Market Factors: 10 stock picks based on a novel investment strategy perspective

This edition of Market Factors begins with research from a Hong Kong-based broker-dealer offering a different spin on investment strategy and stock picks. A bullish view on the AI rally follows and I discussed the importance of TAM in the diversion section.

Outlook 2026

CLSA’s top global stock picks

CLSA Ltd. was formerly known as Credit Lyonnais Securities Asia when founded in Hong Kong in 1986. Now owned by CITIC Securities, China’s largest investment bank, CLSA’s research can often provide a usefully novel perspective relative to the frequent banality of Wall Street consensus.

A Monday research report summarized CLSA’s expectations for global investment themes in 2026. Helpfully, the forecasted themes are crystallized into 10 global stock ideas.

Chief economist Leif Eskesen expects the U.S. economy to regain momentum, with AI proliferation lifting investment and efficiency. For AI-related stocks specifically, chief technical analyst Laurence Balanco studied price action during previous bubbles and believes “tech indices [in the current market] have yet to display the typical exponential characteristics of the final stages of previous bubbles. Historical trends suggest an accelerated advance phase in 2026.”

CLSA’s chief equity strategist Alexander Redman suggested the possibility of AI trade exhaustion later in the year, and investors looking to neglected sectors as a result. Mr. Redman likes Korean stocks, notably sellers of DRAM and NAND memory like SK Hynix and Samsung Electronics, as a late-cycle technology play. He is also closely following equity markets in India and Indonesia for signs of resurgence.

Mr. Redman expects emerging markets equities to outperform developed world stocks again in 2026. This is good news for the TSX, which is often correlated to the MSCI Emerging Markets index in Canadian dollars.

The top 10 stock picks include a lot of unfamiliar names, which is to be expected from an Asia-based brokerage. The list retains two picks from 2025: Indian wireless provider Bharti Airtel (BHARTI-IN) and the U.S. nuclear fuel and equipment specialists BWX Technologies (BWXT-N).

The new names for 2026 are QBE Insurance Group Ltd from Australia (QBE AU), Hong Kong based social media and gaming company Newborn Town (9911 HK) and toy maker Pop Mart International Group (9992 HK). Qfin Technologies (3660 HK), a Hong Kong traded financial technology stock, is on the list as are Indonesia’s Aneka Tambang Tbk (ANTM IJ), Japanese Gaming company Bandai Namco Holdings Inc. (7832 JT), Oracle Japan (4716 JP) and Korean processed food maker Samyang Foods (003230 KS).

I understand that very few readers have the means or interest to buy most of these companies. It is important, however, to remember that there is a big world beyond U.S. technology stocks and domestic banks and one day, some of these CLSA picks may lead global markets.

Tech

AI bubble not about to pop soon

Investors positioning for a collapse in the AI investment theme this year will be disappointed, according to Evercore ISI strategist Julian Emanuel. He finds no signs of systemic risk among the companies involved in the AI buildout.

Mr. Emanuel defends his view by noting that the market conditions present ahead of the dot-com bubble implosion are not apparent now. Cross ownership of shares – technology companies owning stock in other companies in the sector – was rampant in the late 1990s but missing now.

Balance sheets for AI-adjacent companies are healthy, as the majority have more cash than debt. Among the megacap stocks, EBIT, or Earnings Before Interest and Taxes, covers interest expenses by 44 times. Free cash flow remains sizeable.

Mr. Emanuel would become cautious on AI stocks if average net debt to market cap rises over 10 per cent, free cash flow went negative in year-over-year terms or corporate debt spreads in the sector widen out significantly. Until then, he expects AI stocks to lead the market.

Diversions

Gene editing, smart glasses and the importance of TAM

Two recent general interest stories got me thinking about TAM, an acronym for Total Addressable Market, which is vital for technology analysts and investors. It is short form for the maximum revenue opportunity for new innovations.

The first story concerned the gene editing process CRSPR, which longer-term readers of this newsletter know scares the [redacted] out of me. I am certain CRSPR will be abused – only half-joking when I assert that the U.S. military is using it to create Captain America.

The story I read in SciTechDaily, detailing how Australian researchers are using it to turn genes on and off to limit the dangerous effects of genetic diseases, provided yet another example of CRISPR’s potential to save lives. The growing list of CRISPR applications that extend and vastly improve people’s lives make its proliferation, and thus TAM, almost inevitable.

The same may not be true for smart glasses, the subject of the other article I want to discuss. The story from MakeUseOf recommends the Ray-Ban Meta smart glasses, which can capture photos and videos (preferably not in creepy fashion), read messages, make phone calls and listen to music.

The technology to display text on eyeglasses already exists – it is available in a Shoei motorcycle helmet model that no one bought me for Christmas – so that is an obvious next step.

Growth in smart glass sales, however, seems less inevitable than CRISPR revenue. Ear buds and headphones that people already own are doing some of the same functions. The ability to see text right next to the eyeball might not be deemed necessary by consumers. Women I’ve spoken who despise the idea of being videoed in public without their knowledge. The TAM for smart glasses is far less uncertain.

I might be wrong and everyone might be wearing smart glasses by this time next year. It is nonetheless a useful exercise to attempt to distinguish between a technological revolution and a fad that quickly fizzles out.

The essentials

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Globe Investor highlights

Larry MacDonald looks at the latest short sales on the TSX, and what bearish investors are betting against

Norman Rothery crunches some historical numbers to find out if investors would be wise to up their allocation in gold in balanced portfolios

Nine Canadian fund managers reveal their best stock picks – and portfolio advice – for 2026. Meanwhile, here are January’s top 10 stock picks by the outperforming Sid Mokhtari of CIBC

Ted Dixon on the surprisingly bullish stance insiders have towards TSX stocks – especially financials – heading into 2026

Many retail investors are nervous about what will happen with stocks in 2026. Sophisticated indicators, however, suggest they’re being too cautious, according to Ian McGugan

Buying the dip in Constellation Software is going to require patience, says David Berman

Quick hits

In the early 2000s Tiger Woods was so dominant that the option to bet on him or everyone else (Tiger versus the field) was a difficult decision. I’m getting the same vibe now, only its AI versus the field.

The Bloomberg Galaxy Crypto Index was down 23 per cent over the past 12 months. Historically there has been a significant correlation between global money supply and bitcoin, so we’ll see how loosening U.S. monetary conditions – rate cuts are expected – supports a recovery.

See our full earnings and economic calendar here