The S&P 500 has been breaking new highs since April this year.
It even made new highs in May, defying the common bearish adage of “Sell in May and go away”.
As we approach the mid-point of 2026, a few quality stocks remain underappreciated by the market and could be good opportunities at their current prices.
These companies remain market leaders in their respective fields, providing opportunities for investors to position themselves to ride on a potential wave up from their current oversold levels.
Microsoft (NASDAQ: MSFT) – Still a Cloud Infrastructural Leader
According to Statista, Microsoft remains one of the leading global cloud providers.
Crucially, the cloud giant offers the broadest selection of AI models among its peers, including key AI models such as OpenAI and Anthropic.
There is a key benefit too, as AI usage grows, Microsoft’s unified IQ layer is enriched, helping to provide clients with organisational intelligence, while elevating Microsoft’s switching costs.
To this end, Microsoft is embedding its Copilot system across both commercial and consumer domains.
In its third fiscal quarter ended 31 March 2026 (3QFY2026), Microsoft’s revenue jumped 18% to US$82.9 billion year on year (YoY), driven by a strong 40% growth in “Azure and other cloud services”.
While its top-line growth drove 3QFY2026 operating cash flow up 26% to US$46.7 billion YoY, free cash flow fell by 22% to US$15.8 billion due to higher capital expenditures (CapEx) on its cloud and AI infrastructure.
Despite rising CapEx, the demand for Microsoft’s Azure services continues to exceed available capacity, suggesting its growth isn’t constrained by a lack of demand.
Nike (NYSE: NKE) – It Takes More Than One Blunder to Break the Brand
Nike paid the price for its operational blunder with its “Nike Direct first offence” strategy that eventually backfired, sending its stock price plunging to a multi-year low.
But it’s not over for Nike.
While its business is suffering, the Nike brand remains one of the most durable intangible assets in the consumer sector.
The sports giant still enjoys global visibility with a presence in nearly all countries.
Crucially, the footwear giant commands premium pricing power, evidenced by its higher average selling price (ASP) through partnerships with major sports events such as the World Cup, Super Bowl, and the 2028 Olympics.
While competitors may gain some market share due to Nike’s operational blunder, they are not likely to unseat Nike’s dominance in footwear.
In the nine months ended 28 February 2026 (9MFY2026), Nike’s revenue increased just 1% YoY to US$35.4 billion, while its operating cash flow declined 62% to US$1.2 billion, indicating a turnaround that remains a work in progress.
However, the end of the turnaround might be near, as the management expects its “comeback” to be completed by the “end of the calendar year”, possibly staging a stock recovery.
ServiceNow (NYSE: NOW) – A Mistaken Victim of AI Disruption
ServiceNow is not likely to be one of the software businesses being disrupted by AI, despite what the headlines want you to think.
In fact, the workflow orchestrator provider benefits from AI by positioning itself as an “AI Control Tower” — the point of control and governance for enterprise users.
In the first quarter ended 31 March 2026 (1Q2026), subscription revenue climbed 22% YoY to nearly US$3.7 billion, while free cash flow increased by 6.3% to US$1.53 billion.
Such growth is attributed to its collection of agentic AI capabilities, workflow orchestration, and data fabric.
The number of customers that spend more than US$1 million in annual contract value (ACV) on Now Assist (its generative AI capabilities), surged 130% YoY, attesting to the demand for its AI-driven products.
Moreover, its Remaining Performance Obligations (RPO) for 1Q2026 rose by 25% to US$27.7 billion — hence, its future revenue and growth momentum remain visible.
Get Smart: Position Yourself for Potential Opportunities in the Second Half of 2026
The first half of 2026 is almost over.
Before you approach the second half, consider positioning your portfolio to benefit from still beaten-down quality businesses.
Despite the short-term mispricing, the market rewards quality businesses in the long run.
Even if you’ve missed out on the bullish first half of the year, it’s time to consider positioning yourself in stocks that could allow you to benefit from the second half.
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Disclosure: Larry owns shares of Microsoft and Nike.
