🎙️ The Old-Fashioned Way

Surprise, surprise. On Wednesday, Nvidia reported another sensational quarter, registering 122% year-over-year revenue growth. It comes following three straight periods of year-over-year growth in excess of 200%.

Nvidia shares are up over 150% this year after surging almost 240% in 2023. Its market cap recently eclipsed $3 trillion, and it was briefly the most valuable public company worldwide (it’s now second to Apple).

CEO Jensen Huang said the anticipation for Nvidia’s new Blackwell AI chip “is incredible.”

As the AI boom approaches its second anniversary, Nvidia delivered yet another robust outlook.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• Buffett’s Berkshire tops $1 trillion

• Private equity comes to the NFL

This, and more, in just 5 minutes to read.

Chart of the Day

Together With Masterworks

Invest in the asset class predicted to grow +$700 million by 2026.

From CEOs to shop owners, investors in Masterworks’ art offerings have received more than +$60,000,000 in total net proceeds to date (including principal) across their 23 exits.*

Surprised that so many people are interested in art investing? Bank of America recently found 83% of wealthy American investors 43 and under already collect, or want to. Normally, only the top 1% of investors would be able to diversify with art like Picassos and Banksys. But with Masterworks, you can easily diversify into this asset class without needing millions, or art expertise.

With a team that’s been working since 2019, Masterworks investors have realized representative annualized net returns like +17.6%, +17.8%, and +21.5% among assets held for longer than one year.

_{^{*Past performance is not indicative of future returns. Investment involves risk. See Important Reg A Disclosures at masterworks.com/cd. The content is not intended to provide legal, tax, or investment advice. No money is being solicited or will be accepted until the offering statement for a particular offering has been qualified by the SEC. Offers may be revoked at any time. Contacting Masterworks involves no commitment or obligation.  “Net Annualized Return” refers to the annualized internal rate of return net of all fees and expenses, calculated from the offering closing date to the date the sale is consummated. IRR may not be indicative of Masterworks paintings not yet sold and past performance is not indicative of future results. For additional information regarding the calculation of IRR for a particular investment in an artwork that has been sold, a reconciliation will be filed as an exhibit to Form 1-U and will be available on the SEC’s website. Masterworks has realized illustrative annualized net returns of 17.6% (1067 days held), 17.8% (672 days held), and 21.5% (638 days held) on 13 works held longer than one year (not inclusive of works held less than one year and unsold works). *“Net proceeds” represents the total liquidation proceeds distributed back to investors, net of all fees, expenses and proceeds reinvested in Masterworks offerings, of all works Masterworks has exited to date. This metric is not considered a presentation of performance but rather a mathematical figure that displays a platform metric on size, scale, and operation of the platform.}}

In The News

📈 Warren Buffett’s Berkshire Hathaway Tops $1 Trillion

Warren Buffett, who turns 94 on Friday, got an early birthday present this year. His Berkshire Hathaway topped the $1 trillion market cap threshold for the first time, becoming the first U.S. company outside of the tech sector to surpass $1 trillion in market value.

Berkshire shares have risen nearly 30% this year and about 128% over the past five years vs. the S&P 500’s 91% gain. That 30% gain vs. the S&P 500’s 18% in 2024 is one of its best annual starts in a decade. It also puts Berkshire not far behind the Magnificent Seven’s 35% gain this year. 

Old-fashioned: The stock’s latest rally is mainly due to its strong insurance results, which have pushed the Omaha, Nebraska company into an elite league of trillion-dollar companies, mostly in Silicon Valley. They include Alphabet, Meta, Nvidia, and Apple.

• “Berkshire has done it the slower, but more sure, way,” said one chief investment officer with $2 billion in assets under management and Berkshire as their largest holding. “It’s harder to make money the old-fashioned way.”

Staying power: Buffett and his late partner Charlie Munger turned Berkshire from a struggling textile maker into a business empire that will be studied for generations. Berkshire’s market value has climbed 20% annually since 1965, an unprecedented run that’s roughly double the S&P 500’s annual return. This run has also made Buffett one of the richest people worldwide, despite his enormous philanthropic efforts, and the most famous investor of all time. 

• Berkshire’s business empire spans from truck stop operator Pilot Travel Centers to Dairy Queen and battery-maker Duracell. 

All-weather: In 2024, Berkshire added a record $200 billion market cap alone. As a Bloomberg analyst put it, Berkshire might not be as exciting as Nvidia, but the firm has an “all-weather portfolio” that has attracted investors of all risk profiles.

Why it matters:

The milestone “is a testament to the firm’s financial strength and franchise value,” observed one Berkshire analyst. “This is significant at a time when Berkshire represents one of the few remaining conglomerates in existence today.”

Old economy: After slashing stakes in long-time holdings Apple and Bank of America, Buffett still sits on about $277 billion in cash. Analysts said the enormous size of Berkshire’s Apple stake had “become a worry” and that selling the iPhone maker was a decision centered on taking “a lot of that risk off the table.”

