FT : CVC faces shareholder revolt over €10.7bn Recordati take-private Investors

CVC faces shareholder revolt over €10.7bn Recordati take-private
Investors accuse private equity group of pressuring them into selling at ‘lowball’ price

CVC is facing a shareholder revolt over its attempt to take Milan-listed pharmaceutical group Recordati private at what investors claim is an unfairly low valuation.

Shareholders have written to Recordati’s board arguing that CVC’s €51.29-a-share tender offer undervalues the Italian drugmaker and is structured to pressure minority investors into selling.

Six minority shareholders, including several long-only investors, told the FT they opposed the terms of the offer and raised concerns about the governance of the proposed deal.

One letter to the board, from London-based activist investor Palliser Capital, accused CVC of trying to “railroad” minority shareholders into selling at a “lowball price”. 

The letters come amid a split between Recordati’s independent directors and the rest of the board over the merits of the CVC bid.

All four independent directors opposed the take-private, concluding that the offer price was “inadequate from a financial standpoint”, put shareholders under “a relevant degree of pressure to tender” and that the offer as a whole was “not fair”.

CVC has made clear in board-level discussions in Milan that it wants an exit from Recordati, according to people familiar with the conversations.

The private equity group has owned the drugmaker since 2018 when it led a consortium that agreed to pay €3.03bn for the Recordati family’s holding company, which owned 51.8 per cent of the drugmaker. That deal implied an equity valuation for the company as a whole of €5.86bn. 

CVC had been seeking to sell Recordati for five years before launching the take-private earlier this year, the people said, but struggled to attract bids at a valuation above that implied by the current tender offer.

In May, CVC teamed up with Belgium’s Groupe Bruxelles Lambert and other investors to launch the €51.29-a-share tender offer aimed at delisting Recordati, valuing the company’s shares at about €10.7bn. The price represents a 13 per cent premium to Recordati’s share price before news of CVC’s planned takeover emerged in March.

CVC attributes the low premium to Recordati’s complex structure and the risks surrounding its key blockbuster drug, according to people familiar with the private equity group’s position.

Recordati has two distinct businesses: a mature pharmaceuticals division and a fast-growing rare diseases franchise with significant expansion potential in the US.

That opportunity is potentially huge but is also exposed to US policy changes. The current administration has moved to cut the prices of high-cost branded medicines, including by linking US prices to those paid in other high-income countries.

Investors argue that the take-private would cash them out just as Recordati’s rare diseases business enters a potentially lucrative period of growth, allowing CVC to capture any upside by eventually separating and selling the businesses individually.

CVC nevertheless plans to press ahead with the take-private even if it fails to reach the 90 per cent threshold needed to squeeze out remaining shareholders. 

According to the offer documents, it could reshuffle the board and pursue a delisting through a subsequent merger, leaving holdout investors facing either illiquid shares or forced to cash out at a price they consider inadequate. People close to the matter said the board reshuffle reflected a previous agreement between CVC and Groupe Bruxelles Lambert that envisaged equal representation between the investors.

If it cannot take the company private, people familiar with its position said that CVC would pursue alternative ways of selling its controlling stake, including via a block sale — a prospect that could weigh on Recordati’s shares.

>>> Barron’s Weekend Summary

COVER
-Barron’s argues that the traditional bond allocation can no longer be treated as the quiet, “safe” portion of a portfolio. The 10-year Treasury yield has risen from 4.16% at the start of 2026 to as high as 4.8%, while the 30-year reached 5.32%, driven by persistent 3.4% inflation, a $40T federal debt burden and extraordinary issuance from both Washington and corporate America. US companies issued $1.68T through August, up 27%, including $219B from AI hyperscalers. The result is a rethink of 60/40 portfolios: shorter maturities, international bonds, private credit and liquid alternatives can reduce duration risk, although Apollo’s Torsten Sløk argues 5% long yields could prove attractive whether AI succeeds and becomes deflationary or fails and drives investors back into Treasuries.

INTERVIEW
-Kristina Hooper, chief market strategist at Man Group and formerly chief global market strategist at Invesco, argues that US investors remain dangerously concentrated in expensive American equities when Europe, Canada and selected emerging markets offer increasingly credible alternatives. Europe combines lower valuations with accelerating defense and infrastructure spending, regulatory reform and an industrial composition very different from the tech-heavy S&P 500; she favors defense, industrials, energy and dividend-paying companies. Canada offers similar diversification with greater commodities exposure, while India remains her strongest long-term emerging-market case because of its expanding middle class, educated workforce and favorable demographics. She also recommends adding Canadian and German government bonds alongside Treasuries.

TECH TRADER
Nvidia’s $13B acquisition of Hugging Face reveals a strategy considerably broader than defending its dominance in AI chips. Hugging Face is the leading repository for open-weight AI models, and Nvidia benefits if increasingly capable free or inexpensive models undermine the costly proprietary offerings of OpenAI and Anthropic: cheaper intelligence means more AI usage and therefore more demand for Nvidia infrastructure. Nvidia is also investing heavily in its Nemotron models and reportedly committed $7B to Poolside. The irony is that OpenAI and Anthropic are among Nvidia’s largest customers, but Jensen Huang appears determined not to become dependent on them. With projected data-center revenue of $650B next year, Nvidia is using software and open models to defend the hardware tollbooth at the center of the AI economy.

THE TRADER
-The market absorbed a surprisingly strong jobs report, but Barron’s sees inflation as the more consequential test because persistent price pressure could force investors to reconsider expectations for monetary policy just as rising long-term yields are already squeezing valuations. The problem is increasingly circular: Iran-driven energy costs are feeding inflation, Treasury supply is pushing yields upward and massive AI-related corporate borrowing is competing for capital. Equities have survived the bond selloff remarkably well, but another hot inflation reading would make the assumption that the Fed can eventually deliver easier financial conditions much harder to sustain.
-Carnival has fallen to a 52-week low, but Barron’s argues the selloff has gone too far relative to the cruise operator’s improving fundamentals. Strong demand, pricing and operating leverage leave room for earnings recovery even as investors worry about consumer spending and higher fuel costs. The depressed share price therefore offers an asymmetric opportunity if the cruise cycle remains intact, turning a company punished for macroeconomic fears into a contrarian recovery play.

FEATURES
-BMW shares have rarely been cheaper despite a balance sheet that remains unusually strong and the arrival of the Neue Klasse electric-vehicle platform. The market is heavily discounting BMW’s exposure to China, where domestic EV manufacturers have eroded the position of German premium brands, but Barron’s argues the valuation assumes too much permanent deterioration. If the new EV architecture succeeds and margins normalize, investors could obtain both earnings recovery and valuation expansion. The broader wager is that Germany’s premium automakers can survive China’s automotive revolution without surrendering the technological and brand advantages underpinning their global franchises.
-Nothing has raised $450M despite venture capital’s wholesale migration toward AI, making the smartphone maker an increasingly unusual consumer-technology experiment. Founder Carl Pei is attempting to carve out space in a market dominated by Apple and Android giants through distinctive industrial design, software and a deliberately unconventional brand. Nothing hardly threatens the iPhone’s economics yet, but its ability to attract substantial funding while consumer-hardware startups are starved of capital suggests investors see an opening for differentiation in a smartphone market that has become technologically mature and aesthetically repetitive.

