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👉 Jersey Mike's Sells to Blackstone for $8B

Williams-Sonoma, Nvidia, Palo Alto Networks

Happy Sunday, everyone.

Before we jump into the meat and potatoes of it all, I want to share some encouraging data on S&P 500 earnings growth as we head into 2025 —

Yardeni Research

This chart essentially tells us the percent of companies within the S&P 500 that are experiencing positive earnings growth year-over-year. 

This figure has grown to 77.1% since bottoming around 33.2% in 2023. More and more companies experiencing earnings growth is certainly a good thing for the economy and markets as a whole. With the constant chatter of “Is this the top? Are we in a bubble?” it’s important to look back and analyze how this chart reacted to the most recent bubble we’ve experienced (The Dot Com Bubble of 2000).

As you can see above, the blue line fell sharply before we experienced a meaningful pullback in the indices. We’ve yet to experience such a pullback in earnings growth — therefore I remain bullish.

Shoutout to my friend Caleb Franzen for sharing this chart with me.

Hiive’s quarterly state of the private market reports offer a window into pricing, liquidity, and momentum trends in the pre-IPO market, using real-time data derived from user indications and transactions on the Hiive platform. This is information and commentary you won’t find anywhere else.

“The delta between bid price and ask price on the Hiive platform, as a percent discount to the latest implied primary investment valuation, has decreased from 14.1% at the beginning of 2024 to 8.5% at the end of Q3. Bids reflect a shrinking discount, which may indicate overall private market trends toward increasing liquidity. When the bid/ask spread narrows,…”

Portfolio Updates (YTD Performance):

During the month of November, the Dividend Growth Portfolio realized $1,120.50 in dividends across $187,327.98 of invested capital — delivering a 7.2% annualized yield on cost. Mind you, $87K of the total invested capital is now worth $127K (+46%), with $28K of that $40K gain taking place during 2024 alone.

My money-weighted total return on the S&P 500 this year is 26.7% (shown above), whereas my single stock portfolio has delivered a +34.8% return during the same period of time. This doesn’t include the +132.8% return my Bitcoin investment has experienced year-to-date, either.

I’m not going to try and compute the convoluted mathematics to figure out the combined money-weighted return between the two asset classes year-to-date — but I’m sure whatever that figure is… it’s dramatically higher than the 26.7% benchmark set by the S&P 500 in 2024.

Since the start of 2023, I’ve deployed roughly $385,000 toward this portfolio — today its value stands well-above $650,000, a +70% return on invested capital in roughly 24-months time.

Now before you all come at me in the comment section saying “Austin, the S&P 500 is up +60% since January 2023… you’re only up +70%… that’s not impressive!”

I did NOT deploy all $385K during January 2023.

Actually, it took me until September of 2023 to deploy the first $100K! You have to think about things from a dollar-cost-averaged perspective.

My dollar-cost-averaged return on the S&P 500 since the portfolio’s inception is +31.7% … which means my +70% total return during the same period of time have more than doubled the returns of the S&P 500 when you take into account time of capital deployment.

I’m very proud of these returns, and I’m eager to share a more detailed portfolio review in the coming weeks as we near the end of the calendar year.

Week in Review — Too Long, Didn’t Read:

Williams-Sonoma announces a $1B share buyback authorization, Nvidia raised Q4 revenue guidance to $37B, Palo Alto Networks announced a 2-for1 stock split, US stocks continue to soar vs. International indices, Amazon is investing another $4B in Anthropic, Blackstone is buying Jersey Mike’s for $8B, U.S. Consumer Sentiment is heavily split based on political preference, and Home Builder Confidence hit a 7-month high.

Key Earnings Announcements:

Williams-Sonoma announces $1B share buyback authorization, Nvidia raised Q4 revenue guidance to $37B, and Palo Alto Networks announced a 2-for1 stock split.

  • Williams-Sonoma (WSM)

Key Metrics

Revenue: $1.8 billion, compared to $1.9 billion last year

Operating Income: $320.6 million, an increase of +2% YoY

Profits: $249.0 million, an increase of +5% YoY

Earnings Release Callout

“Our strategy of focusing on returning to growth, enhancing our world-class customer service, and driving margin is working. And, as we head into the last quarter of the year, we are optimistic and confident about our business. The fourth quarter is the time of year when we shine. And, therefore, we are raising our full-year guidance.”

My Takeaway

Shares of WSM stock soared by +28% after this earnings print, bringing my total return on the investment to +177% (average cost of $62 / share).

Let’s dig in…

1) The company increased their 2024 margin guidance by more than the Q3 beat — essentially telling investors “You’ve seen nothing yet!” Management indicated better-than-expected gross margins reflect significant improvements within merchandising margins, bolstered by strong full-price sell-through.

2) WSM announced another $1B share buyback authorization after repurchasing ~$530M worth of shares in Q3 alone.

