Human behavior is to become less cautious as markets trend higher. That tendency is fraught with risk especially as the complexion of the market changes, as it has in the past six months. There is a reason that "past performance is not an indicator of future results" is the most commonly used disclosure in the investment industry. 

A shift in market leadership seems to be underway as investor focus branches out from the "Magnificent Seven." Within this group of primarily technology stocks that helped drive gains in the S&P 500, only Google and Nvidia outperformed the broader market last year, rising 66% and 39%, respectively. Shares of Amazon, Apple, Meta, and Microsoft all lagged, with Amazon the weakest performer, gaining about 5% in 2025.

Sectors that have trailed the market for several years, including healthcare, energy, and financials, may now be emerging as new leaders, potentially overtaking large-cap technology. It is a good time to dig for quality bargains with well-managed cash flow and strong balance sheets. 

In Small-cap Doses

In the final quarter of 2025, small-cap stocks staged a notable advance. From January through the third week of November, the Russell 2000, an index tracking smaller companies, gained just 4.5%, significantly lagging the S&P 500's 12.3% return. At that point forward, however, small caps began to outperform the broader market by a wide margin.

That strength continued into the first month of 2026, with the Russell 2000 once again significantly outperforming the S&P 500. While this is still a relatively short time frame, the pattern shares similarities with the late 1990s and the subsequent tech boom and bust. Following the bursting of the internet bubble, small-cap stocks experienced a substantial run, rising 66% from January 2000 through December 2007, while the market, represented by the S&P 500, returned just 4.4% over the same period.

Opportunistic Large Cap Plays

As the market enters a phase in which leadership may broaden, there may be opportunities in high-quality companies that have struggled recently, not because their businesses are broken, but because expectations got ahead of reality. When sentiment resets faster than fundamentals, that can be a signal to lean in.

Fiserv, Inc. (NASDAQ:FISV) is a classic example of a strong franchise that the market temporarily lost patience with. The company provides mission-critical technology to financial institutions, everything from loan processing and digital banking to payments and commerce. These systems are deeply embedded, which creates high switching costs and very sticky customer relationships.

Last year, the stock was hit hard after an earnings miss and a meaningful reduction in forward guidance in the third quarter. That single event triggered a roughly 45% drop in the share price on top of an already weak year for the stock.

The valuation changed dramatically, while the long-term business outlook didn't. At around $60 per share, investors are paying a very modest multiple for a company that continues to grow revenue in the mid-single digits and generates substantial free cash flow. As execution improves and confidence returns, the stock could trade back toward $90–$100, which would simply bring it in line with its historical valuation, not an aggressive assumption.

Another company in the opportunistic category is Netflix, Inc. (NASDAQ:NFLX) which remains the global leader in streaming. Subscriber growth has been steady and substantial from about 220 million five years ago to roughly 325 million today. 

The stock has been under pressure amid concerns about strategic expansion in buying Warner Bros, and the potential cost of acquiring premium film and television assets. Large media deals have a mixed history, so it's understandable that investors are cautious.

Netflix has consistently shown an ability to adapt. The company has reinvented itself multiple times. Management has navigated industry disruption since the company's founding in 1997. 

The current uncertainty creates an opportunity to own a category-defining platform with global scale, strong execution, and strategic optionality at a more reasonable valuation than we've seen in recent years.

Identifying Upside Amid All-Time Highs

A company like Oshkosh Corp (NYSE:OSK), which has performed well recently, may still be undervalued by the market. The company designs and manufactures specialty vehicles for defense, emergency response, and commercial uses, markets with high barriers to entry and long product cycles.

There are two major growth drivers here. First, sustained U.S. defense spending. Second, increased infrastructure and data center buildout, which drives demand for specialized vehicles and equipment.

Valuation is a big part of the appeal here. Oshkosh trades at a significant discount to large industrial peers like Caterpillar and Deere. While they're not direct competitors, the comparison highlights how inexpensively OSK is valued relative to its fundamentals.

The company has a long operating history, disciplined capital allocation, and a strong commitment to shareholders, including a dividend that has grown 50% over the past five years. Even after recently reaching an all-time high, the stock likely still has meaningful upside.

I am not suggesting that today's environment represents a technology bubble. However, evidence suggests that a meaningful rotation into areas of the market that investors have overlooked in recent years is unfolding. It is time for small pivots to avoid chasing momentum when the increased volatility can cause crowded trades to unwind fast. A sustained reversal of the technology trend could have important implications for multi-year portfolio returns.

Featured Image Licensed From iStock by Jeff Ligouri 

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

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