Nancy Tengler shares her six picks for 2026

Key Concepts

• AI-Driven Productivity: The belief that current technological advancements (AI, Quantum, Robotics) represent a "90s on steroids" era of genuine productivity growth.
• Contrarian Investing: The strategy of buying assets when market sentiment is negative (e.g., buying software during recent sell-offs).
• Earnings-Driven Market: The perspective that current market gains are fundamentally supported by sustainable earnings growth and raised corporate guidance.
• Capital Allocation: The importance of dividends and share buyback programs in driving long-term stock value (e.g., NVIDIA’s recent policy shift).
• Consumer Resilience: The argument that the consumer sector remains strong despite negative market narratives, with potential for a rebound linked to interest rate trends.

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1. Portfolio Strategy and Market Outlook

Nancy Tengler, CEO and CIO of Laffer Tengler Investments, discusses her firm's approach to managing portfolios amidst current market volatility.

• Walmart (WMT): The firm has trimmed its position by approximately 20% across all strategies as of late February. The rationale is that the stock is trading at a high valuation (40+ times earnings) without spectacular earnings growth, making it a candidate for profit-taking.
• Market Correction: Tengler anticipates a potential market correction once the current earnings season concludes. She notes that the market will likely shift its focus toward Federal Reserve policy and geopolitical tensions in the Middle East. However, she views any such correction as a buying opportunity, given that the underlying earnings growth remains robust.

2. Technology and AI Investments

Tengler emphasizes holding positions in transformative technologies for the long term, specifically focusing on Space, Quantum, Robotics, and Nuclear energy.

• Coherent (COHR): Identified as a top pick. The company is experiencing 55% earnings growth this year, with 41% projected for next year. Despite a high current multiple (70x), the forward multiple (45x) and a "compelling" backlog make it a strong long-term hold.
• NVIDIA (NVDA): Recently added to the firm's "Value Portfolio." Tengler highlights NVIDIA’s new capital allocation program—including dividend increases and share buybacks—as a strategic move similar to Apple’s historical approach, which she believes will provide a floor for the stock price.
• Software Sector: Despite a recent "meltdown" in software stocks, Tengler argues that the narrative of software's decline is disconnected from reality. She points to the rising demand for software engineers as evidence that the sector remains vital. She is actively adding to positions in Microsoft (MSFT), ServiceNow (NOW), and CrowdStrike (CRWD), viewing them as essential platforms that will benefit significantly from AI integration.

3. The Consumer Sector

Contrary to the prevailing "consumer is dead" narrative on Wall Street, Tengler maintains a bullish stance on consumer discretionary stocks.

• Action: The firm added to its consumer holdings, anticipating that the sector will "return with a vengeance."
• Catalysts: She identifies declining interest rates as a primary catalyst that will eventually stimulate activity in the housing market and broader consumer spending.

4. Methodology and Investment Philosophy

• Opportunistic Buying: Tengler stresses the importance of buying when "everybody hates" a sector. This contrarian approach was applied to software during the first quarter of the year.
• Narrative vs. Reality: She warns against following "narratives" pushed by hedge funds, which she describes as becoming "self-fulfilling" prophecies that often ignore fundamental data like hiring trends in the software industry.
• Long-term Horizon: For transformative technologies (AI, Quantum, etc.), she advocates for a multi-year holding period, noting that these are "real technologies that will change the way we live."

Synthesis and Conclusion

The core takeaway is that while the market may face short-term volatility due to geopolitical factors and Fed policy, the fundamental drivers—specifically AI-led productivity and strong corporate earnings—remain intact. Investors are encouraged to look past short-term market sentiment, utilize corrections to add to high-quality positions in software and transformative tech, and maintain exposure to the consumer sector, which is expected to recover as interest rate pressures ease.