EUROPE
-Spanish travel-technology company Amadeus IT Group offers roughly 40% potential upside, according to Barron’s, because AI appears less threatening to its entrenched airline infrastructure than investors fear. Amadeus provides reservation, ticketing and operational systems embedded deeply within airlines and travel agencies, producing recurring revenues and substantial switching costs. Revenue and earnings have continued growing despite industry disruptions, making the stock a useful counterexample to the assumption that every established software intermediary will inevitably be 'disintermediated' by generative AI.
EMERGING MARKETS-Emerging markets are regaining appeal as the combination of high US valuations, a less dominant dollar and stronger domestic fundamentals encourages investors to look beyond American equities. The strongest cases are India, parts of Latin America, Southeast Asia and Eastern Europe, where fiscal discipline has improved and dependence on dollar-denominated debt is generally lower than in previous emerging-market cycles. India remains the standout structural story because of demographics, an expanding middle class and industrial investment, while resource-rich markets can benefit from higher commodity prices. The broader case is diversification: emerging markets no longer need to outperform the US spectacularly to justify a larger portfolio allocation when American assets are unusually expensive.

COMMODITIES -Corn and soybean prices have jumped more than 10% over the past month as poor weather, El Niño effects and continued disruption from the Ukraine war tighten agricultural markets. December corn futures have climbed to about $5.39 a bushel, their highest since 2023, while soybeans are above $13 and wheat is also elevated. The rally compounds inflation pressure already coming from oil and diesel, with farm fuel costs near $6 a gallon and JPMorgan forecasting global food-price increases above 5% in early 2027. Barron’s suggests broad commodity and agriculture ETFs as the cleaner way to play the move rather than trying to time individual crop futures.

STREETWISE
-EPR Properties, a REIT specializing in “experiential” real estate such as theaters, amusement parks, ski areas and golf facilities, yields 6.2% after returning 26% this year, roughly twice the S&P 500. Its purchase of Great Escape from Six Flags Entertainment illustrates the model: acquire specialized assets at attractive cap rates and lease them on triple-net terms that transfer taxes, insurance and maintenance to operators. Theater exposure has fallen to roughly one-third of the portfolio just as US box-office receipts are running 20% above last year. At about 11 times funds from operations, EPR remains inexpensive despite the rally, and KeyBanc sees another 15% upside.

FT : Can China’s Icicle woo global shoppers in a luxury downturn? Cashmere brand

Can China’s Icicle woo global shoppers in a luxury downturn?
Cashmere brand wants more stores in Europe and the US after being backed by Gucci owner Kering

Buoyed by success in its domestic market, Chinese luxury brand Icicle is forging ahead with plans to expand internationally despite troubles in the sector and tough predictions for the year ahead.

The Shanghai-founded label, which specialises in minimalist ready-to-wear clothing in cashmere and silk, wants to open stores in London, Milan and the US, having received a minority investment from Gucci owner Kering in April. This week, it also appointed former Gucci designer Sabato De Sarno as creative director.

“The help of Kering will make us accelerate the next phase of development,” Louise Xu, executive president of parent company ICCF, told the FT in an interview. “We know that we will continue to do international expansion.”

Icicle, which was founded in 1997, already operates a small number of international outlets, with five across Paris and Ireland in addition to more than 240 in mainland China.

It also plans to use the Kering investment, the size of which was not disclosed, to expand into products such as handbags and footwear, having traditionally focused on ready-to-wear.

Xu said the partnership with Paris-based Kering “will bring the expertise in European craftsmanship and the operation and brand development excellence that we need”.

Icicle has not said when further international outlets might open. But its ambitions are notable given the chill in the luxury sector amid a multiyear industry slowdown.

Kering is itself under pressure. Chief executive Luca de Meo this year outlined a plan to restructure the luxury group and reboot its profitability.

Founded by husband and wife duo Ye Shouzeng and Shawna Tao, both design graduates, Icicle owed its first success to attracting China’s then rapidly expanding population of affluent white-collar workers.

Its early focus on pared-back designs in natural materials such as cotton and linen differentiated it from local competitors and allowed the label to charge premium prices, positioning itself as one of the few contemporary Chinese luxury brands. Today most of its products are priced between £100 and £5,000.

“Its message has always been how can we come up with a solution for the modern, contemporary Chinese woman who works a white-collar job in a big company to make them look better and more professional? The Icicle brand really caters to that target,” said Sukha Zhao, a former project manager in Icicle’s marketing department.

Icicle is also benefiting from the growing popularity of homegrown Chinese brands, including jewellery maker Laopu Gold. While still small compared with the likes of Louis Vuitton and Gucci, such brands are providing Chinese shoppers with alternatives that are more attuned to local taste and sensibilities, often at a more accessible price point.

Chinese fashion companies have traditionally approached international expansion via the acquisition route, scooping up legacy European and American brands.

However, this has often gone badly, as in the case of Shandong Ruyi, which scooped up controlling stakes in brands including Savile Row tailor Gieves & Hawkes before defaulting on debts. Meanwhile, China-headquartered Lanvin Group, which includes French label Lanvin, Italian shoemaker Sergio Rossi and Austrian brand Wolford, reported a €263mn net loss in 2025. Its shares are trading nearly 90 per cent below their 2022 listing price.

In 2018, Icicle bought French label Carven out of bankruptcy, creating ICCF. Efforts to revive the French brand, however, have largely fallen flat.

But Icicle’s international expansion under its own banner has been more fruitful. The first European store, in Paris, was opened in 2019 with another one following in Dublin in 2024.

Icicle is privately owned. But the most recent available records for its holding company in Ireland filed with the country’s Companies Registration Office show sales at the brand grew 6.9 per cent year on year in 2024 to €293mn.

Sales in Europe, which are still a small fraction of the company’s total revenue, increased 36 per cent to €2.7mn in the same period, according to the same filing.

The partnership with Kering, which was negotiated over four years, is a sign of approval from a European fashion group that reflects “our track record of success”, said Xu. She believes that Kering will also benefit from Icicle’s expertise in the Chinese market.

“Kering wants to understand more about the Chinese customer, how their behaviour has changed and what are the trends,” she added. “We can help them think about their Chinese strategy.”

Gucci’s collapse in the country in recent years has been a severe blow to Kering. Having overexpanded in China during the luxury boom years and during star designer Alessandro Michele’s tenure, the group is now pulling back and closing some stores.

De Meo, who was hired last year from Renault, said at the time of Kering’s investment into Icicle that he did not “believe for the moment that Chinese brands will explode internationally”.

But he added: “Certainly in China [they] have a strong, rooted culture . . . We want to understand what’s going on. I know what it means to neglect the innovation power of China, coming from the auto sector.”

Other Chinese companies, from outerwear brand Bosideng to fast-fashion retailer Urban Revivo, have also opened international locations. The former reopened a flagship in London’s Mayfair in 2022, while the latter has opened two locations in London and one in New York since 2025.

International expansion could also burnish Icicle’s credentials with its domestic customers.

A European footprint “helps to reinforce the brand image within the China market”, said Veronica Wang, partner at OC&C Strategy Consultants, strengthening its positioning as a luxury label in the eyes of its Chinese clients.

Icicle has also been exploring a potential listing, which could boost its name recognition outside China.

One fundamental challenge is whether Icicle would be perceived as luxury by international shoppers. While in China the company is increasingly playing up its Chinese identity through collaborations with local designers, artisans and craftspeople to tap into a trend for national pride, in Europe the brand emphasises the quality of its fabrics and design details.

The appointment of De Sarno, an Italian designer with luxury credentials, could help the label elevate its status in the mind of western shoppers. Since 2025, it has also shown collections during Paris Fashion Week.

“We are not too aggressive [in terms of marketing]” said Bénédicte Laloux, who was appointed creative director of Icicle in 2013 and will continue as design director of the women’s show collection under De Sarno. She is aware of the stigma that “Made in China” can have outside the country, with some people believing it means unethical or low-quality manufacturing.

