These underperforming trades could yield big returns over next six months

In a recent discussion, ETF Action co-founder Mike Akins urged investors to consider boosting their portfolios with stocks that have lagged behind major players in the artificial intelligence sector. Speaking on "ETF Edge," Akins highlighted that many software and cloud computing firms, having retreated from their previously inflated valuations, now present compelling growth opportunities. Akins emphasized the essential role of software in daily operations, stating, "These companies prove that 'yes,' we still do need software to do our day-to-day jobs." He also pointed to disruptive technology as a prime area for investment over the next six months, describing it as a thematic strategy that focuses on mid and small-cap stocks that have been overshadowed in a market dominated by mega-cap and semiconductor businesses. He expressed optimism about these underperforming stocks, noting that analysts project a positive earnings growth outlook for them. "It's just a pretty rosy set up," Akins remarked. Furthermore, he pointed out potential in the underwhelming 'Magnificent Seven' index, which includes tech giants like Nvidia, Microsoft, and Apple. Despite being flat year-to-date, Akins sees this group as a viable option for investors looking to catch up in the latter half of the year. In the first half of the year, the Magnificent Seven index saw a decline of over 2%, while the Nasdaq-100 enjoyed a gain of nearly 20%. However, early trading in the second half indicates a shift, with the Magnificent Seven index rising by 5%, in contrast to the Nasdaq-100's slight drop. Looking ahead, Akins anticipates that small and mid-cap companies will emerge as attractive investments leading into 2027. He noted that small-cap stocks have already shown impressive performance this year, stating, "I think you could see that continuing throughout the year — not just from growing earnings and revenue, but also from an expansion of multiples that have been extremely depressed over the last several years." The Russell 2000 index, which tracks small-cap stocks, has surged by nearly 20% this year, while the broader S&P 500 has risen by almost 11%.