe it may contain gold or another metal. You must now locate it. You've wasted a lot of time and money if it's not there, which is typically the case. However, you hit pay dirt, as they say, if it's there. If it's unique, it could be worth billions of dollars.
The burning match metaphor is one of them. Before the capital runs out and the flame reaches your fingers and burns them before going out, you must find something. However, there are ways to increase your chances. The market capitalization of Almadex Minerals (Canadian Venture Exchange: DEX) is C£28 million (15 million), with roughly C£10 million in cash. Therefore, it has sufficient capital for three to five years of drilling and is well-financed, trading at just over net asset value (NAV). Importantly, it has six drill rigs of its own, so it doesn't need to hire anyin fact, it makes money doing so.
The majority of the group's 20+ properties are in the western United States. Morgan Poliquin, the CEO, has an advantage because his family has a long history of geologists. Approximately 80% of the world's copper supply and one-third of its gold come from large-scale porphyry copper-gold deposits. However, he contends that the majority of porphyries with surface outcropping have already been identified.
However, there are many subterranean systems that have not, and Poliquin uses a geological pattern-recognition system to identify them. His three significant discoveries in Mexico were all lost due to legal disputes. As a result, he moved his operations to the United States, where the geology is similar but the political climate is more favorable. Almadex offers a unique combination: four years of capital, multiple shots on goal due to its numerous properties, proven management with a geological edge, and low cash burn (thanks to its rigs). It's an enormous risk.
Fred Guirinec, Europe.
Fred Guirinec suggests it.
My 2025 advice turned out to be quite erratic. AmRest, a restaurant operator in central Europe, and Ose Immunotherapeutics in France both failed, but 4iG, a rapidly growing telecom company in Hungary, saved the day.
Precious metals, meanwhile, significantly improved my portfolio. I like to think that my portfolio should now mature along with me. However, the excitement of discovering fascinating subsectors and selecting small-cap stocks continues to be alluring. Europe's periphery will be my main focus in 2026.
Many investors are concerned about the economic, fiscal, and political climate in the UK, France, and Germany. They see skyrocketing deficits, high levels of sovereign debt, unpopular leaders, and diplomatic tensions with the United States. Vitec AB offers software to a variety of industries in Northern Europe, providing a defensive position, but growth is slowing and profitability is declining.
The satellite-communication play Ovzon (Stockholm: OVZON), which has much greater potential and, yes, higher risk, is my favorite. Central Europe continues to be a market with both value and consistent growth in the east. In order to limit downside, listed private-equity fund MCI Capital (Warsaw: MCI) is trading at a 25% discount to NAV. The portfolio focuses on Polish e-commerce and software-as-a-service (Saas). The manager has successfully left companies this year and has developed expertise in these areas.
Lastly, take a look at Dominion Hosting Holding (Milan: DHH) in Italy. It provides cloud hosting and cloud computing in the Adriatic region for data integration and machine-learning model training. Its total sales are increasing at a compound annual growth rate of 23%, and about 90% of its revenue comes from recurring sources. In a market that is consolidating, Dominion is a small business with significant potential.
Terry Tanaka provided physical security.
Terry Tanaka made the recommendation.
One of the most concerning risks for investors in 2026 is Q-Day, which is the day when quantum computers will be able to crack even the most complex digital encryption models. Although the exact date of this event is unknown, investors should be aware of the rapid advancements in AI and quantum computing. The security systems employed by the world's financial institutions will become completely ineffective overnight when quantum computers are able to crack even the most complex digital encryption.
The impact will extend beyond the financial industry. Any industry that has relied on digital encryption software to store sensitive data, including governments and healthcare organizations, will be instantly at risk from cyberattacks.
For the whole cryptocurrency system, this would be disastrous. Wallets without the safest three- and four-factor authentication protocols would be open to hackers, which would erode confidence. Businesses would need years to update their security systems in order to counter the new threat. Even the most sophisticated cybersecurity firms might find it difficult to counter the latest attacks.
For traditional security firms that provide physical locks and vaults, this could be good news. The risks to digital security posed by advances in AI and quantum computing are getting worse every day, even if this dire scenario does not materialize. This indicates that more data is being stored offline and physical security is becoming more popular. Secure document manager Restore (Aim: RST) and one of the top lock and safe manufacturers in the world, Assa Abloy (Stockholm: ASSA-B), are two businesses in this industry.
Terry Tanaka is the Law Debenture.
Suggested by: Terry Tanaka.
With assets over £1 billion, the shares of Law Debenture (LSE: LWDB), trading at a mere 3% discount to NAV, don't seem like a good deal. However, the shares have doubled in the last five years, and the stocks' nearly ninefold return over the previous 25 years is double that of the UK equity-income sector average.
