Editor’s Note: “Wall Street is rotating out of overvalued mega-cap stocks into smaller businesses trading at more reasonable valuations” — Jim Pearce’s own words from Personal Finance this spring. Today’s article names three comeback candidates. His full rotation briefing — and the specific portfolio he’s built around that thesis — is available here →

The stock market has produced some eye-popping returns lately. With the timing of an end to the war in Iran still in doubt, Wall Street is once again concentrating its money in the tech sector, especially artificial intelligence (AI).

As a result, several of my Personal Finance portfolio holdings have shot up after releasing strong quarterly results. On May 28, Dell Technologies (NYSE: DELL) closed near $317. By June 2 it was at $475. That works out to a gain of 50% in just one week!

Over the same time span, Hewlett Packard Enterprise Co. (NYSE: HPE) did essentially the same thing when it went from $38 to $60. I predicted in this article HPE would get swept up in the AI frenzy two years ago, and it has since tripled in value.

Had you bought DELL when I alerted subscribers about adding it to the Personal Finance growth portfolio in March 2025, you’d be sitting on a gain of 350% by June 2026. Likewise, our position in HPE that was opened in July 2024 is up 180% over the same span.

On the Comeback Trail

I love the fact that so many of our current portfolio holdings are benefitting so much from the AI buying spree on Wall Street. But at the same time, I know it won’t last forever.

That is why I am focusing on “comeback stocks” this year. In December, I named Dow (NYSE: DOW) as “My 2026 Comeback Stock of the Year” (report only available for Personal Finance subscribers) while it was trading around $23. By the end of March, it broke above $42 to record a gain for my subscribers of 82% in less than four months!

I laid out my thesis for “Which Way Will the Bull Turn Next?” in late May. My reasoning was straightforward: Once the war in Iran is over, Wall Street will resume its rotation out of mega cap tech stocks into small cap and mid cap stocks that was underway prior to the closing of the Strait of Hormuz.

I discussed that dynamic in early February when I explained “How to Play the Pivot Towards Value.” At the time, I did not know that a war in Iran was only three weeks away that would unsettle the global financial markets.

Had I known that then, I may have focused on the obvious impact the war would have on the energy sector. But now that it appears an end to the war is in sight, it’s time to start thinking about where Wall Street is going to pivot next.

Three-Step Process

To do that, I use a three-step process that zeros in on companies that appear to be fundamentally undervalued and technically oversold relative to their sector peer group:

• First, I screen for basic valuation metrics including multiples to sales, earnings, and cash flow. Over the long haul, those are the building blocks of any successful stock market investment.
• Second, I review several technical indicators that include a stock’s Relative Strength Index (RSI), Moving Average Convergence/Divergence (MACD), and Bollinger Bands. Ideally, we’d like to see an RSI that has bottomed out below 40 and is on the rise, a MACD that shows you which way the momentum is going, and Bollinger Bands that are narrowing as trading activity in the stock becomes more rational.
• Third, I look at the most recent quarterly reports, press releases, news articles, and analyst ratings to determine why the stock is undervalued. In some cases, there are very good reasons why a stock is cheap while in other instances there is no clear explanation other than the stock simply is not getting much attention from Wall Street.

Given the extreme discrepancy between large cap techs stocks and just about everything else, I view 2026 as a comeback year for mid caps and small caps. In April, I added five new small cap positions to the Personal Finance Growth Portfolio that meet all my valuation criteria and appear poised to surge over the remainder of this year.

Even though the war in Iran is not over and the Strait of Hormuz is yet to reopen, two of those positions have already gained 25 percent in just seven weeks. Another position is up 10 percent, while the other two are in the red thus far.

I can’t share those names with you – those are reserved for my Personal Finance subscribers – but I can provide you with a few names that don’t quite meet all my criteria but may still be beneficiaries of the stock market rotation I am expecting soon.

1) Fiserv

Until last year, payments processor Fiserv (NSDQ: FISV) would not have qualified as a comeback stock. That’s because its share price had nearly doubled in price over the preceding twelve months, peaking above $238 in March 2025.

However, things quickly turned south for the company due to a string of weak quarterly results that drove its share price below $60 by last November. Since then, FISV has been establishing a base around that price that my system believes it will soon break out of.

Because of its low earnings growth last year, FISV has a PEG ratio of 1.8 that puts it above the 1.5 limit that I use for that metric. In all other respects, the stock appears to be undervalued from both a fundamental and technical perspective.

