🎙 Running an Empire

As this bull market turns two years old, stocks look as strong as ever. The S&P 500 has gained nearly 22% this year, and earnings have continued to impress.

Nvidia helped lead the way and just crossed $3.4 trillion in market cap — it’s now up ~186% year-to-date.

“The Big 4 macro tailwinds (stimulus, resilient growth, disinflation, and healthy corporate performance) are all still in place, and they’re powerful enough to overcome rich valuations and geopolitical risks, keeping the SPX on an upward trajectory,” Adam Crisafulli, founder of Vital Knowledge, said in a note on Sunday.

— Matthew & Shawn

Here’s today’s rundown:

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

• The family that went against the grain

• America’s new millionaire class

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

Chart(s) of the Day

Together With Masterworks

Through COVID, soaring inflation, and today’s crushing interest rates, a group of enterprising investors have collectively entrusted one billion dollars from their portfolios to Masterworks’ art investing platform.

Why? Because the contemporary art Masterworks offers—from legends like Picasso and Banksy—has demonstrated a low correlation to the stock market, inflation resistance, and exceptional appreciation potential. Not to mention Masterworks has completed 23 successful exits to date, distributing over $60+ million in net proceeds to investors in those offerings.

These investors didn’t need art expertise to diversify with blue-chip art, because Masterworks does all the heavy lifting, finding artists with appreciation potential (buying <3% of works offered) and then breaking an art offering into shares for you. If Masterworks sells a piece again for a profit, investors get a return. With 3 illustrative sales, Masterworks investors have realized net annualized returns of +17.6%, +17.8%, and +21.5%.*

In The News

🧑🏻‍🍳 How Siete Foods Became a Tortilla Empire

Veronica and Miguel Garza's journey from a small kitchen in Texas to a billion-dollar business with Siete Foods is a compelling story of entrepreneurship, resilience, and innovation. In a decade, they went from a single grocery store to basically every large grocery store in America. 

The Wall Street Journal’s Ben Cohen revealed how they successfully sold their business to PepsiCo for $1.2 billion. We’re summarizing the seven steps as a business case study.

1. They had the right idea.

Many businesses are born out of tough circumstances. Veronica's diagnosis with autoimmune conditions led her to adopt a strict paleo diet, which excluded traditional Mexican foods. That inspired her to create grain-free tortillas that her family could enjoy together — now the healthier version of tortillas are selling off the shelves nationwide. 

"There wasn’t a moment when we started when I believed that we would be where we are today," Miguel said. “The business has been built on stair steps. Every time we take a step, I can see a little bit farther.”

2. They found someone to take a chance on them.

Their breakthrough came when they met Chris Moore at Wheatsville Co-op, who agreed to stock their product after tasting their homemade tortillas. The pivotal moment was crucial: "Sometimes all it takes in the very beginning is one person who believes in you," Miguel noted.

3. They hustled.

The Garza family worked tirelessly, moving production from their home kitchen to a commercial facility. Veronica drove long distances to manage production while balancing multiple jobs, often without drawing a salary, because they reinvested profits back into the business.

4. They put themselves in a position to get lucky.

Persistence paid off when a Wheatsville shopper recommended Siete tortillas to Whole Foods co-founder John Mackey, leading to an unexpected opportunity for expansion into larger markets. By 2015, Siete was in the flagship Whole Foods in Austin before spreading to its stores nationwide. 

5. They got past the gatekeepers.

Another milestone was gaining access to Whole Foods' broader distribution network. Miguel impressed key buyers with Siete's sales momentum and product offerings. A Whole Foods executive had an early inkling that they wanted to highlight this product in all their stores. 

“This one was going to be a hit right from the get-go,” Richmond recalled. “I could see they had a vision for who they wanted to be when they grew up.”

6. They changed—and they didn’t.

As Siete grew, the Garzas maintained their core values and family-centric approach, ensuring their cultural heritage remained integral to the brand's identity. 

Miguel emphasized aligning with investors who understood their vision and values. “It’s my job to both steward the brand and protect my family,” he said. 

7. They cashed in.

Miguel plans to continue leading the brand alongside his family, celebrating their success with a traditional family barbecue—this time without lettuce wraps.

“I want to build a billion-dollar, better-for-you, Mexican-American food brand,” he told investors. 