That mentality, however, is also changing thanks to social media trends such as China-maxxing, which encourage a new appreciation of Chinese culture.

“There is an appetite for a different cultural point of view,” says Claudia D’Arpizio, partner at Bain. “Up to a few years ago people were saying that Americans were not able to develop luxury products. Now some of the fastest-growing, high-end labels are American, like The Row and Khaite. It can happen with Chinese brands too.”

WSJ : This Spanish Island Wants to Ditch Drunk British Tourists for Rich America

This Spanish Island Wants to Ditch Drunk British Tourists for Rich American Ones
Mallorca is taking a less-is-more approach to tourism as anger swells among locals

Mallorca is embracing a strategy of fewer, higher-value tourists in an effort to calm local protests over overtourism while preserving vital tourism revenue.
The island is targeting wealthier, quieter visitors, particularly Americans, who spend more daily in Spain than German or British travelers.
The shift hasn’t quieted local anger, as residents face a severe housing shortage that has forced some to live in campers.

MALLORCA, Spain—This Mediterranean island is a tourist paradise, with glittering turquoise seas, hidden coves and endless white-sand beaches that have been luring Europeans for generations.

It is also the epicenter of Europe’s backlash to overtourism. Local residents have taken to the streets and beaches repeatedly this summer to protest the island’s growing flock of visitors, united by one message: “Tourists, go home.”

The island—roughly 125 miles east of the Spanish mainland, with a population of about one million—is on track to welcome about 14 million tourists this year. They pour in on hulking cruise ships, rowdy budget airline flights and tour buses run by vacation-package companies. In peak summer months, the island’s daily population can rise by 50%.

Mallorca’s tourism model is increasingly a victim of its own success, as overcrowding risks eroding what made it special in the first place. Local politicians are scrambling to calm the backlash from residents—without jeopardizing the revenue that is the lifeblood of the economy.

The flood of tourists has pushed the island’s infrastructure to its limit, leading to traffic jams, strained water resources and a severe shortage of affordable housing for locals. On the outskirts of the capital, Palma, some locals who can no longer afford an apartment live in sprawling communities of camper vans.

Some on the island have called for radical tourism-containment measures, such as an outright limit on visitors.

Mallorca’s leaders are testing a different solution: a rebrand. The island wants to shed its reputation as a hot spot for British bachelor parties and thrifty package-holidayers and transform into a luxury destination for high-rolling tourists like Americans.

“Tourism is our way of life,” said Pedro Homar, managing director of Palma’s tourism board. “The change of model is quality over quantity. We need to have less tourists that spend more.”

Farm land to party island
Mallorca’s sun-drenched beaches and hilltop villages have been a popular hangout for foreign writers, artists and musicians for more than a century.

But it was Spanish dictator Francisco Franco’s tourism push in the 1950s and ‘60s that transformed Mallorca from a quiet agricultural community into a mass tourism destination. Franco saw foreign tourism as a way to soften the image of his authoritarian regime internationally—under the slogan “Spain is different!”

Low-cost packages from British and German tour operators opened the island up for thousands of Europeans.

In Playa de Palma, a 3-mile-long stretch of beach on the southern coast of the island, tourism workers speak fluent German and restaurants offer favorites like döner kebab and currywurst. In Magaluf, a beach town popular among Brits, restaurants serve full English breakfasts and yorkshire pudding.

Mallorca’s reputation as a cheap party destination has long frustrated locals, who complain of public drunkenness, nudity and drug use. But the island’s heavy reliance on tourism has made attempts at change difficult. Tourism accounts for almost half of economic activity in the Balearics, the archipelago that Mallorca is part of, according to Exceltur, a tourism non-profit.

“We depend entirely on them,” said Jaume Moreno, a longtime taxi driver on the island.

Homar, the Palma tourism official and an 8th generation Mallorcan, has for years been working to attract a new type of tourist: wealthier, quieter, interested in traveling outside the peak summer season. And above all: American.

“They are not rowdy at all. They travel with the idea of understanding the culture, mingling with the locals, buying local arts and crafts,” he said. “We are no longer appealing to tourists in the U.K. [or] Germany, whose main motivation is partying and drinking.”

Deep American pockets
American tourists in Spain spend more than any other nationality: about $410 a day in July, compared to $240 by Germans and $260 by British travelers, according to government data.

By many accounts, Mallorca has succeeded in dispelling hard-partiers. On parts of the island, local authorities implemented fines for drunken behavior, banned party boats and limited drinks at all-inclusive hotels to six a day. On a recent summer day, the beaches of Magaluf were quiet and filled with families.

Germans and Brits still make up about half of Mallorca’s tourists, but American visits have surged 60% this year through June. United Airlines has expanded direct flights to the island from its hub in Newark, N.J. Boutique hotels catering to Americans have sprung up across the island. A Mandarin Oriental hotel opened this year.

Laurel and Dustin McQuate, from Breckenridge, Colo., visited Mallorca for the first time this month to celebrate a friend’s 50th birthday.

“We live in the mountains, so we were like, ‘A beach? Yes, yes,’” Laurel said.

The group of eight rented a house for about $6,000, a boat for a day, and two rental cars. They planned winery visits and a day in Palma. The couple was particularly excited about shopping at local markets and trying local pastries.

“I have no room in my suitcase,” Laurel lamented.

Hospitality executive María Martínez had to train workers on how to serve Americans’ needs: they want more small talk, guidance on itineraries and are more interested in the island’s history. The chain she works for, IT Mallorca Unique Spaces, has six boutique hotels across the island, and Americans are its main client group.

Wealthy South Koreans are another group of coveted tourists for Mallorcan businesses. Newlywed Sukyung Lee spent four days in Mallorca in September for her honeymoon. She loved Caló des Moro, a beach nestled between steep cliffs.

“The ocean is beautiful…it’s famous for a reason,” Lee said.

Priced out and living in vans
The shift toward wealthier tourists has done little to quell anger from locals, who argue the problem is the number of tourists, not just the type.

“They occupy our streets, our homes, our spaces, and often fail to respect the people who are working for them,” said Stella Arbona, a 23-year-old who works in a bakery on the island.

“There’s hardly any space left for the locals.”

One local politician this year proposed capping tourist arrivals on the Balearics at 2023 levels. Leaders are instead pursuing measures such as capping cruise ship arrivals and restricting hotel construction.

Thousands of homes and villas have been converted to short-term rentals like Airbnbs, and a black market for illegal apartment rentals has further constrained housing supply for locals. The government is stepping up enforcement and working to build more subsidized housing, but those efforts will take time.

“The problem has grown over many years, and we may need the same time to solve the problem,” said Juan Antonio Amengual, mayor of Mallorca’s second-biggest municipality, Calvià.

A few miles away from the beaches of Magaluf and upscale shops of Palma, the parking lot of a public pool is now home to Mallorcans who have been priced out of the rental market.

Begoña Iglesias, 62, began living in a camper she shares with her son, Hector, about four years ago. More than 100 similar vehicles are parked there, and Iglesias said she’s fielding more questions from people interested in moving there.

“We are collateral damage of the island’s housing crisis,” Iglesias said.

WSJ : Meet the Factions Driving the Democratic Socialists of America From cockta

Meet the Factions Driving the Democratic Socialists of America
From cocktail-party pragmatists to Constitution-abolishing ‘theory bros,’ these groups are steering America’s largest socialist organization in its breakout year

Democratic socialists are having a breakout year, including a win in a mayoral primary in Providence, R.I., on Wednesday. Though many of the group’s contenders have fallen short, candidates recommended or endorsed by a chapter of the Democratic Socialists of America have tallied several high-profile congressional primary victories and about 100 state and local primary wins, according to an August Brookings Institution analysis.

