Nancy Prial, Co-CEO of Essex Investment Management, urges investors to rotate beyond crowded AI trades into small- and mid-cap stocks with improving valuations and earnings. She highlights healthcare strength, especially in pharma and biotech, and names Axsome Therapeutics (AXSM) as a key opportunity. Prial also points to a resilient U.S. economy, supported by reshoring, infrastructure, energy, and a stabilizing housing market. ======== Schwab Network ======== Empowering every investor and trader, every market day. Subscribe to the Market Minute newsletter - https://schwabnetwork.com/subscribe Download the iOS app - https://apps.apple.com/us/app/schwab-network/id1460719185 Download the Amazon Fire Tv App - https://www.amazon.com/TD-Ameritrade-Network/dp/B07KRD76C7 Watch on Sling - https://watch.sling.com/1/asset/191928615bd8d47686f94682aefaa007/watch Watch on Vizio - https://www.vizio.com/en/watchfreeplus-explore Watch on DistroTV - https://www.distro.tv/live/schwab-network/ Follow us on X – https://twitter.com/schwabnetwork Follow us on Facebook – https://www.facebook.com/schwabnetwork Follow us on LinkedIn - https://www.linkedin.com/company/schwab-network/ About Schwab Network - https://schwabnetwork.com/about

Nancy Prial on Rotation Out of AI & into Small Caps, Healthcare

Schwab Network

# Full Transcript

**Podcast:** Schwab Network

## Participants

- **Nancy Prial** (Essex Investment Management)

## Transcript

Welcome back to Opening Bell. Let's now get you set up for the Trading J. Joining us now to do so is Nancy Prial, Co-Chief Executive Officer and Senior Portfolio Manager at Essex Investment Management. Nancy, thank you so much for joining the show this morning. The market has of course climbed back to new highs, I guess with the exception of this morning, but valuations do still remain relatively full. And so where do you think investors should be looking for say the next wave of upside beyond just some of these more crowded now AI plays?

Nancy Prial, CEO, Absolutely. So we do think that it's important here to be looking beyond just the AI plays, to look at some of the other sources of current strength in the market as well as some of the emerging areas of strength. I mean, one I need to point out is the rally that we have seen in the small and mid-cap area. We do think that continues because we're seeing better earnings growth, better revenue growth and valuations that are still very attractive, both on an absolute and particularly on a relative basis.

Nancy Prial, CEO, In terms of industries, we think it's really important to look at some of the areas that haven't participated yet in the market. We think healthcare, in fact, is one of the biggest beneficiaries of AI. There is a lot of opportunity there, both on the pharmaceutical side as well as on the equipment side. Right now, we particularly like that pharmaceutical and biotech area. We're starting to see an increase in M&A activity. And the FDA is accelerating their pace of approving new drugs.

Finally, we think that housing is an area that has really been left behind in the market. We're starting to see some signs that owners and buyers are getting used to the current rate environment. And we may have some positive action coming out of Congress that will make it easier for first-time homebuyers and for homebuilders to build more homes. So those are a couple areas.

Okay, and I like that. So let's talk through some of those more themes that you just discussed. Like if we're looking at right now more of a selective market, say, what themes do you think are still being underappreciated? I know you mentioned healthcare and homes, but what's sort of driving your optimism for maybe this broader rotation that we've been calling for for months now? Right. Well, I mean, certainly the market has gotten very narrow here. And investors, for good reasons, have been very, very excited about the AI trade.

What we think has gotten missed in some of that is just one, how resilient our economy remains. Although AI has been a big driver of economic growth, there are other positive factors, the restoring of manufacturing to the U.S., just the strength of our both export business as well as our domestic demand, the overall health of the consumer.

And we're now in an environment ...

Nancy Prial on Rotation Out of AI & into Small Caps, Healthcare

Transcript

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Nancy Prial on Rotation Out of AI & into Small Caps, Healthcare

Transcript

Built for investment professionals

Every day you wait, your competitors are findingedge in conversations you're not hearing.

Every day you wait, your competitors are finding
edge in conversations you're not hearing.