by Scott Martin | Oct 19, 2025 | Weekly Newsletter 7pm Sunday
The Bull Market Report
Probably the Best Financial Newsletter in the Country
IN THIS ISSUE
Market Summary
Key Market Indicators
The Big Picture
Berkshire Hathaway
Enbridge
ExxonMobil
Visa
Eli Lilly
Airbnb
Twilio
Stryker
Special Report: BlackRock
The Bull Market High Yield Investor
- Ares Capital
- Omega Healthcare Investors
Special Note
Market Summary
The government is shut down. Since you're reading this, you know the world has not ended. Stocks are breaking records and Treasury bonds are not breaking down. And many of our stocks are rallying serenely aloof from all the negativity that can take over Wall Street when investors indulge their worst fears.
What's going on here? Short and sweet: earnings are good and projected to get even better as we approach a new year. While there may be some anxiety out there, it's mostly a factor of Main Street. The biggest companies trading on Wall Street are doing just fine. Energy is coming back strong. Big Pharma is recovering from rumbling in Washington about price caps and even stricter tariffs on imported drugs. And Big Tech keeps powering ahead into the Silicon Valley future.
With only three months left in the year, we're on track to earn a good-to-great return on our recommendations, assuming of course that nothing horrible happens in this earnings season and that the market can avoid external shocks. The only remaining questions revolve around relative leadership. Right now, the BMR universe is dragging a little because we're so heavily invested in diversifiers: overweight Energy, overweight Senior Housing, overweight Real Estate and so on. With Big Tech running the show, every stock in those sectors we recommend is a drag on our results, at least for now. But when the market mood turns, we know we've made the right calls.
There's always a bull market here at The Bull Market Report. Speaking of Big Tech, The Big Picture has a revelation to report on the way the center of gravity in the U.S. economy has shifted away from a pattern that has held up for generations. We're so passionate about the theme that we've dedicated a special section of this report to BlackRock's role. The Bull Market High Yield Investor revolves around the Fed as always, with a few things to say about the government shutdown. And as always, we're eager to update you on as many of our favorite stocks and funds as we can fit into our beloved Newsletter.
Key Market Indicators
The Big Picture: Capex Is Now King
We've lived in a dual-tracked economic world for generations. First, American companies made most of their money on production for export, then as our society pivoted toward internal markets we started to buy more of what we made, creating a system of domestic consumers and domestic producers. The consumers are the biggest engine of economic activity. We collectively drive GDP.
Lately, however, a new fissure has emerged between the "old" brick-and-mortar economy where we buy and sell tangible things and the digital frontier of AI, cloud computing and other transformational technologies. And now the numbers reveal that corporate investment in that digital ecosystem has become a bigger driver of GDP expansion than consumer spending. Computers are where the growth is.
Tech giants like Microsoft, Google, Amazon and Meta are pouring unprecedented capital into building data centers to keep up with skyrocketing AI demand. Together, these four firms are projected to invest a staggering $365 billion this year alone. This surge of investment is reshaping the economy in real time. It means skyrocketing demand for Nvidia processors and all the components that help those servers run. It means demand for power and air conditioning equipment.
This is a historic infrastructure boom now similar to the golden age of railroads or telephone network build. According to one estimate we've seen, AI spending is already 2% of all U.S. economic activity. There's a long way to go here. At the peak of the railroad era, people were spending a full 10% of GDP expanding the lines and keeping the engines rolling on the rails. That's where we could be going now, and in that scenario we're in the earliest stages.
This is the future. And it means Main Street and the old economy are taking a back seat to what's going on with those high-tech giants. The story of 2025 is not one of decline, but of transformation. Consumer spending remains massive, but it’s now sharing the spotlight with another economic paradigm that’s being built, brick by brick, server by server, to power the future. If current trends continue, we may well look back at this moment as the dawn of a new economic model, one where innovation infrastructure isn’t just supporting growth, but leading it.
