You Own the Mag Seven. Small Caps Are Building What AI Needs. Is the Market About to Notice?

Small-cap investing offers a compelling opportunity for diversification and growth, particularly as earnings expectations for smaller companies accelerate relative to mega-cap peers. Tom Maher, manager of Hilton Capital’s small and mid-cap strategy, argues that active management is essential to navigate index-level deterioration, including the rise of unprofitable firms and the scarcity of new public listings. Successful portfolio construction requires a disciplined approach that balances thematic trends—such as the AI infrastructure build-out and domestic manufacturing reshoring—with rigorous valuation screening. Investors should prioritize companies with consistent earnings growth while remaining wary of "value traps." Furthermore, maintaining a flexible strategy that involves booking partial profits during appreciation and scrutinizing stocks that react counter-intuitively to news allows for better risk management and capital redeployment in a volatile macro environment.