Have you ever watched the market go straight up while your portfolio barely budged? That’s been 2025 for a lot of us. The usual suspects keep hitting new highs, but everything else feels stuck in neutral. I’ve been there—staring at the screen wondering when the party finally spreads beyond the big names.
Well, here’s something that actually got me excited this weekend. A top-tier investment bank just put out a note saying 2026 could be the year the market finally broadens out in a meaningful way. And they didn’t just talk about it—they handed us a basket of cheaper small- and mid-cap stocks that fit the exact profile for outperformance when that happens.
Why 2026 Could Be Different for “The Rest of the Market”
Let’s be honest: 2025 has been painfully narrow. A handful of trillion-dollar tech giants have carried the indexes while small- and mid-caps have mostly gone sideways or worse. Breadth has been terrible, and that’s left a ton of quality companies trading at discounts that almost feel too good to be true.
The firm’s core thesis is pretty straightforward. As we move into 2026, earnings growth is expected to accelerate outside the mega-cap universe. When more companies start posting stronger numbers, money tends to rotate into exactly the kinds of names that have been ignored. Add in still-reasonable valuations and some positive price momentum, and you’ve got the recipe for serious relative—and sometimes absolute—gains.
They screened for stocks under roughly $55 billion market cap that show improving earnings and sales growth trajectories into 2026, rank cheap on a “growth at a reasonable price” basis, and have positive technical momentum. The result? A list that feels refreshingly different from the usual suspects.
Lattice Semiconductor – The AI Edge Play Flying Under the Radar
First up is a name that immediately caught my eye: Lattice Semiconductor. Yes, it’s a semiconductor stock, but it’s not one of the usual giants you hear about every five minutes. Lattice specializes in low-power programmable chips—think field-programmable gate arrays (FPGAs) that are perfect for edge AI applications.
The stock is already up a respectable 24% this year, but the analysts believe there’s plenty more to go. Their price target sits at $85, which would mean another 21% upside from recent levels. For context, that would you turn down low-twenties upside on a company growing earnings in the teens (or better) with exposure to two of the hottest themes out there?
“Upcoming catalysts include next-gen server deployments, continued hyperscaler investment and incremental share gains in mid-range FPGA markets.”
What I particularly like is that Lattice isn’t trying to compete head-on with the monster chip designers. Instead, they dominate niches where power efficiency and flexibility matter more than raw performance. Think industrial automation, automotive, communications infrastructure, and—crucially—edge AI devices that can’t afford to burn through battery or rack space.
In my experience, these “picks and shovels” plays in mega-trends often deliver the smoothest rides. You still get the growth tailwind, but without quite the same stomach-churning volatility of the pure-play leaders.
- Strong positioning in both AI and edge computing
- Clear roadmap of new products through 2026–2027
- Share gains in mid-range FPGA segment
- Premium valuation actually looks justified versus analog peers
Entergy – The Utility That Doesn’t Act Like One
If someone told me a few years ago that I’d be excited about a regulated utility serving the Gulf Coast, I probably would have laughed. But then data centers happened.
Entergy has quietly positioned itself as one of the best ways to play the explosion in power demand from hyperscale computing facilities. The company operates in Louisiana, Arkansas, Texas, and Mississippi—exactly the kinds of locations where new data centers are popping up like mushrooms after rain.
The stock has already climbed 29% in 2025, yet analysts see another 19% upside to their $116 target. Perhaps even more impressive: they’re forecasting double-digit EPS growth over the coming years. Try finding another regulated utility doing that.
“One of our top utility ideas with among the best exposure to data center growth, accelerating and enhancing an already leading profile.”
Beyond the near-term data center catalyst, longer-term tailwinds look solid too. Industrial reshoring, rising LNG exports, and general economic revitalization across the U.S. South should keep power demand elevated for years. Meanwhile, Entergy’s regulated status means earnings visibility is about as good as it gets.
Personally, I love when boring old utilities start behaving like growth stocks. The combination of defensive characteristics and legitimate secular growth is incredibly rare.
Other Names That Made the Cut
The note highlighted several additional stocks that passed their screening process. Two that jumped out:
- Signet Jewelers – Yes, the parent of Zales and Jared. Consumer discretionary has been hit hard, but improving margins and share buybacks could drive a sharp re-rating if spending holds up.
- Lincoln Electric – Industrial manufacturing at its finest. Exposure to automation and infrastructure spending, trading at a discount to historical multiples despite steady growth.
Both fit the broader theme perfectly: solid companies, temporarily cheap, with improving fundamentals on the horizon.
How to Think About Positioning for 2026
Look, nobody has a crystal ball. The market could stay narrow forever (though history suggests otherwise). But if you believe—even a little—that mean reversion and broader participation are likely at some point, building exposure to quality names at reasonable prices feels like the smart bet.
My own approach has been gradual. I’m not selling my core mega-cap positions, but I’ve been trimming winners and rotating some proceeds into exactly this kind of opportunity set. It’s the investment equivalent of refusing to leave all your chips on red just because it’s hit ten spins in a row.
The beauty of the names above is that many of them pay you to wait. Decent dividends, ongoing buybacks, and real fundamental improvement mean time is actually on your side rather than working against you.
At the end of the day, 2026 might turn out to be the year that “the rest of the market” finally gets its moment. And when that rotation comes, having exposure to undervalued companies with accelerating earnings could make the difference between another ho-hum year and one you actually remember fondly.
I know which outcome I’m positioning for.