BMR Companies and Commentary
Berkshire Hathaway (BRK-B: $499, flat this week)
STOCKS FOR SUCCESS PORTFOLIO
Diversified conglomerate Berkshire Hathaway released its second-quarter results recently, reporting $93 billion in revenue, down 1% YoY, compared to $94 billion a year ago. Profits stood at $12.4 billion, or $5.73 per share, down from $30.3 billion, or $14.08, in the prior year. This decline, however, is essentially the result of a $24 billion one-time investment gain that Berkshire had reported during the year-ago quarter.
Long led by Warren Buffett himself, Berkshire has continued to trim its equity holdings even after the Oracle of Omaha's retirement, selling more stock than it purchased, a trend that’s been ongoing for the past two years. The conglomerate sold roughly $4 billion worth of Apple shares, which remains its largest holding, valued at $72 billion. Additionally, the company fully exited its position in T-Mobile.
Berkshire, however, made some sizable bets during the quarter and the weeks that followed, starting with a $1.6 billion stake in beaten-down health insurer, UnitedHealth Group (UNH – one of our favorites). The stock’s steep pullback this year, amid souring sentiments, but with robust fundamentals, makes it a textbook Buffett pick, who constantly looks for value in places other investors ignore or stay away from, making it a contrarian bet.
Additionally, the company has been gradually expanding its presence in the energy sector, notably with Chevron, its investment now valued at over $17 billion. This is again a stock that perfectly suits the Berkshire ethos, given its defensive moats and fundamentals, which make it a safe play in the volatile energy sector. Additionally, Chevron has a high annualized dividend yield of 4.5%, which is again something Buffett has always sought after.
Last week, Berkshire announced the acquisition of Occidental Petroleum’s chemical unit, OxyChem, in a $9.7 billion all-cash deal. Berkshire already owns 33% of Occidental, and while many believed it would go on to acquire a controlling stake in the company, it instead chose the lucrative chemicals business. This acquisition is a good fit for the company, which already has a specialty chemicals business through its subsidiary, Lubrizol. Additionally, it is a good deal for OXY, as it lowers debt, AND enhances the value of Berkshire’s 33% stake.
Berkshire shares are up 10% YTD, after some pullback following the announcement of Buffett’s retirement recently. The cash hoard continues to swell, hitting $350 billion, while Buffett himself referred to it as a “terrible long-term asset.” It remains to be seen how Greg Abel deals with this once he takes over. The company ended the quarter with $127 billion in debt and $27 billion in cash flow.
Our Target is $535 and We Would Never Sell Berkshire Hathaway.
Enbridge (ENB: $50, up 1%. Yield=5.5%)
ENERGY PORTFOLIO
Leading pipeline operator Enbridge released its second-quarter results recently, reporting $10.8 billion in revenue, up 32% YoY, compared to $8.2 billion a year ago. It posted $1.0 billion in profit, or $0.47 per share, against $910 million, or $0.42 the prior year, primarily driven by the company’s recent acquisitions of gas utilities, plus several other broad-based tailwinds that have been aligning in its favor.
The company experienced robust growth in its gas transmission and distribution segments, which reported $1.0 billion in profits during the quarter, up from $790 million in the same period last year. Management attributes this to higher contracting, favorable rate settlements, and higher utilization rates amid colder-than-normal weather conditions in Ontario this year, which drove up demand for natural gas. By contracting, they mean locking in more customers or volume commitments through contracts, which provides predictable revenue and contributes to increased profit.
In the Liquids Pipelines segment, Enbridge similarly delivered strong results, with Mainline volumes averaging 3.1 million barrels per day, up 7% YoY. The company noted robust customer demand, citing an oversubscribed open season on the Flanagan South pipeline. Progress continued on the Gray Oak pipeline expansion, which aims to transport 120,000 barrels of Permian crude to Gulf Coast export markets, with full commercial operations expected by mid-2026. Want to know more about Flanagan and Gray Oak? We oblige.
