Portfolio Manager Sissons Favors Franco-Nevada, Microsoft, Munich Re Amid Market Rotation

Darren Sissons, a portfolio manager at Campbell, Lee & Ross Investment Management, is steering investors toward three stocks he believes offer genuine value in a market that has grown increasingly unmoored from fundamentals. The year 2026 has been defined by wild swings—inflation spikes, aggressive profit-taking, and a dramatic rotation out of energy and into artificial intelligence. Now, with oil prices falling after peace returned to the Strait of Hormuz, with U.S. job creation slowing, and with the AI boom beginning to exhaust itself, Sissons sees an opening for disciplined investors willing to look beyond the headlines.

The broader economic picture is mixed. The American economy remains resilient, but the cracks are widening. Job creation has slowed, labor force participation has declined, and wage growth is barely keeping pace with inflation. Interest rate expectations remain elevated, which will help U.S. investments for Canadian holders but will weigh on American exports and growth. A stronger U.S. dollar cuts both ways: it benefits Canadian exporters but dampens American competitiveness. The inflation story, meanwhile, has shifted. Lower oil prices suggest that the rate of price increases should moderate, though the stickiness of existing price hikes means broad-based reductions across industries remain unlikely.

For investors, 2026 has been a lesson in the cost of being wrong about the future. Those who stayed out of artificial intelligence and energy missed significant gains. But the energy rally has already peaked—investors booked profits in late March and have been gradually moving that cash into cheaper sectors offering growth with some defensive characteristics. Sissons argues against chasing oil exposure now. Instead, he sees opportunity in health care, medical technology, and software companies that have been unfairly punished by the AI mania simply because they are not AI companies.

Franco-Nevada sits at the top of his list. The company operates a portfolio of royalties across precious metals, base metals, and more recently oil and natural gas. It carries no debt, maintains a substantial cash position, and has access to significant untapped credit lines—a combination that gives management flexibility to capitalize on opportunities when commodity prices bottom out. The company's dividend has grown at an average annual rate of 44 percent over the past decade, and it currently yields 0.85 percent. More importantly, Franco-Nevada has built a robust pipeline of new projects. Côté Gold, Porcupine, Valentine Gold, and Greenstone are all beginning or expanding operations. Cobre Panama, a major asset, is expected to resume production in the second half of 2026. These projects, taken together, should drive a meaningful step up in the company's financial performance in the years ahead. Over the past ten years, Franco-Nevada has delivered an annualized total return of 12.6 percent.

Microsoft represents a different kind of opportunity. The software giant has been dragged lower alongside the broader sector as investors rotated away from artificial intelligence plays, but Sissons sees this as a mispricing. The stock now trades at a 36 percent discount to its five-year historical average price-to-earnings multiple of 33 times. Management is also right-sizing the expense base through strategic job cuts, which should improve future earnings. The real kicker, though, is the company's substantial investment in OpenAI. When that investment is commercialized—and the company expects it will be—it should deliver a significant boost to return on investment and earnings per share. The market has not yet priced in that upside. Microsoft's dividend has grown at an annualized rate of 27 percent in Canadian dollars over the past decade, and the ten-year total return, including the recent sell-off, stands at 23.95 percent.

Munich Reinsurance rounds out the trio. The company is yielding 4.80 percent, a substantial return in the current environment. Last year was relatively benign from a catastrophic loss perspective, which allowed the company to strengthen its balance sheet and earn a credit rating upgrade from Moody's in late June. First-quarter earnings rose 57 percent year-over-year, driven by lower losses. The company is also making a strategic pivot into artificial intelligence, deploying the technology to improve underwriting and claims management—a move that should lower costs and enhance risk management. The dividend has grown at an average annual rate of 11 percent over the past decade, supplemented by a two percent annual buyback. Over ten years, Munich Reinsurance has delivered an annualized total return of 18.20 percent in Canadian dollars.

Sissons's picks reflect a conviction that the market has overcorrected in some areas and undercorrected in others. The AI boom has created genuine value in some companies but has also created a vacuum of opportunity in others. His three selections—a royalty company positioned to benefit from commodity cycle recovery, a technology giant trading at a discount despite its own AI exposure, and an insurance behemoth generating substantial income while improving its operational efficiency—suggest that the next phase of market leadership may belong not to the most obvious winners, but to the most underappreciated ones.