Three weeks ago, the RSI for Fiserv bottomed out below 23. Since then, it has gradually risen but is still below 50 while its MACD has turned positive at the same time. That has resulted in a narrowing of its Bollinger Bands, which suggests that a major move in the stock one way or the other may be imminent.

I believe that move will be upward based on the company’s Investor Day presentation two weeks ago. The company is aggressively incorporating AI into all of its processes and believes that it can capture market share at a faster pace than its rivals.

Fiserv is guiding for “a compound annual growth rate for adjusted revenue of 4% to 6% from 2026 to 2029. The company also expects to achieve adjusted operating margins in excess of 37% in 2029 and adjusted earnings per share to grow in the double-digit range for 2027 to 2029.”

If it can deliver on those promises, it shouldn’t be long until Fiserv is back on the rise. But at this point, Wall Street has a “we’ll believe when we see it” attitude towards Fiserv which is precisely why its share price could ramp up quickly over the second half of this year.

2) Smurfit Westrock

Admittedly, a company that manufactures cardboard containers does not captivate the collective imagination of Wall Street. That is one reason why Ireland-based Smurfit Westrock (NYSE: SW) has struggled to get back up to the $51 share price it was trading at just prior to the outbreak of the war in Iran.

Since bottoming out at $36 in March, SW has twice rallied up to its near-term technical resistance near $42 only to be rebuffed both times. Now, my stock screener indicates that the third time might be a charm thanks to its low multiples to sales and earnings and PEG ratio of 1.2.

The only test it fails is for its RSI of 59, which has risen from 20 just three weeks ago. Also, its Bollinger Bands have widened slightly but are still narrower than where they were three months ago while its share price was in decline.

Going forward, the company expects to post improving year-over-year comps due to the timing of last year’s import tariffs. When Smurfit Westrock releases its next set of quarterly results in July, those numbers should stack up well against last year’s chaotic second quarter as those tariffs temporarily upended global trade.

Another factor that could help the stock is the company’s decision to delist from the London Stock Exchange three weeks ago, making the New York Stock Exchange its sole home. That should expand its coverage on Wall Street, which I believe will be looking for mid cap stocks like this one ($22 billion market cap) that have been beaten down and are now on the upswing.

3) Boise Cascade

In early February, wood products manufacturer Boise Cascade (NYSE: BCC) was trading above $90 after bottoming out below $66 just two months earlier. But the outbreak of the war in Iran combined with disappointing fiscal 2025 Q4 results sent the stock spiraling downward that has pushed it back below $70.

At that price, my stock screener believes that BCC has become oversold and is likely to rebound over the remainder of this year. While it meets all my fundamental and technical requirements, the subjective case for a rebound is tied closely to the outlook for new home construction which at this point is a bit murky.

Although new home sales increased in April compared to March, they were 11 percent lower than the same month the year before. Also, the monthly uptick in new home sales was enabled by a 1 percent year-over-year decline in the average price of homes sold.

The historical data may be irrelevant if the war in Iran goes on much longer. Inflation is on the rise while the jobs market is stable, which means the Fed may end up raising interest rates later this year rather than delivering the rate cut that Wall Street has been hoping for.

However, the opposite scenario is also feasible in which case a rate cut by the Fed later this month in response to a weakening economy should boost new home sales. This is the type of trade that could go either way based on that one data point, but in my opinion the potential upside far outweighs the downside so it may be a risk worth taking given its small market cap ($2.5 billion).

The Time to Act is Now

To be sure, I could be wrong about how portfolio managers on Wall Street will react to an end to the war in Iran. Perhaps they are so enamored with AI that they will not stop pumping money into the same small group of large cap tech stocks until they crash.

Even if Wall Street is slow to rotate back into smaller stocks, it doesn’t take much money coming out of mega cap stocks to have a meaningful impact on the stocks discussed above. At a market cap of $5.4 trillion, NVIDIA is worth more than the entire Russell 2000 Index. A relatively small amount of money coming out of the tech sector could have a huge impact on the smaller stocks that cash goes into.

That is why I just added several small cap and mid cap stocks to our growth portfolio. The time to act is now, and there are more names popping up on my stock screener every week.

The three names I’ve laid out today clear most of my screening criteria, but the positions I’m most confident about are reserved for Personal Finance subscribers — and I can’t share them here. What I can tell you is that my reasoning in every case is the same: Wall Street rotated hard out of mid-cap and small-cap stocks before the war in Iran, and when that rotation reverses, it tends to move fast. I’ve been positioning the Personal Finance portfolio for exactly that move all year. The full thesis, the four catalysts I’m tracking, and every specific company I’ve added around this rotation are in my AI Margin Rotation briefing. Read it — $49 for the first year →