Let’s start with an uncomfortable truth about the stock market right now.
The S&P 500 has surged 78% over the past three years. Sounds amazing, right? Except corporate earnings only grew 20% during the same period. Do the math—stocks aren’t rising because companies are making more money. They’re rising because investors are willing to pay more for the same profits.
The market is trading at 26 times earnings. Historically, when inflation runs between 2.5-3% (where we are now), that number should be around 19 times.
Translation? Stocks are expensive. Really expensive.
Here’s what’s propping things up: The Federal Reserve is cutting interest rates despite inflation being above target for four consecutive years. Easy money is inflating valuations like a balloon.
And remember what happened the last time the Fed changed course? In 2021, they called inflation “transitory.” By 2022, they were hiking rates faster than they had in 40 years. The so-called Magnificent 7 stocks? They dropped 46% on average.
Then there’s the AI spending question. OpenAI’s struggle to fund $1.4 trillion in infrastructure commitments in Q4 2025 was a warning shot. We’re entering year four since ChatGPT launched, and investors are getting pickier about which AI bets actually make money.
So Niles did something smart for 2026: He built a portfolio with both offense and defense.
The picks: A closer look
Cisco Systems ($CSCO) – The only repeat from 2025
Everyone’s building AI data centers. Google has them. Microsoft has them. Meta has them.
But here’s what nobody talks about, these massive data centers need to communicate with each other. And corporations dealing with exploding AI traffic? They need to upgrade their networks too.
That’s where Cisco comes in.
Niles calls it “Keep Riding the AI wave,” and the numbers back him up. Cisco’s revenue growth was stuck at 1% annually for five years. Then AI happened. Growth hit 5% in fiscal 2025, and Niles expects it to accelerate to high single digits in 2026.
The company is launching new silicon products specifically designed to network AI infrastructure together. As Niles puts it: “You’re going to have to network these AI data centers together. And corporations—as that AI data starts to flow—are going to need to start upgrading their networks.”
Here’s the kicker: Cisco trades at just 20 times earnings versus 26 times for the S&P 500. The stock jumped over 30% in 2025, but there’s still room for the valuation to expand as growth continues improving.
Cisco is the boring infrastructure play in a sexy AI world. But infrastructure is where real money gets made.
Apple ($AAPL) – Fashionably late to the AI party
Apple had a forgettable 2025, up just 9% while the S&P 500 gained 17%. Investors were frustrated by delayed AI features and lack of innovation.
But Niles thinks being late might actually work in Apple’s favour.
Two catalysts for 2026: First, Apple is finally rolling out an AI-powered Siri. Yes, they’re roughly two years behind schedule. But as Niles notes, “them being multiple years late on AI may actually turn out to be a good thing because they can take advantage of some of these more marginal players that may need to really work with them.”
Think about it, struggling AI companies desperate for distribution will bend over backwards to partner with Apple and its billions of users.
Second catalyst: the foldable iPhone. History shows bigger form factors drive upgrade cycles. When Apple moved from a 4-inch screen to 5.5 inches with the iPhone 6, revenue growth exploded from 7% to 28% in a single year.
Apple might be late, but with a loyal customer base waiting for their next upgrade, late doesn’t mean wrong.
Boeing ($BA) – Following the money (and the backlog)
Boeing had a tough few years, crashes, production problems, regulatory nightmares. The stock lost credibility with many investors.
But Niles sees something different: “I love big backlogs I cannot lie.”
Boeing’s order backlog stands at over $600 billion, nearly seven times this year’s revenue. That’s not just a number; it’s multi-year visibility into future sales and production.
Plus, powerful secular trends are emerging. The US “Golden Dome” missile defense project needs Boeing. NATO is raising defense spending from 2% to 3.5% of GDP—billions in additional demand. Countries making tariff deals with the US are including aircraft purchases as part of negotiations.
But the real story is cash flow. Boeing lost about $2 billion in 2025. Niles expects them to turn positive in 2026 with low single-digit billions in free cash flow, ramping to $10 billion by decade’s end. For context, Boeing generated $14 billion in cash flow back in 2018.
The stock has already climbed nearly 60% from its April 2025 lows, but with that massive backlog and improving fundamentals, Niles thinks there’s more runway.
Nike ($NKE) – The turnaround nobody’s talking about
Nike lost 15% in 2025. The valuation is near decade lows. Most investors have moved on.
That’s exactly when Niles gets interested.
New CEO Elliott Hill—a 32-year Nike veteran who came out of retirement just over a year ago—is taking the company back to basics: sports, strong retail partnerships, and innovation. The previous CEO had pushed an aggressive direct-to-consumer strategy that alienated retail partners. Hill is reversing course.
And here’s a tell: insiders are buying. Hill bought shares. Even Tim Cook, Apple’s CEO and a Nike board member, bought stock. When executives put their own money on the line, smart investors pay attention.
Niles sees Nike as a classic turnaround play with a depressed multiple providing downside protection. Sometimes the best opportunities hide in beaten-down companies with new management and a clear fix.
Impinj ($PI) – The dark horse that could 10x
Here’s the pick that might surprise you: Impinj makes RFID chips—those tiny tags retailers use to track inventory.
Today, RFID is mainly used in apparel, representing about 80 billion units annually. But in late 2024, Kroger announced it would use RFID in food tracking. Walmart followed in October 2025.
Why does this matter? The food market represents over one trillion units annually—more than 10 times the current apparel market.
Impinj’s new M800 chips cost just 1 cent each and come with software that finally makes food tracking economically viable at scale. As Niles puts it: “RFID is a technology whose time has come.”
This is a classic inflection point story. A boring technology suddenly becomes essential, and the market is 10 times bigger than anyone expected.
The philosophy: Darwin was right
Niles is refreshingly honest about his approach. He expects only three of these five picks to outperform—a 60% hit rate. Even the best investors get it wrong 40% of the time.
But notice the strategy: two AI-adjacent plays (Cisco and Apple) for growth, two turnarounds (Boeing and Nike) for value and defense, and one moonshot (Impinj) for asymmetric upside.
This isn’t a portfolio built for maximum gains in a raging bull market. It’s built to survive and thrive in choppy conditions.
As Niles says, quoting Charles Darwin: “It is not the strongest of the species that survives, nor the most intelligent, but the one most adaptable to change.”
In a market trading at all-time valuation highs with inflation risks, tariff uncertainty, and questions about AI spending sustainability, adaptability might be the most valuable skill of all.
The real lesson? Don’t just chase what’s hot. Build a portfolio that can handle both sunshine and storms.
Because in 2026, one of America’s top fund managers thinks we might get both.
Sonia Boolchandani is a seasoned financial writer She has written for prominent firms like Vested Finance, and Finology, where she has crafted content that simplifies complex financial concepts for diverse audiences.
Disclosure: The writer and her his dependents do not hold the stocks discussed in this article.
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