Excess Returns

Tom Maher of Hilton Capital Management explains what is changing for small-cap stocks as earnings improve and AI spending reaches beyond big tech. After years of justified large-cap leadership, he sees reasons to revisit smaller companies while remaining selective about business quality, financing needs and valuation.
In this episode of Excess Returns, we explore the physical infrastructure behind AI, the case for diversifying beyond the largest stocks, and how Tom Maher finds businesses with improving fundamentals. We also discuss the effects of passive investing, opportunities in reshoring, and why knowing more about a company does not always lead to a better investment decision.
Topics covered:
Why stronger earnings helped justify large-cap leadership and what could change that balance
How AI construction and equipment spending can benefit smaller industrial companies
Why some small companies grow into large caps while others remain small
Self-funding businesses versus companies that depend on outside capital
Unprofitable index constituents, private equity and the changing IPO market
How interest rates affect financing costs, valuations and portfolio decisions
Why ETF flows can move a stock independently of its business fundamentals
Finding improving businesses without mistaking a low valuation for an opportunity
Evaluating management incentives, consistency and acquisition decisions
Tom Maher's lessons on taking partial profits and reading unexpected stock-price reactions
Learn more about Hilton Capital Management.
Chapters:
00:00 Tom Maher's outlook: earnings, valuations and risk
05:26 Small-cap earnings and AI infrastructure spending
11:41 Defining small caps and why some companies stay small
16:45 Active management and business quality
22:03 Small-cap index quality and companies staying private
27:15 Combining stock selection with a macro view
32:58 Higher interest rates and portfolio decisions
37:04 Passive investing and ETF-driven stock moves
41:33 Finding stocks with improving fundamentals
51:13 Valuation, consistency and management quality
56:39 Reshoring and the industrial recovery
01:01:14 Research, profit-taking and investor expectations
Learn more about the Excess Returns podcast network.
No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.

Ed Yardeni of Yardeni Research explains why he still sees the S&P 500 reaching 10,000 by 2029, even as higher oil prices and bond yields make him more cautious near term. His destination hasn't changed, but the timetable has: he has pushed his 8,400 target to mid-2027 while retaining his Roaring 2020s outlook.
In this conversation with Justin Carbonneau and Jack Forehand, Ed distinguishes an earnings-led bull market from a speculative melt-up, explains why retiring baby boomers keep spending, and makes the case for AI's benefits spreading beyond the Magnificent Seven. He also weighs the return of the bond vigilantes, diesel's inflation impact, global diversification and the risks that could challenge his optimistic base case.
Topics covered:
Ed Yardeni's FEMO: fabulous earnings momentum versus fear of missing out
Why strong earnings can support stocks even as valuation multiples fall
The assumptions behind Ed Yardeni's S&P 500 target of 10,000 by 2029
Retiree wealth, consumer spending and Ed Yardeni's G-shaped economy
AI, productivity and data as a fourth factor of production
Why Ed Yardeni favors the “impressive 493” as potential AI beneficiaries
Cloud revenue, compute demand and the returns on AI capital spending
Bond vigilantes, fiscal deficits and the difference between growth-driven yields and a debt crisis
How diesel costs could feed into core inflation
Global diversification and the bond market's role in guiding Fed policy

Chapters:
00:00 Ed Yardeni's bull case and near-term caution
04:26 The Roaring 2020s and retiree spending
08:53 Technology and the productivity thesis
13:06 AI, economic growth and data as a resource
18:22 Why the economy is more than AI spending
24:10 AI returns and the impressive 493
29:48 Valuations, S&P 10,000 and rising bond yields
38:42 Government debt and demand for Treasuries
43:34 Diesel inflation and global diversification
47:41 Fed policy and signals from the bond market
51:55 Yardeni Research's process and tools
56:19 Why Ed Yardeni favors a G-shaped economy
Learn more about the Excess Returns podcast network:
https://excessreturns.co

Andy Constan, Brent Kochuba and Eric Pachman examine rising bond yields, options positioning and the inflation risks facing stocks. What happens if the rate relief traders are betting on never arrives?
On this month's Last Call, Jack Forehand and Matt Zeigler connect three perspectives on the market. Andy Constan explains why stronger growth and debt supply can push yields higher without signaling a bond crisis. Brent Kochuba examines options flows that suggest traders are still leaning toward a rebound. Eric Pachman traces the path from refinery constraints and diesel shortages to freight costs and consumer inflation. Jack and Matt close with the investment implications of AI spending, efficiency and adoption.