Yet the public is still trying to learn what the movement believes, how it is organized and the level of its followers’ involvement.

For many on the left, aligning with the DSA will be the culmination of their ideological journey. But for a certain subset, that is just the start. Once inside the DSA tent, they can go deeper and sign up for one of its many competing caucuses.


There are caucuses for those who yearn to make New York City more like Stockholm and others for Marxist-Leninists seeking permanent revolution. And many more.

The caucuses account for much of the DSA’s chaotic and cacophonous reputation. Their ranks are small—no more than a few thousand members, according to most estimates. But they are the movement’s most active and committed members. They are the thinkers and leaders setting its course. All 27 members of the DSA’s National Political Committee, the party’s leadership board, belong to a caucus.

Here’s an informal directory:

The Half-a-Loaf Crowd

SOCIALIST MAJORITY CAUCUS
Founded: 2019 | What they read: The Agitator | NPC Seats: 4

This may be the DSA’s most pragmatic, middle-of-the-road caucus—and its most popular. It includes stars from New York Mayor Zohran Mamdani’s team, including Tascha Van Auken, who led the campaign’s field operation, and Cea Weaver, his housing guru. They regard themselves as the DSA’s adults, with cocktail parties that feature elected officials and networking.

In political terms, the SMC is more reformist than revolutionary. They attribute the DSA’s rise to the success of socialist candidates like Mamdani and Rep. Alexandria Ocasio-Cortez (D., N.Y.) in Democratic Party primaries, and want more of it. (Neither is a member, but Claire Valdez, who recently won the Democratic primary for a House seat representing parts of Queens and Brooklyn, is). “It’s not always a purity test there,” one observer said of the caucus. Indeed, the SMC call themselves “materialists”—more interested in changing real-world policies and conditions than ideological perfection. They are eager for an AOC presidential campaign.

GROUNDWORK
Founded: 2023 | What they read: Building Up | NPC Seats: 5

Groundwork is often linked with the SMC. Perhaps the biggest difference is that it is more focused on climate issues. It led the movement’s charge on the Green New Deal.

Groundwork wants to transform the DSA from a patchwork of chapters into a socialist political party with mass appeal—one that can influence future presidential elections. Heavyweight members include Gustavo Gordillo, the New York City DSA’s co-chair and Ashik Siddique, the NPC’s co-chair. Also a big AOC supporter. Its Atlanta chapter was active in the “Cop City” protests.

NORTH STAR
Founded: 2018 | What they read: Dissent | NPC Seats: 0

The antifascist old guard. Their overriding priority is defeating President Trump—and Trumpism—and ending Republican control of Congress. They are, therefore, willing to support mainstream Democratic Party candidates if need be. “DSA and the broader left must join forces to confront the international rise of authoritarianism,” a North Star strategy paper states, urging the movement to jettison the DSA’s “go it alone” approach.

The heirs to DSA co-founder Michael Harrington’s vision of striving for “the left wing of the possible,” North Star has struggled to attract a younger crowd that detests the Democratic Party and is animated by Palestine and anti-Zionism.

The Revolutionaries

BREAD & ROSES
Founded: 2019 | What they read: The Call | NPC Seats: 5

The name is a nod to the women’s suffrage movement and was popularized by a 1912 textile industry strike in Lawrence, Mass.

This Marxist caucus was instrumental in the DSA’s backing of Bernie Sanders’s 2020 presidential campaign. Devoted to rank-and-file labor organizing, it wants to put its people into key industries—logistics and public education, for example—and then embolden their unions. “Our goal is to create a mass movement that can force elites to make concessions—and eventually remove them from power,” it states.

B&R doesn’t display the electoral pragmatism of SCM and Groundwork. But it supports so-called class struggle elections—that is, running socialist candidates as a means to boost class consciousness and promote the cause. It imagines a future in which the movement jettisons the Democratic Party to build its own rival.

COMMUNIST CAUCUS
Founded: 2019 | What they read: Spadework | NPC Seats: 0

The “Commie Caucus” grew out of the Bay Area DSA chapter, with particular emphasis on housing and tenant organizing. Members tend to be “small-c” communists with a younger, down-and-dirty vibe. “We have nothing but our bodies and minds, and we are forced to put them to work. We are compelled to carry out unfulfilling jobs, work long hours, piece together dangerous hustles, or else suffer precarity and deprivation. In short, our lives are dominated by capitalism,” they state.

The Commies eschew the ballot box for grassroots organizing, convinced the revolution will be built from below. They have their own educational curriculum with an extensive reading list. Membership isn’t guaranteed; the Commies practice what they call “selective recruitment.”

They tend to avoid the DSA’s internal politicking, but are reputed to throw its most raucous parties.

MARXIST UNITY GROUP
Founded: 2022 |What they read: Cosmonaut and Light & Air | NPC Seats: 3

The MUGs are known for being more into academic theory and Marxist orthodoxy than others. They have required reading and a special fondness for theorist Karl Kautsky. MUG wants to begin the DSA’s break with the Democratic Party yesterday.

Members skew white and male—the “theory bros,” in one observer’s words. They have made their mark by leading the DSA debate on rewriting the Constitution and abolishing American institutions like the Senate and presidency. As with others in this revolutionary category, members are skeptical of AOC. They want a presidential candidate who is a “socialist tribune,” not a mere progressive.

The New Radicals

SPRINGS OF REVOLUTION
Founded: 2025 | What they read: Cosmonaut | NPC Seats: 4

SoR is an expression of the DSA’s anti-Israel rage. Its leaders were active in the student encampments that sprang up after Hamas’s Oct. 7, 2023, attack on Israel and pushed earlier DSA campaigns against Zionism.

Their high mark was winning passage at last year’s national convention of a controversial measure that makes it an expellable offense for members to support Zionism—or even criticize the BDS movement to boycott, divest and sanction Israel.

Their stock has risen alongside Israel’s war in Gaza. The anti-imperialist SoR has also protested the Trump administration’s intervention in Venezuela.

RED STAR
Founded: 2019 | What they read: Zenith | NPC Seats: 3

The Marxist-Leninist Red Star emerged from the San Francisco DSA, where it had a tetchy relationship with Bread & Roses. Even some close observers struggle to define what seems like a caucus in search of a mission. Red Star has had various relaunches over the years and periods of “critical self-reflection.”

The caucus talks a lot about organizational structure and theory. It wants a more disciplined DSA that can eventually become a vanguard party to lead a revolution. Red Star’s anti-imperialist streak has translated to an embrace of authoritarian, anti-American regimes in Havana and Caracas and support for Hamas. Megan Romer, the DSA’s national co-chair, is a member.

LIBERATION CAUCUS
Founded: 2025 | What they read: BlackRedGuard’s Substack | NPC Seats: 0

This up-and-coming caucus is Maoist and openly hostile to AOC, whom it derides as an opportunist and figurehead of the DSA’s right wing. A section of their website is devoted to “common misconceptions about Maoism.” Their reading list ranges from the Communist Party of the Philippines to the Black Panthers.

CARACOL CAUCUS
Founded: 2023 | What they read: Monthly Review | NPC Seats: 0

Eco-Marxist champions of “de-growth” to save the planet and heal society. The snail is their mascot. Caracol members believe the Green New Deal championed by AOC doesn’t go far enough and that the very notion of “green” or “sustainable” growth is mistaken.