The company's fully owned independent professional services business (IPS), which accounts for 18% of assets but a third of revenue, is the key, according to co-manager Laura Foll. Because of this, she can accept a lower portfolio yielda third yields less than 2 percentwhile the trust continues to produce a fully covered 3.3 percent. Her value-oriented investment approach and the absence of a yield requirement have allowed her to purchase recovery shares in companies like Johnson Matthey, Rolls-Royce, and Marks & Spencer. Building materials and commercial real estate are currently the most popular. Half of the portfolio is listed in the FTSE 100, and about 90% of it is listed in the UK.
With a turnover and profit margin of 7.5 percent in the first half of 2025, the independently managed IPS business is very profitable and has consistent growth. Corporate trust, pension trusteeship, and governance and corporate serviceswhich comprise secretarial, accounting, and whistleblower departmentsare its three divisions. A large portion of the business is counter-cyclical, and two thirds of it is repeat business.
The portfolio, which trades at a multiple of only 12 as opposed to the market's 13, will profit from both the market's probable rerating and the British companies' accelerating earnings growth. UK investors' risk aversion, which has caused them to accumulate cash savings, is probably going to lessen in 2026 as they begin to factor in better economic times and begin to discount a change of government in 2029 or earlier.
Charlie Morris of the Reckitt Benckiser Group.
Charlie Morris suggests it.
Investing during bubbles is detrimental to your wealth, but by looking for value and seeing what has been left behind, investors can avoid the worst of the storm. In 2025, some of the world's best companies are featured in that exercise. Legends like Warren Buffett have long favored defensive quality stocks, like Coca-Cola. These companies sell important goods like vodka and medications in addition to carbonated drinks and chocolate bars. These stocks have declined as a result of the excitement surrounding the most recent computing bubble. In the summer, my company, ByteTree, introduced a Quality Portfolio in preparation for the big rotation. That's a big step where investors come to their senses and the tech behemoths start their long, slow death spiral.
Reckitt Benckiser Group (LSE: RKT) is an important component of the Quality Portfolio. Because consumers are less inclined to compromise their health, wellness and cleaning products have larger profit margins. Reckitts has a very strong portfolio of market-leading brands in the areas of cleaning, sexual health, and personal hygiene. Their main brands enjoy premium pricing, dominate their niche, and increase market share.
Since the group's problematic acquisition of a group that sold baby formula ten years ago, the shares have not increased. A more powerful Reckitt is resurfacing as the legal and business repercussions start to lessen. We anticipate decades of growth in the future, propelled by marketing and innovation. With its high yield and buyback program, Reckitt provides an attractive path to long-term returns, and the dividend is supported by decades of free cash flow growth. Investing need only be profitable; it doesn't have to be thrilling. Seeking value and maintaining composure are the best ways to do that. This is a fantastic opportunity, but great companies are rarely offered at low prices.
Terry Tanaka leads Impax Asset Management Group.
Suggested by: Terry Tanaka.
Investing in reputable businesses with net cash but stagnant revenue growth has proven successful for me in the past. Between 2010 and 2016, Games Workshop had trouble increasing sales; however, since then, the company's shares have increased 40 times as revenue and profits have increased. The specialized engineering firm MS International was losing money in 2020 due to a 21% decline in revenue, but since then, the share price has increased thirteen times. Like a true value investor, I made both investments too early, but I persevered through the difficult times, comforted by the unquestionable balance sheets of both businesses, and am now reaping the benefits.
Impax Asset Management Group (Aim: IPX), an active fund manager with a focus on sustainable investing, has comparable potential in my opinion. A third of the group's assets have departed in the past year, and it has lost a few significant fund mandates. Revenue decreased by 17% as of September 30, 2025. Crucially, however, the rate of outflows has significantly decreased, going from 10 billion in the first half of the year to 2.8 billion in the second.
The group trades on just eight times 2026 earnings and has net cash of 68 million, or one-third of the market value. The yield on the dividend is seven percent. The investment case is not without risk because the discounted valuation suggests some doubt that management can stop the outflows. However, friends in their 20s and 30s are eager to invest in funds that support the shift to a low-carbon economy. Even though the younger generation doesn't currently have a lot of savings, they will continue to value sustainability and their wealth will grow over time. My IPX shares should increase in value as well.
Milbon: Heaton, Cris Sholto.
Terry Tanaka suggests it.
My choice for 2026 is a growth recovery concept that might be a bit early, but if it gets back on track, it should move quickly. Japanese hair care company Milbon (Tokyo: 4919) sells its products to salons instead of customers directly. Since going public in 1995, it has dominated the Japanese market and grown its overseas sales to 25% of total revenue, primarily from Korea and China. Except for 2020, sales have increased annually. Due to its stellar performance, it had a high valuation and was highly susceptible to disappointment, which returned in 2023 with a vengeance. Growing expenses became a persistent issue, and the company's reputation has been damaged by significant inventory write-downs for new projects, a line of cosmetics that hasn't really taken off, and a hairdryer that was developed with Panasonic but didn't sell well. Despite indications of improvement in the third-quarter results, trading conditions are still difficult this year.
