Barron's Advisor Dryden Pence: Why I'm Bullish on Small-Caps, Defense Stocks, and AI
Oct 14, 2025
Dryden Pence, Chief Investment Officer of Pence Wealth Management and a former U.S. Army military intelligence officer, shares his unique investment perspective. He dives into why lower interest rates and strong earnings are set to boost small- and mid-cap stocks in the coming year. Pence discusses the transformative potential of AI, particularly in healthcare and productivity. He also explores global defense spending's impact on investment opportunities and highlights the importance of understanding labor productivity as a key growth indicator.
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Target Codifiable Work For AI Gains
- Focus on sectors where tasks can be codified: law, data services, and analytics.
- Seek firms that apply AI to replace routine work and raise labor productivity.
AI: Early Infrastructure, Nascent Implementation
- Pence estimates AI infrastructure is early (third inning) but implementation is at the first pitch.
- Rapid adoption speed makes outcomes hard to predict yet promises big productivity gains.
Pick Profitable Small Manufacturing Names
- Consider profitable small- and mid-cap manufacturers that will gain from on-shoring and margin expansion.
- Prioritize companies that embrace tech to boost efficiency and lower financing costs.