CrunchBase : The Week’s 10 Biggest Funding Rounds: The Boring Co., Cognition And

The Week’s 10 Biggest Funding Rounds: The Boring Co., Cognition And Motive Lead A Massive Week

It was a monster week for U.S. startup funding, with four companies each raising $1 billion or more. Elon Musk’s tunnel-drilling company The Boring Co. led with a $3 billion Series D, followed by AI coding startup Cognition at $2 billion. Joining them near the top was fleet management software provider Motive, which landed $1.3 billion, while reusable rocket developer Stoke Space raised another $1 billion.

Big checks also flowed to U.S. solar manufacturing, defense tech, legal AI and companies building the chips and networking infrastructure needed for artificial intelligence.

1. The Boring Co., $3B, transportation and infrastructure: Musk’s Bastrop, Texas-based tunneling company raised a $3 billion Series D led by the United Arab Emirates, with participation from investors including Andreessen Horowitz, Sequoia Capital and Valor Equity Partners. The company is developing underground tunnel networks designed to move passengers and vehicles while reducing surface traffic, and already operates its Vegas Loop system beneath Las Vegas. The latest deal values it at $23 billion and brings its total funding to nearly $3.9 billion, per Crunchbase.

2. Cognition, $2B, artificial intelligence: San Francisco-based Cognition raised a $2 billion Series E led by Accel, Andreessen Horowitz, Avenir, Founders Fund and General Catalyst. The company is best known for Devin, its autonomous software-engineering agent, and is part of a highly funded crop of startups betting AI agents will take over increasingly complex coding and development work. Cognition has raised nearly $3.9 billion to date and was valued at $48 billion in the latest round, our data shows.

3. Motive, $1.3B, fleet management and transportation: San Francisco-based Motive raised $1.3 billion in private equity funding led by General Catalyst. The company, formerly known as KeepTruckin, has an AI-driven platform used by trucking, construction and other physical-economy businesses to manage fleets, monitor driver safety, and automate operations and spending. The latest deal brings Motive’s total funding to just over $2 billion, according to Crunchbase data.

4. Stoke Space, $1B, aerospace: Kent, Washington-based Stoke Space raised a $1 billion Series E co-led by Point72 Ventures and Spark Capital, with Y Combinator among the additional investors. The company is developing fully reusable rockets, including its Nova launch vehicle, as it looks to lower the cost of transporting satellites and other payloads to orbit. The latest round values Stoke at $10 billion and brings total funding to roughly $2.4 billion. Its raise adds to the already record-setting sums for space tech startup investment this year.

5. Suniva, $835M, solar energy: Norcross, Georgia-based Suniva raised $835 million from investors including Electron Capital Partners, OIC and Rubric Capital Management. The longtime U.S. solar manufacturer produces high-efficiency solar cells and plans to use new capital to expand domestic production, including a new South Carolina facility that would more than quadruple its manufacturing capacity. Suniva has raised nearly $1.2 billion to date.

6. Mach Industries, $600M, defense tech: Huntington Beach, California-based Mach Industries raised a $600 million Series C from investors including Ribbit Capital and Sequoia Capital. Founded in 2022, the defense manufacturer develops unmanned aircraft, long-range weapons, propulsion technology and the infrastructure needed to produce defense systems at scale. Mach is part of a broader surge in venture investment into defense companies looking to bring Silicon Valley-style development and manufacturing speeds to military hardware. The latest round values the company at $3.7 billion and brings its total funding to nearly $1.1 billion.

7. Harvey, $550M, legal AI: San Francisco-based Harvey raised a $550 million Series H co-led by Diffusion and Lightspeed Venture Partners, with investors including Andreessen Horowitz and Sequoia Capital also participating. Harvey builds generative AI tools for lawyers and other professional-services workers, with products for legal research, document analysis and contract work. The company was valued at $15.5 billion in the latest deal, which brings its total funding to date to nearly $1.8 billion. That makes it one of the most well-funded players in the legal tech space, which has seen robust investment this year, though slightly lower than last year’s all-time high.

8. (tied) Fab2, $500M, semiconductors: Fab2 raised a $500 million Series A led by Fundomo, with Maverick Silicon among the other investors. Formerly known as Atomic Semi, Fab2 is trying to rethink semiconductor manufacturing by designing its own fabrication tools, components and software with the goal of building smaller chip factories faster and more cheaply. The funding is the first disclosed round for the company, which maintains headquarters in California and Kentucky, and values it at $3.7 billion.

8. (tied) Positron, $500M, AI infrastructure: Reno, Nevada-based Positron raised a $500 million Series C led by James Clark and NEA, with Qatar Investment Authority among its other investors. The startup develops purpose-built hardware for AI inference, where models actually process queries after they have been trained, and is one of a growing crop of chip companies challenging GPUs in particular AI workloads. The latest financing values Positron at $5 billion and brings its total funding to nearly $1.2 billion, per Crunchbase.

10. (tied) Celero Communications, $275M, AI networking infrastructure: Laguna Beach, California-based Celero Communications raised a $275 million Series C led by Atreides Management, CapitalG and Valor Equity Partners. Celero develops coherent digital signal processor technology that helps move enormous quantities of data between chips and data centers while using less power, an increasingly critical bottleneck as AI clusters grow. The round values the company at $3 billion and brings total funding to roughly $413.4 million, according to Crunchbase.

10. (tied) Encoded Therapeutics, $275M, biotechnology: South San Francisco, California-based Encoded Therapeutics raised a $275 million Series F led by Google Ventures, with investors including Arch Venture Partners, Janus Henderson Investors and Venrock also participating. The clinical-stage biotech develops precision genetic medicines for severe neurological disorders, with its lead therapy targeting Dravet syndrome, a rare genetic epilepsy. Encoded has raised $514.1 million to date, per Crunchbase.

Barron's : Europe Is Stronger Than Investors Think. What to Own Now. Bad news gr

Europe Is Stronger Than Investors Think. What to Own Now.
Bad news grabs the headlines, but European companies are turning in strong profit gains.

Key Points
  • European companies reported second-quarter earnings growth of 16% from the year-ago period, marking the strongest pace in three years.
  • The Euro STOXX 600 index has risen more than 16% this year, trading at 16 times forward earnings compared with about 20 times for the S&P 500.
  • European manufacturing activity has turned around following a three-year contraction that began in mid-2022

Europe has had its share of hardships this year: an energy shock created by the war in Iran, the hottest summer on record, competitive pressure from China, and political volatility. But beneath the turmoil, there’s a bright spot not fully recognized by investors.

European companies are doing remarkably well.

In the second quarter, European companies, on average, reported earnings growth of 16% from the year-ago period, the strongest pace in three years and the biggest increase outside of the post-Covid recovery in more than a decade, according to BCA Research. Strategists expect the momentum to continue.

The Stoxx Europe 600 is up 10.3% this year—just behind the S&P 500’s 11.7% gain—yet strategists say U.S. investors still own little in Europe. That’s reflected in valuations. The European market is trading at 16 times forward earnings compared with about 20 times for the S&P 500.

Henry McVey, head of global macro and asset allocation at private-equity giant KKR, sees a structural transformation that paves the way for more durable cash flows and a Europe better positioned for geopolitical and other shocks than it was when Russia invaded Ukraine in 2022.

Part of this shift is a normalization in interest-rate policy and an emergence from the negative interest-rate period that weighed on Europe for years. Germany approved a constitutional amendment early last year that changed the country’s limits on federal debt, setting the stage for nearly one trillion euros in defense and infrastructure spending. Europe is also well positioned for a global increase in capital spending—for electrification and energy diversification, reshoring supply chains, and the buildout of artificial intelligence.