3) As the furnishing category remains soft (currently we’re living through the lowest mortgage application rate in 30+ years … which means homes aren’t being furnished) WSM is leaning into life stages (like having a baby and building a nursery), holiday decorating, and “cash and carry” products (chairs, side tables, etc.). Their B2B furnishing business also grew by +9% during the quarter, and management expects that growth to continue in 2025 and beyond.

All in all, WSM is doing everything right. They’re operating in a difficult market environment (especially when you factor in how few homes are being bought and sold right now) and they’re adapting accordingly.

Remember, I bought the company because they’re the definition of a “dividend growth stock.” Their operating margins and net profits are growing, their dividend is up +18% compounded annually over the last 5-years (+26% in 2024 alone), and they continue to execute well during a dynamic market environment.

This growth has allowed my yield on cost to grow to 3.6%, compared to their 1.3% current dividend yield. That’s nearly 3X the current yield, while also being up +177% on my average cost per share!

I’ll continue to opportunistically buy shares of this company.

  • Nvidia (NVDA)

Key Metrics

Revenue: $35.1 billion, an increase of +94% YoY

Operating Income: $21.9 billion, an increase of +110% YoY

Profits: $19.3 billion, an increase of +109% YoY

Earnings Release Callout

“The age of AI is in full steam, propelling a global shift to NVIDIA computing. Demand for Hopper and anticipation for Blackwell — in full production — are incredible as foundation model makers scale pretraining, post-training and inference.

Enterprises are adopting agentic AI to revolutionize workflows. Industrial robotics investments are surging with breakthroughs in physical AI. And countries have awakened to the importance of developing their national AI and infrastructure.”

My Takeaway

Nvidia’s stock price had a muted reaction to their earnings results, not moving dramatically up or down.

Let’s dig in…

For several quarters in a row, NVDA has once again delivered upon heightened investor expectations — while forecasting a path to strong revenue growth during Q4 and 2025. Revenues grew by +$5B quarter-over-quarter driven by data center sales and in particular the H200 ramp (representing double-digit billions in revenue).

Management guided to $37.5B in revenue for Q4. With NVDA seemingly consistently exceeding guidance by +$2B, this sets NVDA up for another beat as Wall Street models only $39B in revenue for the company next quarter.

Blackwell appears to be ramping (at least as fast as expected). NVDA’s management indicated Q4 is tracking ahead of guidance for a few billion in sales. The April quarter is expected to see a crossover with Blackwell sales exceeding Hopper sales.

Additionally, there are no apparent overheating issues with Blackwell.

Management also noted that demand for Blackwell will exceed supply for several quarters. Demand risk remains minimal in 2025, and perhaps even in 2026. Finally, gross margins should record quickly — as management guided for a +1.5% dip in Q4 and for margins to bottom around the low-70s before bouncing back higher in 2025 with Blackwell going to market.

For now, I’ll continue to hold my NVDA shares and opportunistically buy more.

  • Palo Alto Networks (PANW)

Key Metrics

Revenue: $2.1 billion, an increase of +14% YoY

Operating Income: $286.5 million, an increase of +33% YoY

Profits: $350.7 million, an increase of +81% YoY

Earnings Release Callout

“Our Q1 results reinforced our conviction in our differentiated platformization strategy. We see a growing market realization that platformization is the game changer that will solve security and enable better AI outcomes. I expect this will be a multiyear trend for which we are best positioned to deliver to our customers.

Our platformization progress continued in Q1, driving strong financial results. As a result, we are raising our NGS ARR, revenue and non-GAAP EPS guidance for the year.”

My Takeaway

PANW’s stock had a muted reaction to their earnings results, up +30% YTD and +47% from February lows (remember when I told you all to buy the dip?)

Let’s dig into their earnings results…

As PANW refocuses the business on “platformization,” the three most important factors to keep an eye on to gauge the success of this strategy shift are 1) remaining performance obligations (RPOs), 2) annual recurring revenue (ARR), and 3) free cash flow margin (FCF).

Their RPOs grew by +17%, outpacing Wall Street’s +11% growth expectations. Their ARR grew by +40%, outpacing Wall Street’s +35% growth expectations. Their FCF margin remained the same (38%), but with the company raising their full year revenue guidance by +$20M, this should result in another $10M of FCF being added to the pile — increasing their margin slightly.

All three important factors are trending in the right direction. All of this aides in their long-term vision of achieving $15B in ARR by 2030. The company also announced that its board has approved a two-for-one stock split expected to take place on December 12th.

I’ll continue to hold shares of the stock, and purchase more opportunistically.

Investor Events / Global Affairs:

US stocks continue to soar vs. International indices, Amazon is investing another $4B in Anthropic, and Blackstone is buying Jersey Mike’s for $8B.

