Why the market is turning its back on 2025's winners

2026-07-11 · By Lubin Danilo, founder of Lubin Investment

Since the start of 2026, money has been gradually leaving 2025's biggest winners (AI-driven tech) and moving into more down-to-earth sectors: energy, industrials, consumer staples. My screener had already flagged, before this move, quality stocks that were cheap in these overlooked sectors. Here is what that changes.

The recurring script: yesterday tech, today industrials

2025 was the year of tech and artificial intelligence: the sector's giants carried the indices on their shoulders, often at very generous valuations. 2026 tells a different story. Tech is cooling off after that massive run, while quieter sectors take over: energy has gained more than 22% since the start of the year, industrials more than 16% (led notably by Caterpillar), and consumer staples (Walmart, Costco) are up 13.3%. The rotation accelerated further in early July, with a notable comeback of small-cap stocks (the Russell 2000 clearly outperforming the large-cap indices), after a first half where they had been largely overlooked in favor of tech giants.

What this actually means

A sector rotation is when investors move capital massively from one group of sectors to another, often because growth expectations or valuations on one side have gotten stretched, while the other side looks overlooked without good enough reason. It is neither an automatic buy signal nor a reason to panic about tech: it is a shift in investing style, not necessarily a judgment on the quality of the companies involved.

What my screener had already flagged, before the move

Here is what interests me most: my method never predicts market rotations, but it had already flagged, well before this move became visible in the indices, quality stocks that were clearly undervalued in sectors that are now in fashion. Take Gulfport Energy, a natural gas company rated 9 out of 10 criteria in my screener: it trades at just 3.1 times annual free cash flow, and my model puts a reasonable buy price well above the current price. Same story for APA Corp, also rated 9 out of 10, at 3.0 times free cash flow.

Both companies were already spottable in my screener before energy became 2026's star sector. This is not luck or a lucky prediction: it is simply what a framework reveals when it compares quality and price without caring what is fashionable at the moment.

Should you follow the rotation, or look for what it missed?

That is the real question to ask yourself. Following a rotation after it has already happened often means buying what just went up, right when the discount has already vanished. My method prefers the opposite: looking, sector by sector, for companies that still tick both quality AND price, whether they are trendy or not. Energy in 2026 is a good concrete example: the sector has climbed, but some individual stocks within it remain cheap by my criteria, simply because the market has not noticed all of them yet.

How I use this in my method

I never make a macro sector bet. But when an entire sector becomes trendy, I specifically look at whether cheap individual stocks remain within it, before everyone else takes notice. That is exactly the work my screener does, sector by sector, every day.

Key takeaways

Energy (+22%), industrials (+16%), and consumer staples (+13.3%) are outperforming tech since the start of 2026
A sector rotation is a shift in investing style, not a judgment on the quality of the overlooked companies
My screener had already flagged Gulfport Energy and APA Corp, two companies rated 9 out of 10, cheap before the energy sector became trendy
Following a rotation after the fact often means buying a discount that has already vanished
My method looks, sector by sector, for quality at the right price, regardless of what is fashionable

FAQ

What is a sector rotation?

It is when investors move capital massively from one group of sectors to another, often because valuations on one side have gotten stretched and the other side looks overlooked.

Should you sell tech and buy energy now?

My method does not make macro sector bets. I prefer to look, sector by sector, for companies that tick both quality AND price, rather than follow a trend that is already well underway.

How did my screener spot Gulfport Energy and APA Corp before the energy sector rally?

By systematically comparing quality (10 fundamental criteria) and price (the price-to-free-cash-flow ratio) across thousands of stocks, regardless of what is fashionable at the time of analysis.

Does a sector rotation last a long time?

It varies. Some rotations last several quarters, others reverse quickly. That is why I prefer to judge each company on its fundamentals rather than bet on the duration of a macro trend.

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About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).