The return of a looser fiscal policy, along with a new credit cycle as banks benefit from higher interest rates, brings a breath of new life to a region that has been starved for public investment for more than a decade, says Davide Oneglia, director of European and global macro at TS Lombard.

Radical Change
“Something is actually changing radically,” he says. Policymakers are pushing reforms to more deeply integrate the 27 countries in the European Union, including reshaping market infrastructure to improve liquidity and possibly spur cross-border mergers and acquisitions. These moves could help European industrial companies gain global scale and compete against U.S. and Chinese rivals.

Manufacturing activity has turned around following a three-year contraction that began in mid-2022, confirmed by recent Purchasing Managers’ Index data. Oneglia sees the recovery broadening, helped by a much improved job market producing annual wage growth of 2.5% to 3%. Those are levels, he says, that would have been a dream in the 2010s. “Without the war, we would have seen a greater expansion of real incomes because inflation wouldn’t have picked up that quickly and wages would have been OK. It’s in a soft patch but the trend is upward,” he says.

One potential catalyst would be an end to the Iran war. Oneglia says that even if a resolution of the conflict resulted in tolls in the Strait of Hormuz, that would still be a positive for Europe because it would restart the flow of energy and companies would adjust to slightly higher oil prices.

Risks remain. If the war continues into the winter, volatility could follow as central banks are forced to deal with inflationary pressures. A spate of elections this fall, including presidential elections in France and state elections in Germany, could inject bond market volatility. And Europe could find itself in a trade battle. Policymakers have set an October deadline to rebalance its trade relationship with China as its dependence on exports for growth and decreased appetite for European goods threaten the region’s industrial heartland.

But strategists see any bumpiness as an opportunity in a market where investors are quick to price in bad news, and much slower to credit good news. Some of that good news is showing up in corporate earnings and in the economy, drawing investors looking to diversify their U.S. and AI-heavy portfolios.

A Bet on Banks
The improved outlook for European financials is a big positive for the market, where financials have three times the representation they do in the U.S. indexes. Most European banks make more than 50% of their earnings through net interest margins, so the normalization in interest rates is a major catalyst.

Financial companies in Europe stand to gain on other fronts, including an aging population and considerable retirement savings driving a need for financial advice. McVey also sees an opportunity for mergers and acquisitions as industrial companies in Germany, Italy, and France look to build scale to become more dominant globally. The iShares MSCI Europe Financials exchange-traded fund offers a broad-based way to tap into the opportunity.

Markus Hansen, co-manager of Vontobel’s Quality Growth International Equity strategy, owns Norway’s largest bank, DNB Bank. DNB was one of the rare banks that didn’t need to raise capital during the 2008-09 global financial crisis and is well run, Hansen says.


The bank is a beneficiary of a strong local and export market for Norway, which is seeing strength in its shipping, drug, fishing, and technology industries. DNB looks attractive versus international peers, is focused on shareholder return, and is supported by the Norway government’s one-third ownership, Hansen says. The stock trades at 1.6 times book value, with earnings expected to grow this year at 5% and a dividend yield of 5.5%.

Fund managers are also finding value in the luxury sector, which has seen stocks fall about 25% on average in recent years. The sector has had its share of bad news: Chinese consumers reluctant to spend amid a multiyear economic rut; tariffs; and, more recently, the war in the Middle East, a region that represents about 10% to 15% of sales for the sector.

Many companies have been able to pass along tariff costs, so the hit to Middle East spending hasn’t been as bad as feared. The global rise in asset prices and a boom in initial public offerings in the U.S. and Asia also helps.

Iconic Brands
In the age of AI and abundance, Baillie Gifford manager Lawrence Burns favors iconic brands with a track record for craftsmanship, including Hermès International
and Ferrari. “Things that are limited see their value go up—and these companies’ value comes from things others can’t replicate, like European heritage and links to the British royal family,” Burns says.

Both are also staying fresh. The Birkin bag is a hit on TikTok, appealing to a younger audience. The recent launch of an electric Ferrari created debate around its design, but the first one was sold at a charity auction for $40 million—several times what was expected, in a nod to its brand power, Burns says. Another plus: Both Ferrari and Hermès were slower to move into China, which means more limited exposure as consumers there are still on the sidelines.

One of the knocks against Europe is that it doesn’t have the AI superstars like Anthropic or OpenAI, nor the Metas or Googles of the world. That may be a positive if there is an AI-oriented market bust. That view also misses how well positioned Europe is for the global industrials boom as countries spend billions on electrification, energy diversification, reshoring, and building AI infrastructure.

Vontobel’s Hansen owns Sandvik, a beneficiary of the copper mining needed to fuel many of these trends. The Swedish company provides the tooling and equipment for mining and gets a steady stream of business from maintenance and servicing parts. Another indirect beneficiary is Weir, an oil-and-gas company based in the United Kingdom that now focuses on water solutions required in mining.

Both are well positioned as demand for mining increases at the same time that regulatory and political hurdles make building new ones difficult. That puts a premium on their products that help make existing mines more effective. “If you are a large miner like BHP Group or Rio Tinto, once you have a contract, you tend to use the product even more because it’s proven hardware and you’re relying on it,” Hansen says.

Weir trades at 21 times 2026 earnings and is expected to increase earnings per share 16%. Sandvik trades at 24 times with an expected earnings per share growth rate of 18. Both look cheap versus international peers, Hansen says. Both also pay a 1.5% dividend.

Playing Defense
Scott Rosenthal, a manager of the Hotchkis & Wiley International Value fund, says investors are underestimating the resilience and durability of earnings of some of the businesses in Europe that become even more attractive in a world where uncertainty is rising. Lately, Rosenthal is picking through more defensive sectors like healthcare and even consumer staples, which are contending with high commodity prices, tariffs, and changing preferences.

One such holding is Heineken. The beer giant’s stock has lagged behind the market, up just 5% over the past year while the Dutch market is up 20%, in part due to concerns that people are drinking less alcohol. Rosenthal sees that as more of a trend in the U.S. and Europe, while much of Heineken’s business comes from emerging markets. Rosenthal thinks Heineken still has growth prospects as emerging market consumers trade up to more premium beer as incomes rise and preferences evolve.

“The business is priced as if it is not going to grow,” says Rosenthal. He expects Heineken to see increased sales as well as earnings improvement with the entrance of Rafael Oliveira as Heineken’s chief executive in October. Oliveira formerly led coffee and tea maker JDE Peet’s, focusing a portfolio of sprawling brands and allocating capital to improve growth and financial performance. Rosenthal expects him to use a similar playbook for Heineken.

Investors have been writing Europe off as a place with major structural challenges. Rosenthal says that view means a lot of opportunities for growth can be found on the cheap.

Barron's : Growth Without AI: 8 Stock Picks With products ranging from cardboard

Growth Without AI: 8 Stock Picks
With products ranging from cardboard boxes to new drugs, these companies are all on track to double their earnings.

Artificial intelligence is a fourth industrial revolution, or a super bubble, depending on which Wall Street seer is talking. It will set off a hyper-productivity supercycle, or a crash—maybe both. It will conquer disease and poverty, unless it first lowers the barrier for mass destruction. It’s…all just a little exhausting at times.

Below are eight promising stocks that have blessedly little to do with AI. Each company can double its earnings by the end of the decade; has a reasonable valuation, leaving share prices room to rise with earnings; and looks financially strong, so it can persevere even if the economy doesn’t roar.