  • U.S. Stocks Continue to Soar Versus International Stocks

U.S. stock valuations vs. international indices have surged to levels not seen since the Dot-Com bubble of 2000-2001. The price-to-earnings (P/E) ratio of the US stock market compared to global stocks has reached a staggering 1.8x, marking its highest point in over two decades. This means investors are now paying nearly double for US stocks compared to their global counterparts for the same earnings potential.

Since 2009, the S&P 500 has delivered a total return of +447%, while the tech-heavy Nasdaq has soared by an astounding +786%. In stark contrast, the MSCI World ex-USA index, which tracks global stocks outside the US, has posted a disappointing gain of just +52%.

These figures underscore the dominance of US markets in recent years but also highlight the premium investors are willing to pay, raising questions about sustainability and future growth.

Are we calling for a crash? Nope — if you read the comments at the very top of the newsletter, you should know that.

It will be very interesting to see if the United States’ dominance continues as the world’s central banks continue with rate cuts.

  • Amazon (AMZN) to Invest Another $4B in OpenAI Rival

Amazon announced an additional $4 billion investment in Anthropic — a leading AI startup founded by ex-OpenAI researchers — bringing its total investment to $8 billion. Despite the substantial funding, Amazon remains a minority investor. However, the company has made Amazon Web Services (AWS) Anthropic's primary cloud and AI training partner.

AWS customers will gain early access to unique features, such as fine-tuning Anthropic’s Claude AI with their own data. Anthropic, known for its Claude chatbot and cutting-edge AI models, is competing in the rapidly growing generative AI market, alongside OpenAI and Google. The startup recently introduced AI agents capable of complex, human-like computer tasks, marking a significant technological milestone.

Amazon's strategic partnership highlights its commitment to advancing generative AI through both external investments and in-house innovations.

Amazon (AMZN) Stock Performance, 5-Year Chart, Seeking Alpha

“Together with AWS, we’re laying the technological foundation—from silicon to software — that will power the next generation of AI research and development. By combining Anthropic’s expertise in frontier AI systems with AWS’s world-class infrastructure, we’re building a secure, enterprise-ready platform that gives organizations of all sizes access to the forefront of AI technology.”

— Anthropic Press Release

  • Blackstone (BX) to Acquire Jersey Mike’s for $8B

Sources: Geert Vanden Wijngaert / Bloomberg via Getty Images / Jersey Mike’s

Blackstone has reached an $8 billion deal to acquire Jersey Mike’s Subs, the fast-casual sandwich chain with over 3,000 locations nationwide. The agreement, which includes an earn-out structure tied to the chain’s expansion, is expected to close in early 2025. Jersey Mike’s CEO Peter Cancro, who began franchising the business in 1987, will retain an equity stake and continue leading the company.

Blackstone plans to support Jersey Mike’s domestic and international growth, building on its expertise in accelerating franchise businesses.

This deal highlights private equity’s growing interest in food franchises, following Roark Capital’s $9.55 billion acquisition of Subway last year.

Blackstone (BX) Stock Performance, 5-Year Chart, Seeking Alpha

“We believe we are still in the early innings of Jersey Mike’s growth story and that Blackstone is the right partner to help us reach even greater heights. [Blackstone] has helped drive the success of some of the most iconic franchise businesses globally.”

— Peter Cancro, CEO of Jersey Mikes

Major Economic Events:

U.S. Consumer Sentiment is heavily split based on political preference, and Home Builder Confidence hit a 7-month high.

  • Consumer Sentiment

U.S. consumer sentiment rose in November but fell short of expectations, reflecting sharp political divisions following Donald Trump’s election victory.

The University of Michigan’s sentiment index reached 71.8 — its highest since April but lower than the preliminary estimate of 73. Republican confidence surged to its highest since 2021, while Democratic sentiment dropped to a one-year low.

Year-ahead inflation expectations eased to +2.6%, the lowest since 2020, though long-term inflation expectations ticked up. Despite optimism among some consumers and businesses — economists warn that Trump’s policies could exacerbate inflation and restrain economic growth.

“Ultimately, substantial uncertainty remains over the future implementation of Trump’s economic agenda, and consumers will continue to recalibrate their views in the months ahead.”

— Joanne Hsu, Director of the Survey of Consumers at the University of Michigan

  • Home Builder Confidence

Builder confidence rose for the third consecutive month in November, reaching an index of 46, reflecting optimism following Republican wins in the White House and Congress. Builders anticipate regulatory relief under unified Republican control, boosting expectations for increased housing construction. However, challenges persist, including labor shortages, high material costs, and limited buildable lots, alongside policy uncertainty and rising long-term interest rates.

Notably, 31% of builders reduced home prices in November, averaging a 5% decrease, while sales incentives usage dipped slightly to 60%. Regional confidence showed modest gains across most areas, with significant increases in the Northeast and Midwest.

“With the elections now in the rearview mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to the construction of more homes and apartments. This is reflected in a huge jump in builder sales expectations over the next six months.”

— Carl Harris, Chairman of the National Association of Home Builders (NAHB)

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