Read more

More Headlines

📈 SiriusXM stock surges after Warren Buffett's Berkshire Hathaway boosts its stake

✈️ Boeing will cut 10% of workers amid strike that has cost $5 billion so far

💰 Elon Musk is on track to become world’s first trillionaire by 2027

📉 Why venture capital deal activity is slowing down

💭 Nobel Prize in economics awarded to trio for explaining why some nations are rich and others poor

🔧 America’s New Millionaire Class: The Skilled Trades

The path to building wealth in America has long included jobs in law firms, doctor’s offices, and on Wall Street. But America’s new millionaire class includes skilled trades entrepreneurs such as those running plumbing, heating, or air conditioning companies. 

After running a firm for a decade, one HVAC entrepreneur sold his company to a private equity firm in 2022. 

• “The trades are hard work. A lot of today’s society, picking up a shovel is foreign to them,” the entrepreneur, Aaron Rice, told The Wall Street Journal.

Lovin’ it: Private equity loves the skilled trades lately, especially home services like HVAC (heating, ventilation, and air conditioning), plus plumbing and electrical companies. Often, they try to grow the businesses by making them bigger and more profitable. 

• Private equity firms have been offering mom-and-pop shops seven- and eight-figure paydays. That wasn’t always the case; in previous generations, owners passed down their companies to their children.
  

• As WSJ reports, the private equity infusion is adding shine to working with a tool belt.
  

• “You don’t need to go to Silicon Valley to have a successful career and entrepreneurial opportunities,” said a partner at Huron Capital, which focuses on investments in service companies.

Everybody and their uncle: Since 2022, private equity investors have bought almost 800 HVAC, plumbing, and electrical companies. Many smaller deals aren’t tracked, though they can also be worth millions: One company sold to private equity had 18 employees and about $3 million in annual revenue. 

“Everybody and their uncle owns an HVAC business in the private equity space today,” said a chairman of a private equity firm that has acquired 35 companies in the past four years. It has bought companies whose valuation ranges from $1 million to $20 million.

Why it matters:

WSJ reports that “for private-equity investors, the strategy has been put to use in industries as varied as car washes and nursing homes: Roll up businesses to create larger players and improve their margins by adding managerial know-how, back-office efficiency, and beefed-up marketing and recruiting budgets. Critics of the PE model say that it can mean higher prices for consumers and less competition, but others say it can improve service quality and boost the bottom line.”

Running an empire: Some private equity investors have made over $200 million in deals. “Next thing you know, you’re running an empire,” one PE investor noted. 

• Yet, the opportunities might only increase, as McKinsey reports that more skilled trades companies face a hiring crunch for carpenters, electricians, welders, and plumbers. 

The trend is clear: An aging U.S. workforce and too few younger people entering the trades. There’s still a stigma associated with the trades: 74% of young Americans surveyed perceive a stigma associated with choosing vocational school over a traditional four-year university. 

Said one HVAC company owner: “It’s like we’re finally seen and recognized. The trades are one of the businesses that, if you have the grit, you can go and do the American dream.”

Read more

Sponsored by FNRP

Your Bridge to Commercial Real Estate

Often, who you invest with matters more than what you invest in.

Signing up with FNRP is simple and only takes a few minutes. After filling out a brief qualification survey, you’ll gain access to our deals. Once you have access, you can review and research our offerings at your convenience without high-pressure sales tactics or marketing gimmicks.

FNRP is one of the leading private equity sponsors of commercial real estate in the U.S., with over $2 billion in assets under management nationwide. Vertically integrated, the firm manages each asset's full lifecycle.

Quick Poll

On Friday, we asked: Have you noticed any recent price changes at your favorite restaurants or retailers?

— Nearly half of readers noticed prices still rising at their favorite stores. “Things like the ‘egg crisis’ was a reason to raise prices at restaurants, yet when the “crisis” ended, prices never went down. Breakfast today now costs what dinner did several years ago.”

— Added another: “Tips are becoming kind of mandatory and increasing.”

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.

^{*Past performance is not indicative of future returns. Investment involves risk. 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. Contemporary art data based on repeat-sales index of historical Post-War & Contemporary Art market prices from 1995 to 2023, developed by Masterworks. There are significant limitations to comparative asset class data. Indices are unmanaged and a Masterworks investor cannot invest directly in an index. Net proceeds distributed back 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. See important Reg A disclosures at masterworks.com/cd.}

[email protected] 

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