There will be no discussion here of neuromorphic computing or cybernetic convergence. No paradigms will shift—but some cruise ships will make good time. We’ll ignore the singularity, but briefly touch on squish toys. Instead of event horizons, we have a pretty big videogame launch.

We don’t promise a 100% AI-free list. A broker that we’ll come to has surely benefited from speculators flipping Direxion Daily AI & Big Data Bull 2X shares and other securitized flotsam. A pair of drugmakers, like virtually all of their peers, use machine learning to look for new treatments to test. Even a corrugated box company has a spiel about AI-driven efficiency, and a chain of discount gyms will point you toward an AI coach if you really insist. But our list has only 7.7% exposure to AI as an investment theme. That’s what one of the popular chatbots tells, and the figure does seem about right.

To find these stocks, we screened the U.S. market without much regard for company size, sector, or style—growth versus value, for example. We frankly have a hard time telling the difference between a cheap growth stock and a growthy cheap stock, and so do the style funds, judging by the holdings overlap.

Kindly don’t read this AI reprieve as subtle doomsaying. We’re optimistic. And don’t look at these stocks as any kind of ideal portfolio. Instead, think of them as a list of individual candidates for consideration, should you feel as though your portfolio has wandered too far into the matrix.

Royal Caribbean Group
Ten-year investors in Royal Caribbean Group have made 352%, beating the S&P 500 index by 34 points. Think of that. When Covid-19 hit in March 2020, Royal shut down for 15 months worldwide. Bringing its full fleet back into action took another year. Overseas incorporation and a global workforce left the company ineligible for U.S. government aid, so it issued high-interest bonds and sold new shares to get by. And the result has been outperformance.


This year, industry worries abound. Will new ships in the Caribbean create oversupply? War in the Middle East has driven up marine fuel costs. Will it also dampen European wanderlust? And will red tape delay the opening of Royal’s Perfect Day Mexico, the next pillar in the company’s lucrative private-island model, from late next year into 2028? Our best guesses: Supply looks manageable, strength in North America and the Caribbean can offset any softness in Europe, and the Mexico island will get pushed back.

BioMarin Pharmaceutical
Some drug stocks represent all-or-nothing bets on a single treatment in development. Others are attached to mature companies with plenty of cash flow but sleepy growth. BioMarin Pharmaceutical sits in the middle. Its Voxzogo for achondroplasia, the most common cause of dwarfism, is given as a daily injection to children while their growth plates are open. It can improve proportionality, reduce skeletal complications, and increase adult height from, say, just over four feet to just under five. Sales of Voxzogo will top $1 billion this year. They could ultimately hit $2 billion, if BioMarin can expand treatment to a related condition called hypochondroplasia, and to younger patients, while fending off new competition.

A competitor, Ascendis Pharma, has a new weekly injection for achondroplasia. BioMarin sued, claiming patent infringement, and the two recently settled, with terms that give BioMarin a relatively high royalty rate while it develops its own next-generation treatment. Meanwhile, BioMarin’s acquisition this year of Amicus Therapeutics for $4.8 billion gives it two treatments for genetic disorders called Fabry and Pompe diseases, each of which has more than $1 billion in yearly sales potential. Cost-cutting from the deal should add to cash flow. If BioMarin is successful, by the end of the decade it will look less like a one-blockbuster drugmaker than a diversified, rare-disease specialist with much higher earnings.

Eli Lilly
If you want to cut healthcare costs for overweight Americans age 55 and older, spring for Zepbound, the best-selling obesity shot. This was the finding of a recent study published in the journal Diabetes, Obesity and Metabolism, and funded by, as you might imagine, Eli Lilly, the company that sells Zepbound. It is no doubt aimed at the U.S. Congress. Medicare is prohibited by law from covering drugs designed solely for weight loss. But GLP-1s like Zepbound are proven to help with diabetes, sleep apnea, and heart and kidney disease, and are being studied for drug and alcohol addiction, rheumatoid arthritis, and much else.

The Centers for Medicare and Medicaid Services has created a temporary program to help seniors afford these drugs. Now, Congress must decide whether to create a permanent plan.

The Lilly-funded study found that patients who took Zepbound for 12 months had fewer hospital admissions and emergency-department visits than patients who hadn’t, generating an average of $607 less per month in healthcare costs. This doesn’t count the cost of the Zepbound itself, which is $195 a month under the bridge plan.

Whatever the study’s conflicts, it’s a compelling argument, and both private insurance coverage and patient uptake for GLP-1s are rapidly rising. Lilly is developing next-generation GLP-1s, including a newly launched pill and shots in trials that can spur even more fat loss, and perhaps preserve muscle. It’s investing some of its winnings to diversify beyond GLP-1s into oncology, neuroscience, and immunology. All of it comes together to explain why free cash flow, which came in just below $10 billion last year, could top $50 billion by 2030.

Five Below
Wall Street has struggled to separate the substance from the squish when it comes to Five Below. The chain sells low-cost impulse items to the parents of pleading kids. This fiscal year through January, earnings are expected to jump 53% on same-store sales growth of nearly 12%. Estimates have been rising all year. Yet as recently as July, the stock was trailing the U.S. market, and analysts with Buy recommendations were in the minority.

Blame Squishy Dumplings, pliable fidget toys made to look like Chinese bao buns in traditional steamer baskets, which became a viral hit, and set off a squeezevalanche of iterations, from Plop Pets to Chubby Buddies. Surely this will pass and growth will collapse, the thinking went.

Not so fast. On Sept. 2, Five Below reported same-store sales growth of over 14%, and management said that squishy dumplings were only a low-single-digit contributor. It acknowledged a halo effect, whereby squish visitors were buying other things and making repeat visits. Call it a fad, or just a rapid reaction to capitalize on a social trend—the sort of thing befitting a company that says it aspires to be “America’s greatest little toy store.”

Investors are coming around to the view that Five Below, unlike dumplings with facial features, has legs. The consensus calls for a slowdown to 8% earnings-per-share growth next year against difficult comparisons, rebounding to 14% the following year, and estimates have been rising. The stock is now beating the market, and two-thirds of analysts say Buy.

Smurfit Westrock
Corrugated packaging—or cardboard boxes, to those who take liberties with their paper terminology—don’t bring to mind easy profits. But Smurfit Westrock is in a position to double earnings in four years, or perhaps even three, with a bit of cooperation from the economy and a lot of postmerger efficiency wringing.

The company dates to 1938, when English industrialist Jefferson Smurfit bought a Dublin box maker. In recent decades, dealmaking has brought changing add-ons to the name. There was Smurfit-Stone, following a merger with a Chicago concern, and Smurfit Kappa, after private equity led a tie-up with a Netherlands operator. Two years ago, the company combined with WestRock, which itself was a marriage of RockTenn and MeadWestvaco, and here we are. Whereas Smurfit has a reputation as a lean operator, WestRock didn’t, so the opportunities to cut waste, close underperforming factories, and cancel or replace bad contracts are substantial.

Industry margins, meanwhile, are sitting near typical trough levels, in part because costs have shot up faster than contracts can be renegotiated. That helps explain why Smurfit is expected to increase earnings per share by more than 50% next year, and a still-healthy 14% the following year.

Charles Schwab
Charles Schwab stock used to trade at forward price/earnings ratios in the 20s, denoting its peppy earnings growth. Now the multiple is 15. The decline more or less corresponded with Federal Reserve interest-rate hikes, which caused Schwab’s earnings per share to drop by 20% in 2023 and barely grow the next year.

