Mag 7 and software could boost portfolio in second half: ETF Action

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%.