3 High-Conviction Stocks to Buy With $1,000 for a Diversified 2026 Portfolio

As of December 2025, the U.S. equity market is firmly in the "late cycle" phase of the bull market, a period historically marked by strong returns but also heightened caution due to mid-term election dynamics and potential Federal Reserve policy shifts. Investors are increasingly rotating into cyclical sectors and value stocks, which have outperformed growth-oriented names in recent months. This shift reflects improved growth expectations and a search for income in a maturing market cycle. For 2026, a diversified portfolio should prioritize sectors aligned with economic sensitivity, dividend sustainability, and long-term innovation. Below are three high-conviction stocks across energy, industrials, and healthcare that meet these criteria.

1. Cenovus Energy Inc (CVE): Energy Sector

The energy sector remains a cornerstone of value-driven growth in a late-cycle environment, particularly as global demand for energy persists and dividend yields remain attractive. Cenovus Energy Inc (CVE) stands out as a top pick for 2026, offering a forward annual dividend yield of approximately 4.8% and a "Strong Buy" rating from 37 analysts. The company's focus on low-cost oil production and its strategic position in North American energy markets make it well-suited to benefit from ongoing fiscal stimulus and a weaker U.S. dollar. Additionally, CVE's commitment to capital discipline and operational efficiency positions it to generate consistent cash flow, even in a tightening monetary policy environment.

2. Waste Management Inc (WM): Industrial Sector

Industrials are another key sector for late-cycle investing, driven by automation, infrastructure spending, and the transition to green energy. Waste Management Inc (WM) exemplifies this trend, with its focus on renewable natural gas (RNG) production and automation technologies. The company generates robust free cash flow and has consistently reinvested in its operations to align with environmental regulations and consumer demand for sustainable solutions. Its strategic pivot toward RNG-a byproduct of waste that can be converted into clean energy-positions it to capitalize on both regulatory tailwinds and long-term growth in the clean energy sector. . With a debt-free balance sheet and a history of disciplined capital allocation, WM offers a compelling mix of income and growth potential.

3. Eli Lilly & Co (LLY): Healthcare Sector

Healthcare is a defensive yet innovation-driven sector that thrives in late-cycle markets, particularly as global demand for medical advancements accelerates. Eli Lilly & Co (LLY) is a standout in this space, with its obesity-related drugs-Zepbound and Mounjaro-driving unprecedented revenue growth. Analysts project that LLY's dominance in the GLP-1 (glucagon-like peptide-1) market will translate into long-term earnings visibility, even as supply constraints ease. The company's strong balance sheet and R&D pipeline further insulate it from near-term risks, making it a high-conviction pick for investors seeking both income and exposure to transformative healthcare innovations.

Conclusion

A $1,000 investment split among Cenovus Energy, Waste Management, and Eli Lilly offers a well-diversified portfolio aligned with the late-cycle dynamics of 2026. These stocks combine income potential, operational resilience, and exposure to structural growth trends in energy, industrials, and healthcare. While the market remains vulnerable to sudden Fed policy shifts, a focus on high-conviction, value-driven names can help mitigate risks and position investors for long-term success.