Flanagan South Pipeline
Length - 600 miles
Initial Capacity - 585,000 barrels per day (bpd)
Route - From Flanagan Terminal, Illinois (Pontiac area) through Illinois, Missouri, Kansas, terminating at Cushing, Oklahoma.
$2.7 billion project cost
Became operational in 2014
The Gray Oak Pipeline is a significant crude oil transportation system in the United States, serving the Permian Basin in West Texas. It extends approximately 850 miles from Orla, Texas, near the New Mexico border, to the Gulf Coast, with key delivery points in Corpus Christi and Freeport. The pipeline facilitates the movement of crude oil to major refining and export hubs along the Gulf Coast.
The pipeline has undergone expansions to meet increasing demand. The initial phase commenced in late 2019, and the system became fully operational in early 2020. As of 2025, the pipeline's capacity stands at 980,000 barrels per day (bpd), with an additional 40,000 bpd expansion slated for completion in 2026.
Gray Oak's strategic location and capacity enhancements play a crucial role in alleviating transportation bottlenecks in the Permian Basin, thereby supporting the efficient delivery of crude oil to domestic and international markets.
On the renewables front, the company’s 600-megawatt Clear Fork Solar project in Texas was formally sanctioned, with the output already contracted to Meta Platforms. Another large solar project, the 815-megawatt Sequoia development, is expected to come online in 2025, with full output anticipated in 2026. Management reiterates that all sanctioned projects are eligible for U.S. tax credits.
Enbridge is increasingly positioning itself as a key player in the massive AI and data center buildout, highlighting the fact that 30 new data center projects are located within 50 miles of its existing natural gas infrastructure. The company is additionally targeting 80 coal-fired plants for potential conversion to natural gas, creating additional long-term demand for its massive pre-existing pipeline infrastructure.
Despite all of the trade, tariffs, and geopolitical uncertainties, Enbridge is up 13% YTD. The company increased its dividend for the 30th consecutive year, while still maintaining a robust coverage ratio of between 60% to 70% of distributable cash flow. Not a bad dividend, either, clocking in at 5.5%. Management plans to return between $40 to $45 billion over the next five years. The company ended the year with $1.2 billion in cash, $100 billion in debt, and $13 billion in cash flow.
This is a $110 billion sleeper. We added the stock at $43 in January with a Target of $51, which it reached this week. We are hereby raising our Target to $61 and increasing our Sell Price from $35 to $45. With the move into AI infrastructure support, we can see this company reaching triple digits by 2028.
ExxonMobil (XOM: $113, down 3%)
ENERGY PORTFOLIO
Energy giant ExxonMobil released its second-quarter results recently, reporting $82 billion in revenue, down 12% YoY, compared to $93 billion a year ago. Profits were lower, but still substantial at $7.1 billion, or $1.64 per share, down from $9.2 billion, or $2.14, primarily due to substantially lower realized prices, as crude oil and natural gas prices are currently under pressure.
The company posted record quarterly production, reaching 4.6 million oil-equivalent barrels per day, its highest output ever, following the merger of Exxon and Mobil 25 years ago. Exxon finally hit its stride in Guyana, with three significant developments online producing a combined 650,000 barrels per day. The company plans to scale this up to a massive 1.7 million barrels per day across eight projects in the region by 2030. Wow.
ExxonMobil highlighted progress across its downstream and chemical operations, with several major projects coming online this year. The company ramped up activity at its China Chemical Complex to serve the world’s largest domestic market. In Texas, it expanded capacity at its Proxima Systems blending facility.
Altogether, these 2025 project startups are expected to generate more than $3 billion in incremental earnings in 2026. Management highlighted the company’s progress in carbon capture and storage, with its first third-party project now operational and capable of storing 2 million metric tons of carbon annually. The company has signed seven long-term off-take contracts with customers.
The company reported $1.4 billion in structural cost savings so far this year, and remains on track to achieve $18 billion in savings by 2030. The recent acquisition of Pioneer Natural Resources led to increased depreciation and amortization costs. Management notes that this acquisition has generated significant cost synergies of $3 billion, with additional savings and productivity gains anticipated.
The stock is up 6% YTD, amid substantial macro headwinds and volatility throughout this year. The company has an ambitious outlook for 2030, aiming for $20 billion in earnings and an additional $30 billion in cash flow. It has raised its dividend for 42 consecutive years, and now sports a yield of 3.5%. The company ended with $14 billion in cash, $40 billion in debt, and $54 billion in cash flow. We’ve mentioned this many times, but it’s worth repeating: the company has a long history of repurchasing its own stock, a practice that began in the mid-1980s. In 2024, it purchased $20 billion, and in the first half of 2025, it bought $10 billion. Like clockwork!
Our Target is $120 and our Sell Price is $105. We added the stock at $99 in 2023, so the return hasn’t been great, but the company is STURDY. Very little can hurt this company, and when crude moves back to the $75 level, profits that are big now will turn into a gusher.
Visa (V: $350, up 4%)
FINANCIAL PORTFOLIO
Payments giant Visa released its third-quarter results recently, reporting $10.2 billion in revenue, up 14% YoY, compared to $8.9 billion a year ago. It produced a profit of $5.8 billion, or $2.98 per share, against $4.9 billion, or $2.42, driven by strong performances across key segments and metrics such as payment volumes, data processing revenues, and value-added services, among several others. Read that sentence again. This company is so profitable, it makes us crazy! We can’t think of another company that produces profits of 57% after tax. It’s trading at a PE of 29, but only 27 on 2026 earnings, and 24 on 2027 earnings. We could make a strong argument that it ought to be trading at 35 times earnings now, which would bring the price to $420.
During the quarter, the company saw its global payments volume surge 8%, with cross-border volumes up 13%, which it attributes to the resurgence in travel and ecommerce. Visa experienced momentum across its services and segments, with data processing revenue up 15%, international transaction revenue up 14%, and services as a whole rising 9% from the previous year, amid substantial currency volatility.
Visa highlighted continued momentum in its digital payment initiatives, noting that more than half of all global e-commerce transactions are now tokenized* as the company works toward its goal of full adoption. Tap-to-pay penetration reached 78% of face-to-face transactions worldwide, and meanwhile, Tap-to-Phone technology gained significant traction, with 3 million new devices added in the quarter.
*Tokenization: Instead of transmitting your actual credit card number during a transaction, Visa replaces it with a unique digital “token.” This makes transactions much safer because the real card number is never exposed to merchants or hackers.
The company expanded its stablecoin capabilities, supporting four blockchains—Ethereum, Stellar, Avalanche, and Solana —as well as four regulated stablecoins. This provides dollar access in emerging markets with volatile currencies, while facilitating cross-border transactions for B2B and remittances.
It has facilitated over $25 billion in crypto spending since 2020 and is working with partners to deepen adoption and integrate settlement solutions. Visa is leaning heavily into stablecoins as a growth lever, seeing them not as a threat to its network but as an extension of it. CEO Ryan McInerney said the company supports the Genius Act, calling it a milestone toward regulatory clarity for digital assets, which have long been mired in uncertainty.
In the face of substantial trade, tariffs, and geopolitical uncertainties, Visa is up 11% YTD, after mounting a stellar recovery following its “Liberation Day” pullback to $305 in early April. The company repurchased stock worth $4.8 billion during the quarter, in addition to the $1.2 billion in dividends, made possible by its robust balance sheet, which held $19 billion in cash, $25 billion in debt, and generated $23 billion in cash flow.
Our Target is $400 and We Would Not Sell Visa.
Eli Lilly (LLY: $840, up 16%)
HEALTHCARE PORTFOLIO
Pharmaceutical company Eli Lilly released its second quarter results recently, reporting $15.6 billion in revenue, up 38% YoY, compared to $11.3 billion a year ago. It posted a profit of $5.7 billion, or $6.31 per share, against $3.5 billion, or $3.92, representing an impressive 63% increase, driven by strong demand for its incretin therapies, particularly Mounjaro for type 2 diabetes, and its weight-loss drug, Tirzepatide, sold as Zepbound.
The company saw strong contributions from new launches such as Ebglyss, Jaypirca, Kisunla, Omvoh, and Verzenio, as it remains focused on expanding manufacturing capacity within the U.S. Eli similarly saw strong growth in its oncology, immunology, and neuroscience portfolios, helping offset some of the headwinds related to pricing, rebates, and discounts that it has been dealing with recently.
This was an eventful quarter on the pipeline front, with several late-stage programs advancing to the next level. This includes the Phase 3 results for Orforglipron for obesity in pill format, as well as the trial demonstrating tirzepatide’s cardiovascular benefits, all of which yielded strong, positive results. It further saw retatrutide entering Phase III trials for chronic low back pain and metabolic liver disease during the quarter.
Eli continued to expand its portfolio via acquisition, with the $1 billion purchase of SiteOne Therapeutics adding a promising non-opioid pain drug, STC-004, aimed at increasing its footprint in neuroscience. Similarly, the $1.3 billion acquisition of Verve Therapeutics adds genetic medicines for heart disease, perfectly aligned with the company’s broader strategy of investing in innovative, long-lasting therapies.
Eli Lilly acknowledged that CVS’s decision to exclude Zepbound from its formulary does create headwinds and is already impacting prescription volumes. However, the company states that the long-term trend in incretins remains intact, as the market continues to expand, with Zepbound as the market leader in the U.S., holding a roughly two-thirds share in branded prescriptions in this space.
The stock is up 8% YTD, with the company ploughing through the trade, tariffs, and other policy-related uncertainties. At nearly $800 billion, Eli Lilly is the most valuable pharmaceutical company in the world, still trading at a fairly reasonable 27 times earnings and 14 times sales. It returned $2 billion in buybacks and dividends, before ending the quarter with $3.6 billion in cash, $40 billion in debt, and $11 billion in cash flow.
Our Target is $1,100, and We Would Not Sell Eli Lilly. Want a risky, leveraged 2X stock that goes up twice the percentage of Eli Lilly stock? Take a look at ELIL. It’s trading at $20, and had been as high as $27 in April when Lilly was $902. Just 10 days ago, when Lilly was at $715, the stock was at $15. Now $20. Speculative, so only for your “fun” money!
Airbnb (ABNB: $120, down 3%)
LONG TERM GROWTH PORTFOLIO
Vacation rental platform Airbnb released its second quarter results recently, reporting $3.1 billion in revenue, up 13% YoY, compared to $2.7 billion the prior year. Profits stood at $640 million, or $1.03 per share, against $560 million, or $0.86, as the company benefited from resilient domestic and international travel in the face of the substantial trade, geopolitical, and macroeconomic uncertainties in recent months.
A total of 134 million nights and seats were booked on the platform during the quarter, up 7% YoY, with growth led by Latin America and Asia-Pacific regions in the mid and high-teens. (Take a moment to have this sink in. 134 million nights and seats booked. This is no small company.) The North American regions experienced a slight slowdown, with growth in the low single digits; however, the market is far from saturated, as hotels continue to dominate, leaving plenty of room for further development and disruption.
This was an eventful quarter on the product front, as the company redesigned its app to seamlessly integrate homes, services, and experiences into a single interface. On Artificial Intelligence, Airbnb rolled out a custom-built customer service agent, which has already reduced the need for human intervention by 15%. Looking ahead, the company plans to integrate AI into search, booking flow, and personalized recommendations.
To address supply constraints in specific key markets, