After years of mega cap dominance, the tech trade has run into some turbulence and investors are widening the lens. Small and midcap stocks are starting to draw fresh attention. Joining us now for an ETF spotlight to discuss is Randy Gwartzman, portfolio manager at Baron Capital. Randy, thanks so much for joining us.>> Thanks uh for doing this, Caroline. >> Really appreciate you being here. So Randy, there's been a lot of talk about the rotation that we've been seeing out of Mega Cap Tech.We're seeing money ...

Core Insights - The article highlights three stocks that have significantly outperformed the market over the past decade: Intuitive Surgical, Nvidia, and Axon Enterprise, with returns ranging from 887% to over 22,120% [2][4][8]. Intuitive Surgical - Intuitive Surgical specializes in robotic-assisted surgical systems, enhancing surgical precision and patient outcomes [3]. - Over the past decade, Intuitive Surgical's shares have increased by more than 887%, with notable underperformance in 2019 and 2022 [4]. - The company has a market capitalization of $202 billion and a gross margin of 66.37%, with projected growth of around 17% in da Vinci procedures this year [6]. - Despite a high price-to-earnings (P/E) ratio of 75, the stock is considered a promising long-term investment due to its innovative products [7]. Nvidia - Nvidia, a leading chipmaker, has achieved returns exceeding 22,120% over the past decade and is currently the most valuable company globally [8]. - The stock has risen 34% this year, with only two years of underperformance against the S&P 500 in 2018 and 2022 [8]. - Nvidia has a market capitalization of $4,364 billion and a gross margin of 70.05%, with significant free cash flow of over $77 billion [10][11]. - The stock trades at a P/E ratio of 44, which is considered high but justifiable given its growth potential in the AI sector [9]. Axon Enterprise - Axon Enterprise, known for its body cameras and less-lethal weapons, has seen its valuation rise by 2,860% over the past decade [12]. - The company had off years in 2015 and 2017 but generated positive returns in 2022 amid market turmoil [12]. - Axon has a market capitalization of $43 billion and a gross margin of 60.31%, but it trades at a high P/E ratio of 171, indicating potential overvaluation [14][13]. - The stock is currently down 10% this year, and while it has strong growth prospects, it is advised to be cautious due to its high valuation [15].

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Core Viewpoint - Axon Enterprise reported a mixed third quarter, leading to a stock decline of approximately 9%, despite maintaining strong operational performance and growth in adjusted EBITDA [1][4]. Financial Performance - The company achieved a 25% adjusted EBITDA, aligning with previous guidance of a $2 billion year, which is now projected to be $2.7 billion [4]. - There was confusion regarding GAAP EPS due to stock compensation tied to stock performance, which affected perceptions of profitability [3][5]. Supply Chain and Tariffs - Tariffs impacted margins but did not significantly affect earnings, as the company was able to meet its operating numbers despite these challenges [6]. Acquisitions and Technology - Axon acquired Prepared 911 to modernize the 911 call technology stack, which currently relies on outdated systems [7][8]. - The new technology allows for AI integration to assist operators, improving efficiency and handling non-critical calls, which resulted in a 33% drop in operator workload during peak call times [11][12]. Market Competition - Axon faces competition from Motorola Solutions, which claims to have developed competing products. However, Axon emphasizes its focus on customer satisfaction and technological superiority [13][14][15].

Market Overview - The market is experiencing a rebound with the Dow up more than 300 points, S&P 500 up about 0.7%, and NASDAQ rallying about 1% [2][50] - Trade-sensitive stocks, including automakers and apparel retailers, are seeing gains following Supreme Court hearings regarding President Trump's tariff policies [2][10] Supreme Court Hearing on Tariffs - The Supreme Court justices, including Chief Justice John Roberts, expressed skepticism towards the Trump administration's legal arguments for tariffs, suggesting they may be viewed as taxes on Americans [6][7][10] - The questioning from both liberal and conservative justices indicates a potential challenge to the legality of Trump's blanket tariffs, which could impact market expectations [5][10][13] Labor Market and Federal Reserve Policy - ADP reported a surprising addition of 42,000 jobs in October, reversing a decline from September, which may influence Federal Reserve policy discussions [14] - Fed Governor Steven Myron indicated that the labor market poses a greater risk than inflation, suggesting a more cautious approach to monetary policy [15][16] AI and Technology Sector Insights - Concerns are emerging regarding AI valuations, with analysts cautious about the sustainability of current business models and potential market corrections [20][21][22] - Companies are underweight in AI-related stocks, favoring investments in European markets due to attractive valuations [23][24] Scott's Miracle Grow Performance - Scott's Miracle Grow reported a decrease in net sales but improved gross margins and market share, indicating a recovery phase [28][30] - The lawn and garden sector is described as recession-resistant, with strong consumer demand and growth in DIY projects [33][34] Qualcomm's Financial Results - Qualcomm's Q4 results showed earnings per share of $3, beating expectations, with revenue at $11.27 billion, also above estimates [54][57] - The company is diversifying into automotive and IoT markets, with a focus on AI chip development to enhance growth potential [59][66] Robinhood's Earnings Report - Robinhood's Q3 earnings showed a beat on both top and bottom lines, with significant net deposit growth, although initial stock reactions were negative due to high expectations [83][88] - The company is exploring opportunities in prediction markets, which could diversify revenue streams and enhance long-term growth potential [90][92] ARM Holdings Performance - ARM reported earnings per share of 39 cents, beating estimates, with revenue of $1.14 billion, also exceeding expectations [70][72] - The company is well-positioned in the chip industry, with strong demand for its designs across various markets, including data centers and IoT [79][80]

