Skip to content

These underperforming trades could yield big returns over next six months

Chimera readability score 55 out of 100, Graduate reading level.

Overlooked market areas may have a banner second half of the year.
ETF Action co-founder Mike Akins is encouraging investors to boost exposure to groups that underperformed compared with major artificial intelligence stocks.
He told "ETF Edge" this week that his list includes software and cloud computing names. Many have fallen from "nosebleed valuations" and have "very strong growth scenarios."
"These companies prove that 'yes,' we still do need software to do our day-to-day jobs," Akins said.
He is also flagging disruptive technology as a strong buy for the next six months.
"It's a thematic strategy," Akins noted. "It kind of plays a little bit further down market into the mid [and] small-cap range. Those names have been kind of left behind in this mega-cap, semiconductor-led market …. Those could do quite well when you look through to their earnings growth estimates by the analysts. It's just a pretty rosy set up."
Akins, who was head of exchange-traded funds at ALPS before co-launching his independent financial tech and research firm, also highlights opportunities among the underperforming "Magnificent Seven" index, which is comprised of Nvidia, Microsoft, Alphabet, Amazon, Meta, Apple and Tesla.
"Who [would have] thought that Mag 7 was going to be flat year-to-date at the halfway market," said Akins, who considers the group as a sound catch-up trade for the year's second half.
The Magnificent Seven underperformed the Nasdaq-100 in the first half of the year, falling more than 2% while the Nasdaq-100 gained nearly 20%.
The momentum may already be materializing. In the early trading days of the year's second half, the Magnificent Seven index is up 5% while the Nasdaq-100 is 1% lower as of Friday's close.
Plus, Akins expects small and mid-cap companies as favorable spots going into 2027, noting how small-caps in particular have performed incredibly well this year.
"All of the down-market names are really starting to catch up," he said. "I think you could see that continuing throughout the year — not just from growing earnings [and] growing revenue, but also from an expansion of multiples that [have been] extremely depressed over the last several years."
So far this year, the Russell 2000 index, which tracks small-cap stocks, is up almost 20% while the broader S&P 500 is up almost 11%.

Facts Only

* ETF Action co-founder Mike Akins encourages boosting exposure to groups that underperformed compared with major artificial intelligence stocks.
* The list includes software and cloud computing names.
* These companies have fallen from "nosebleed valuations" but have "very strong growth scenarios."
* The recommendation emphasizes the need for software to perform day-to-day jobs.
* Disruptive technology is flagged as a strong buy for the next six months, described as a thematic strategy playing further down the market into the mid and small-cap range.
* Underperforming names among the "Magnificent Seven" index include Nvidia, Microsoft, Alphabet, Amazon, Meta, Apple, and Tesla.
* The Magnificent Seven underperformed the Nasdaq-100 in the first half of the year, falling more than 2% while the Nasdaq-100 gained nearly 20%.
* In the early trading days of the second half, the Magnificent Seven index was up 5%, while the Nasdaq-100 was 1% lower as of Friday's close.
* The Russell 2000 index is up almost 20% this year.
* The broader S&P 500 is up almost 11% this year.

Executive Summary

Investors are encouraged to increase exposure to software and cloud computing groups, as some have underperformed compared to major artificial intelligence stocks but possess strong growth scenarios. This recommendation stems from the observation that these companies demonstrate continued necessity for day-to-day operations despite market shifts. Furthermore, disruptive technology is flagged as a strong investment theme for the next six months, suggesting a strategy focused on mid and small-cap names that have been less represented in the mega-cap, semiconductor-led market. The analysis also notes that the underperforming "Magnificent Seven" index may serve as a catch-up trade for the second half of the year, as these names lagged the Nasdaq-100 in the first half. Finally, smaller and mid-cap companies are expected to perform favorably going into 2027, with small-caps showing strong performance this year.

Full Take

The narrative frames a necessary re-evaluation of market leadership, suggesting that current mega-cap momentum based on AI may be yielding suboptimal results compared to the performance potential in software and cloud infrastructure. The argument hinges on a perceived underestimation of the growth potential in mid and small-cap segments, which are positioned to catch up through earnings and multiple expansion. This suggests a structural divergence where established market metrics (like those defining the Magnificent Seven) may not accurately reflect underlying growth realities for all sectors. The pattern involves pivoting investment focus from pure AI dominance to foundational enterprise technology. The implication is that systemic risk exists in over-concentration within the dominant index, which historical performance patterns suggest will eventually correct itself, allowing previously lagging segments to realize their potential multipliers. The question remains whether this correction is inevitable or dependent on external macroeconomic forces; what specific drivers will accelerate the convergence of growth metrics between the large-cap technology sector and the broader, less valued enterprise software space?

Sentinel — Human

Confidence

The text appears to be a genuine report synthesizing expert investment commentary and relevant market data, exhibiting the typical voice of financial journalism.

Signals Detected
low severity: Sentence length variance is natural; the flow reflects direct quotation insertion and explanatory narrative.
low severity: The text flows logically from an expert opinion to specific data points, showing a coherent argument structure.
low severity: Specific data points (index performance) are cited directly to support the central thesis, indicating grounding in reporting style.
severity: No immediately obvious markers of LLM confabulation; specific financial context is used effectively.
Human Indicators
Use of direct, quoted expert testimony ('Akins said...', 'He told...') woven into the narrative structure.
The integration of contrasting index performance data (Mag 7 vs. Nasdaq-100) acts as a sophisticated analytical tool rather than simple recitation.
These underperforming trades could yield big returns over next six months — Arc Codex