Follow Last Call on Spotify⁠⁠⁠⁠⁠⁠⁠⁠⁠
⁠⁠⁠⁠⁠⁠⁠⁠⁠Follow Last Call on Apple Podcasts⁠
Topics covered:
Andy Constan on growth, AI capital spending and the supply of debt
Why Andy Constan sees more attractive bonds without calling for a recession
How higher yields can constrain stock returns even when growth remains strong
Brent Kochuba on bond volatility, calm equities and bets on falling yields
Why Brent Kochuba is watching both upside surprises and downside risk
Eric Pachman on crack spreads and why cheaper crude may not mean cheaper fuel
How diesel prices can flow through freight bills into CPI
Eric Pachman on wage inequality and what national averages miss
AI spending, productivity and the difference between slower growth and contraction
The practical obstacles to bringing AI agents into everyday life
Chapters:00:00 Rising yields and the outlook for stocks05:26 Andy Constan: Growth, debt supply and higher yields12:01 Why bonds look more attractive after the selloff18:33 Brent Kochuba: Options flows and bets on rate relief23:21 Equity complacency and risks in both directions31:12 Eric Pachman: Diesel shortages, crack spreads and inflation40:06 Wage inequality and the limits of average inflation44:40 AI capital spending, productivity and investment returns50:34 AI adoption, automation and everyday obstacles
Learn more about the Excess Returns podcast network:⁠https://excessreturns.co⁠
No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.

Michael Baron of Baron Capital explains his case for AI beneficiaries beyond the biggest tech stocks, including software companies the market fears will be disrupted. He joins Matt Zeigler and Justin Carbonneau to discuss how competitive advantages, management quality, and a long investment horizon shape the firm's growth portfolios.
Baron Capital's co-president and portfolio manager walks through the firm's investments in Tesla and SpaceX, from vertical integration and autonomous driving to reusable rockets, Starlink, and the potential for AI infrastructure in space. He also explains why proprietary data may strengthen some software businesses, how the firm manages positions as winners grow, and what would make him sell. The conversation closes with lessons from Ron Baron on curiosity, primary research, and building conviction.
Topics covered:
Finding growth opportunities across technology, financial services, real estate, and consumer businesses
Why Michael Baron believes some apparent AI losers could become beneficiaries
Proprietary data and the investment cases for Shopify, Guidewire, FactSet, MSCI, and Gartner
Tesla's evolution, energy business, and the potential economics of autonomy and software
SpaceX's reusable rockets, Starlink, and Michael Baron's vision for AI infrastructure in space
Valuing businesses over a long horizon and assessing reliance on key leaders
Lessons from Ron Baron and the importance of management relationships during market stress
Letting winners run while managing concentration, leverage, and portfolio correlations
Distinguishing portfolio trims from selling when a competitive advantage deteriorates
Why Michael Baron believes AI will increase the importance of investment judgment
Learn more about Baron Capital:
https://www.baroncapitalgroup.com/
Chapters:
00:00 Michael Baron on finding growth beyond technology
04:16 AI disruption and the opportunity in software
10:54 Tesla, Elon Musk, and vertical integration
18:33 Long-term valuation and key-person risk
23:28 SpaceX, Starlink, and AI infrastructure in space
34:11 Lessons from Ron Baron and the firm's future
40:08 Evaluating management and competitive advantages
47:11 Time as an edge and managing growing positions
54:11 When to trim a position and when to sell
58:11 Curiosity, primary research, and conviction
Learn more about the Excess Returns podcast network:
https://excessreturns.co
No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.

How much of your portfolio does a good investment idea deserve? Kris Abdelmessih of Moontower joins Matt Zeigler to explain why having an edge is only part of the decision: position size can determine whether favorable odds translate into long-term growth or damaging losses.
Through a coin-flipping experiment and everyday examples, Kris makes the Kelly Criterion accessible without a complicated derivation. The conversation explores the difference between expected returns and compounded wealth, why growth-maximizing bets can still be uncomfortable, and how uncertain probabilities make a case for betting less. From portfolio decisions to insurance and extended warranties, the goal is to build better intuition about how much risk to take.
Topics covered:
How a favorable coin-flipping game exposed costly mistakes in bet sizing
Why maximizing the expected payoff of one bet differs from maximizing long-term compounded growth
How oversized bets can undermine an otherwise profitable opportunity
The Kelly Criterion's three inputs: probability of winning, probability of losing, and payoff
Why a constant percentage of your bankroll means changing the dollar amount after wins and losses
How different payoffs change the appropriate size of a bet
Applying the framework to hypothetical self-insurance and extended-warranty decisions
Why full Kelly can involve substantial drawdowns, and the tradeoffs of fractional Kelly
Working backward from a position size to the odds needed to justify it
Allowing for uncertainty in your estimates and preserving capital for future opportunities
The essay behind this conversation:
After this post you will be sizing bets in your head
https://www.panoptica.com/after-this-post-you-will-be-sizing-bets-in-your-head/
Research discussed:
Rational Decision-Making Under Uncertainty: Observed Betting Patterns on a Biased Coin
https://arxiv.org/abs/1701.01427
Kris Abdelmessih's Moontower newsletter:
https://moontower.substack.com/
Moontower:
https://moontower.ai/
Kris Abdelmessih on X:
https://x.com/KrisAbdelmessih
Chapters:
00:00 Position sizing and the favorable coin-flip experiment
04:45 Why a good bet can produce bad outcomes
13:49 The Kelly Criterion formula explained
18:10 Adjusting your bankroll and accounting for the payoff
23:03 Applying Kelly to a self-insurance decision
30:25 Full Kelly, drawdowns, and reasons to bet less
34:59 Working backward from bet size and evaluating warranties
41:09 Volatility drag, uncertain odds, and the experiment's results
46:09 How much capital does your edge deserve?
Learn more about the Excess Returns podcast network:
https://excessreturns.co
No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.