Core Insights - The article highlights the top five best-performing stocks in the S&P 500 over the past decade, showcasing significant growth rates and their involvement in the semiconductor and AI sectors [2][3]. Group 1: Company Performance - Nvidia has seen a staggering increase of 26,927% over the last decade, with a market value of $4.4 trillion and an average annual growth rate of about 75%. The company is heavily involved in AI and data center chips, benefiting from a partnership with OpenAI [3][4]. - Advanced Micro Devices (AMD) has grown by 10,971% over the past ten years, with an average annual growth rate of 60%. AMD is also partnered with OpenAI and is gaining market share in PC CPUs [5][6]. - Broadcom has increased by 3,666% in value, with an average annual growth rate of nearly 41%. The company produces both semiconductor and software products and is expected to benefit from AI growth [7][8]. - Arista Networks has experienced a growth of 3,253% over the past decade, with an average annual growth rate of 42%. The company specializes in networking equipment for data centers [9][10]. - Axon Enterprise has seen a growth of 2,890% with an average annual gain of nearly 41%. The company focuses on public safety hardware and software, including body cameras and drones [11][12]. Group 2: Valuation Insights - Nvidia's stock is considered reasonably valued with a forward P/E ratio of 28, below its five-year average of 39 [4]. - AMD's shares are also reasonably valued, with a forward P/E of 35, slightly above its five-year average of 30 [6]. - Broadcom's stock appears overvalued with a forward P/E of 37, significantly above its five-year average of 19 [8]. - Arista Networks' shares seem overvalued with a forward P/E ratio of 42, above its five-year average of 32 [10]. - Axon Enterprise's shares are viewed as overvalued, with a forward P/E of 83, well above its five-year average of 74 [12]. Group 3: Investment Options - For investors interested in semiconductor and data center stocks, an exchange-traded fund (ETF) like the iShares Semiconductor ETF (NASDAQ: SOXX) is suggested, which includes major companies like AMD, Broadcom, and Nvidia [13].

Core Viewpoint - Axon Enterprise, Inc. (NASDAQ:AXON) is highlighted as a strong investment opportunity due to its consistent growth and market presence in the public safety sector, particularly with body cameras and tasers [1][2]. Group 1: Analyst Insights - Michael Landsberg from Landsberg Bennett Private Wealth Management identifies Axon Enterprise as a top non-tech stock, emphasizing its growth potential and market dominance in public safety products [1]. - Axon Enterprise is noted for its significant growth rate of approximately 30%, indicating robust demand for its products [1]. - ClearBridge Growth Strategy mentions that Axon complements existing defense holdings, suggesting a strategic alignment with growth in aerospace and public safety markets [2]. Group 2: Market Position and Growth Potential - Axon Enterprise is recognized as a dominant player in its industry with substantial opportunities for growth and margin expansion [2]. - The company’s products, such as body cameras, are ubiquitous in law enforcement, reinforcing its market presence [1]. - The investment community acknowledges the potential of Axon, although some analysts believe that certain AI stocks may offer higher returns [2].

Market Trends & Economic Outlook - The market may see a similar situation to a year ago with potential for rising inflation and two-year Treasury yields around 35%, possibly moving higher [1] - Economic growth alongside rising inflation isn't necessarily negative [1] - Small caps are potentially underowned, with futures short on Russell, suggesting lower rates could benefit them [1] Investment Strategies & Portfolio Allocation - The firm suggests not being long bonds and considering a lower bond allocation, with alternatives like gold for balance [1] - Diversification is crucial, with potential opportunities in international markets (e g, China) and small caps [1] - Consider diversifying from the "Magnificent Seven" (Mag 7) due to their concentrated exposure [1] Individual Stock Picks & Sector Focus - Axon, a maker of body cams and tasers, is highlighted as a potentially good investment with 30% type growth [1] - AI is a significant theme for the next 3-5 years, but diversification beyond chip manufacturers is recommended, including data centers, cooling systems, and energy companies [1][2] Valuation & Risk Management - Overconcentration in a few AI chip names carries significant risk [2] - The traditional valuation game may not always work, as seen with Nvidia and Broadcom, where earnings eventually justified high valuations [1] - Stocks hitting highs often continue to make new highs, while stocks hitting lows can potentially go to zero [1]