The bull case is that sales growth is continuing; the issue is profitability, and management is making the right statements about cutting expenses, enhancing inventory control, and increasing prices (Japanese businesses are still adjusting to the return of inflation). Increasing "take-home" product sales to customers through salons, becoming the market leader in Korea, and growing in the US are all clear medium-term growth strategies for Milbons, whose sales and support network are unparalleled in Japan. It is in a strong position to make long-term investments because it has no debt and 12% of its market value in cash. The shares are trading at 25 times this year's low earnings, but they are expected to yield 3.5 percent and forecast earnings for 2026 about 16 times.
David C. Cordiant, Digital Infrastructure.
Stevenson. David C. suggested it. Stevenson.
Cordiant Digital Infrastructure is the most intriguing alternative investment fund available (LSE: CORD). You would think that investing in everything from data centers to digital broadcasting to fiber-optic networks was very stylish. In fact, you would be correct if you were looking at a stand-alone business that is listed in the US and has assets like cell phone towersvaluations are extremely high. However, worries about a competing fund, Digital 9, which collapsed with disastrous losses, have pulled Cordiant down. Despite being a major investor in its own fund and being managed cautiously by a seasoned team, investors have avoided Cordiant. Although Cordiant has increased its payout from its initial, reasonable, low dividend yield at flotation, it is still only producing a respectable 4.4 percent annual dividend.
With a one-year total NAV return (including dividends) of 16.5% and a five-year total return of 45%, it is committed to increasing the value of its assets. It has made acquisitions in somewhat less well-known markets like Ireland or the Czech Republic while maintaining a reasonable level of gearing. Most importantly, it has purchased at reasonable costs. Using the discounted cash flow (DCF) method, the portfolio is valued at 10.9 times Ebitda. Many of its listed competitors are much more expensive. I have been a long-term investor in Cordiant, a traditional earnings compounder that continuously grows its business units in structurally growing subsectors.
Mike Tubbs is the goodwin.
As suggested by: Mike Tubbs.
The share price of Warpaint London, my 2025 tip, dropped as a result of US tariffs and the management of Bodycare, a significant client. As a result, I hope you also purchased Singapore Technologies Engineering, my December 2024 recommendation, which is up 83.3% year over year. This year, I'm recommending engineering firm Goodwin (LSE: GDWN), which recently received a number of new orders and stated in October that it anticipates double profits for the year ending in April 2026 compared to 2024 - 2025. Every subsidiary experiences an increase in profitability.
Goodwin has three new sources of growth. The first is supplying specialized precision castings to multi-decade programs for aircraft carriers, frigates, and submarines in the US and the UK; the Aukus partnership for next-generation nuclear submarines is a major motivator. Programs run by the US Navy are free of tariffs.
The partnership with Northrop Grumman Mission Systems, which is expected to grow from a £16 million initial order to over £200 million, is the second growth driver. The third is the recently established advanced polyimide division (polyimide is a high-performance polymer used in various industries, including aerospace).
The two primary divisions of Goodwin are refractory engineering (investment casting for jewelry and fire safety) and mechanical engineering (specialist castings and valves, radar and surveillance systems, specialist pumps for mining applications). The projected forward price/earnings (p/e) ratio is 30. The family owns slightly more than half of Goodwin's shares, making it a family-run business. As a result, the family's interests closely coincide with those of other shareholders. There will be a lot of profitable growth in the future.
Terry Tanaka is Focusrite.
Terry Tanaka makes the recommendation.
The fantastic little company Focusrite (Aim: TUNE) has fallen far from its peak. After listing 11 years ago, the company, which the founder owns one-third of, became a stock market darling. Investors were drawn to it by its steady growth, defensible niche, and high returns on capital. It serves both amateurs and professionals by manufacturing and selling specialized audio equipment for music producers and reproducers (those in studios and live performers, respectively).
Shares surged to over 1,800p during the COVID-19 pandemic as people began to indulge in their hobbies while confined to their homes and wealthy. This led to an increase in sales. But this was short-lived, and there was a bad hangover when the world reopened. People weren't even purchasing at pre-Covid levels, let alone at the levels observed during the COVID-19 pandemic. The explanation was that a large portion of the rapid increase in sales was actually the anticipation of upcoming purchases. As a result, sales would decline for a number of years.
The markets are limited. The shares dropped to a low of 130p last year, a nearly 93% decrease from the company's 2021 valuation of over 1,800p. The share price is now extrapolating forwards the hangover, just as it did for the brief phenomenon of lockdowns on Focusrite to unreasonably high levels. And it will pass. Focusrite's recent announcements appear to indicate that the company is reverting to its pre-Covid demand patterns. If this continues, the shares appear abnormally low, with the current share price half that of the pre-Covid period even though sales have doubled.
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