This week’s Excess Returns Weekly Wrap looks at what Ian Cassel, Chris Mayer, Jim Paulsen and Elena Khoziaeva can teach investors about stock picking skill, inflation risk, AI, software moats, small caps and market concentration. Jack Forehand and Matt Zeigler break down clips on why elite investors can be wrong almost half the time, why today may not be the 1970s or the 1990s, how AI is affecting software businesses, and why the S&P 500 may be far less diversified than investors think.
Topics Covered
Why great stock pickers can be right only 49% of the time and still generate exceptional returns
The role of outliers, magnitude and position sizing in long-term investing success
Jim Paulsen’s argument that today’s inflation backdrop is very different from the 1970s
How supply shocks, tariffs, commodities and labor force growth shape the inflation outlook
Bridgeway’s research on redefining the small-cap premium by excluding IPOs and fallen large caps
Why vertical market software may be more resilient to AI disruption than horizontal software
How the AI boom and new era economy are masking weakness in the rest of the economy
Why the S&P 500 may effectively be driven by fewer than 50 stocks despite having 500 names
What management meetings can and cannot add to a stock picker’s process
Why patience, conviction and independent business verification may be enduring investing edges
Timestamps
00:00 Intro and episode preview
05:30 Why outliers drive stock picking returns
09:58 Why today’s inflation may not be the 1970s
17:27 Rethinking the small-cap premium
24:11 AI disruption and vertical market software
32:04 The AI boom versus the rest of the economy
37:04 Why the S&P 500 acts like 46 stocks
46:09 What investors can learn from management teams
53:32 Why today’s tech boom is not the 1990s
58:34 Patience, conviction and the last investing edge
01:05:32 Closing thoughts and Excess Returns Substack