• Added one analyst: “It’s a tribute to Mr. Buffet and his management team, as ‘old economy’ businesses ... are what built Berkshire. Yet, these businesses trade at relatively much lower valuations versus tech companies, which are not a major part of Berkshire’s business mix... “Moreover, Berkshire has achieved this through a conglomerate structure, a model that many view as ‘archaic,’ as corporations have increasingly moved to specialization over the decades.”

Two classes: Berkshire Class A shares are around $695,000 or roughly 68% more than the median price of a home in the U.S. Its Class B shares are around $463 apiece. Berkshire issued Class B shares in 1996 to attract smaller investors who wanted a slice of Buffett’s conglomerate. 

Class A shares are so high because Buffett has never split the stock: He believes the high share price attracts long-term, quality-oriented investors, many of whom use the stock as a savings account. 

Read more

More Headlines

📉 Super Micro shares cut by 25% amid major selloff since March

🤯 Nvidia employees work 7 days a week until 2 a.m., but stay for comp

📱 Apple CFO to move into new role after 10 years

⚾ Babe Ruth jersey of ‘Called Shot’ fame sells for record $24 million

🎙️ Jason and Travis Kelce sign $100 million podcast deal with Amazon

🏈 How sports betting replaced the stock market

🏈 Private Equity Ownership Comes to the NFL

Private equity is coming to the NFL. League owners voted to allow private equity firms to buy stakes in their teams, which is expected to bring billions in capital and boost team valuations. 

Changing the game: Private equity firms can own up to 10% of an NFL franchise. Firms include Arctos Partners, Ares Management, and Sixth Street Partners. Several teams, including the Los Angeles Chargers, the Philadelphia Eagles, and the Buffalo Bills, are already on the hunt for firms. 

• “This is certainly going to change the game,” said an athlete investment firm’s CEO. “What individual wants to put up a $700 million check for a business where you have no control and no path to ownership? Institutional ownership was inevitable.”

Most limited ownership partners for NFL teams have been friends, former players, and celebrities. But now, private equity investors are looking to get real investment results. They’ll also have to hold an investment for six years with a minimum 3% stake in a team. 

Surging valuations: NFL teams have soared in value this decade as the game has continued to attract viewers, ad dollars, and massive TV deals. Team valuations generally range from $5 billion to $10 billion, so a 10% stake would be roughly $500 million to $1 billion. Some teams do well over $200 million in operating income, and virtually every time does north of $500 million in annual revenue.

• NFL teams’ surging valuations mean existing owners could face large tax bills when ownership is handed off to the next generation. However, an owner could offset that tax liability by selling a portion of the franchise to private equity investors. 

• The average NFL team is worth billions largely because of more TV money flooding the sport. Last year, the Washington Commanders were sold for $6.05 billion at 11 times revenue. 
  

• The most valuable franchises are the Dallas Cowboys, the New England Patriots, the Los Angeles Rams, and the New York Giants.
  

Why it matters:

Private equity is the latest sign that the NFL is an enormously profitable, successful business, not just a sport. Its popularity has continued to soar even as other sports grapple with plateauing viewership.  

Whereas controlling owners can invest in only one team at a time, private equity investors can invest in up to six NFL teams. They have plenty of dry powder to put to work, too, so they’re expected to buy up portions of franchises very soon.

Capital sources: One goal was “giving owners the different options for capital sources, but at the same time maintaining how we operate,” Kansas City Chiefs owner Clark Hunt said. The league will still be “32 owners around the table, making decisions and deliberating. That won’t change with this step today.”

• A principal NFL owner must pay for at least 30% of a team, and an ownership group can’t be more than 25 people. Those rules have historically made selling teams somewhat of a challenge — buying an NFL team requires enormous up-front capital. And lately, valuations are very high. Like any investment, investors must ask: After a surge in value, what kind of future return might I get?

Context: The NBA allows teams to sell up to 30% stakes to institutional investors as long as no individual fund owns more than 20%. Across the pond in European soccer, sovereign-wealth funds can buy teams. 

Read more

Build Wealth, Minimize Risk With FNRP

Tired of volatile investments or meager returns? Dive into the world of commercial real estate with First National Realty Partners. Our curated, high-yield opportunities offer:

• Steady, passive income streams

• Robust portfolio diversification

• Tax-advantaged growth potential

Join savvy investors nationwide. Let FNRP's expert team navigate the complexities while you reap the rewards.

Quick Poll

On Monday, we asked: How much should a CEO's compensation be tied to company performance?

— One reader said a CEO’s comp should be half tied to performance. “A lot is outside of a CEO's control (think pandemic) that he/she shouldn't be penalized for, but otherwise, the CEO should have some skin in the game.”

— About one in four investors believe a CEO’s entire compensation plan should be based on performance. “How performance is measured also matters. Set expectations, measure results against a suitable benchmark, and compensate leadership accordingly.”

See you next time!

That's it for today on We Study Markets!

Enjoy reading this newsletter? Forward it to a friend.

Was this newsletter forwarded to you? Sign up here.

Use the promo code STOCKS15 at checkout for 15% off our popular course “How To Get Started With Stocks.”

Advertise with us.

Follow us on Twitter.

Keep an eye on your inbox for our newsletters on weekdays around 6pm EST and on weekends. If you have any feedback for us, simply respond to this email.

You can also leave your comments/suggestions/feedback anonymously here.