To see why, consider that clients come to Schwab for a low-cost, transparent, one-stop banking and brokerage shop. They can trade many exchange-traded funds for free, get reimbursed for cash machine fees, and so on. Schwab makes money in two main ways. Some clients shift funds to specialty products or advisory services with higher fees. And many of them leave funds parked in a checking account earning next to no interest by default. Schwab can put this money to work and earn a spread.

When interest rates rise, customers become more likely to engage in “cash sorting,” or putting idle money to work in something that pays more. Forgoing a 1% money-market fund is one thing, but a 4% one is worth logging on for to click a buy order. Since this is liquid money that Schwab invests in longer-term things, cash sorting can create a funding crunch. To solve it, Schwab turned to higher-cost sources of funds, squeezing its profit margins.

Cash sorting has now plateaued, and Schwab is gradually retiring its high-cost funding. Meanwhile, client money continues to pour in. The result last quarter was 21% revenue growth and a 42% jump in earnings per share.

Planet Fitness
In the interest of keeping workouts unintimidating, Planet Fitness gyms have a playful “lunk alarm” to be sounded in the event of weight slamming or loud grunting. But shareholders will be forgiven a primal bellow or two over their 54% decline this year. Is this a broken growth company, or a buying opportunity?

The decline started with weak sign-ups during the crucial beginning of the year, which led management to pause a planned price hike on its Black Card memberships to $29.99 a month from $24.99, and bring down its financial guidance for the year. Planet Fitness follows a model that the gym industry calls high value, low price, or HVLP. It famously held its base membership price at $10 a month for decades before raising it to $15 two years ago. Low prices drive high sign-ups, including among members who rarely visit. Base members get access to one location. Black Card members get access to any, plus free guest visits, tanning, and so on.

Maybe Planet Fitness has hit a wall on pricing. But it might also have just been clumsy, failing to add new treats for Black Card members to justify higher prices, like red light therapy or cold plunges, or not focusing January marketing enough on its core of fitness casuals.

Gym-level economics remain strong. With no swimming pools, child care, or big instructor-led classes to bloat costs, margins are high, and Black Card conversions continue. Free cash flow is strong, and memberships last quarter were stable. “This does not read like a business with fundamentals rolling over,” wrote investment bank Jefferies of the results. “It reads like one holding its shape while management retools the growth engine.”

Shares are trading for 14 times forward earnings estimates, down from more than 30 times at the start of the year. Earnings growth this year is pegged at just 6%, but Wall Street predicts a return to midteens growth in coming years.

Take-Two Interactive Software
It can be no surprise that Take-Two Interactive Software is expected to double its earnings quickly. Grand Theft Auto V, released 13 years ago, was the biggest videogame hit in history, and one of the biggest entertainment hits of any kind. A follow-up is expected to launch in November. The cost to make it has already been spent—time to open the profit floodgates.

We point out only that the long stretch since the last GTA was one of fairly steady earnings increases, as an online version of the game kept making money, and Take-Two turned out titles for its other franchises—it’s also big in sports and a cowboy shoot-’em-up franchise called Red Dead Redemption. The new GTA is sure to spring an online version of its own, and Wall Street predicts increased opportunities for in-game moneymaking, including on mobile devices. It is safe to say that interest in GTA VI is running high. Take-Two recently released an extended preview of the game through Netflix. It passed traditional Hollywood fare to hit No. 1 on Netflix’s English-language movie charts in nearly every market where it operates. When the pitch is drawing crowds, it’s usually good news for the product.

>>> Situational Awareness, the counterparty is the story (CNBC / FT / bbg)

Situational Awareness, the counterparty is the story

I imagine you saw the Faber segment on Friday. The FT and Bloomberg have since added the parts that make it interesting.

CNBC reported that Situational Awareness has been buying options again, several hundred million dollars of premium late last week and early this week. The FT reports that JPMorgan has ended its prime brokerage lending relationship with the fund altogether, and that the new positions are flex options. Bloomberg confirms that the fund has established a prime broking relationship with Clear Street.

The lending relationship is the fact worth sitting with, not the options.

Recall where this started. In July the fund's assets fell 67 per cent on cascading collateral demands against a highly levered AI book, and the bulk of the public portfolio went to Citadel in a single block. The prime brokers who worked the positions down at the time were Bank of America, Goldman Sachs and JPMorgan.

Aschenbrenner then told investors he would "fight another day", that the fund would continue as a hybrid public-private vehicle, and that the public book would henceforth be run on a fully paid-for basis. He also told them the fund was up 80 per cent on the year, which is worth holding alongside the 67 per cent asset decline rather than in place of it. The first is a performance figure, the second is a balance sheet figure, and they measure different things.

Six weeks later he is back. Three things follow.

First, the counterparty verdict. JPMorgan did not trim the relationship, it ended the lending. A G-SIB terminating a prime brokerage relationship after the event is a judgment about the client rather than about the market, and it is made with full sight of the positions and of how the account behaved under margin pressure.

Morgan Stanley, per the FT, held discussions since the fund launched and never opened a relationship at all. Goldman Sachs and Citigroup remain on the list. The tier of institution prepared to face this fund has narrowed, and that is more informative than any single name he is buying.

Second, where the exposure now sits. Clear Street is a prime broking relationship, not merely an execution venue. It was founded in 2018, it is not a bank, and its differentiator is a proprietary unified technology stack rather than the vendor patchwork the bulge bracket runs. So the financing and clearing relationship for a rebuilt concentrated AI book has moved from balance sheets subject to bank capital rules and supervisory examination to one that is not. Whatever view one takes of Clear Street itself, and it is well regarded in the space, that migration is the part of this story with implications beyond a single fund. This is what non-bank intermediation looks like when it happens to a name everyone is watching.

Third, and here I would push back on the comeback narrative: "fully paid" is not the same as "less leveraged". Paying cash for an option caps the loss at the premium and removes the collateral call, which is a genuine improvement in survivability, and prime brokers in discussion with the fund report he has said he will run far less leverage than before. But the FT is explicit that the premiums are small relative to the exposure obtained, which is the entire purpose of structuring a flex option that way. The leverage has moved from the financing to the instrument. Notional exposure per dollar of capital may not be materially lower than it was in June. What has genuinely changed is who bears the gap risk, and the answer is now the dealer rather than the fund.

On sizing, one caution that I think matters. Bloomberg reports, citing Nomura data, that between 4 and 8 September one fund spent at least 315 million dollars on calls in the flex-options market, across AMD, Bloom Energy, CoreWeave, SK Hynix, Intel, Sandisk and the Roundhill Memory ETF. The list matches the reporting.
Bloomberg does not attribute that spend to Situational Awareness, and I would not either. The inference is obvious and probably correct, but it remains an inference, and it is the sort that hardens into fact by repetition.

Two observations on the composition, if the attribution does hold. They are calls, so this is outright long convexity, not a hedge and not a spread. And the presence of a memory sector ETF alongside SK Hynix and Sandisk suggests the memory view is being expressed at both the single name and the basket level, which reads as conviction rather than opportunism.

One question stays open, and CNBC is explicit that it is unresolved: whether new outside capital has come in for the public book. If the premium is funded from what survived July, the concentration is being rebuilt with the residual capital of a fund that nearly failed six weeks ago. If it is new money, someone underwrote that trade remarkably quickly.

My reading: July was widely described as a clearing event for the AI infrastructure trade. The same participant, rebuilding the same exposure in the same names, six weeks later, in calls, with one principal lender having walked away and a non-bank having taken the seat, argues that it cleared considerably less than people assumed. The trade did not deleverage. It changed counterparty.

Happy to compare notes if you read it differently.

Best regards,
Laurent Chekroun
Graham Advisors Sàrl
+41 79 350 71 09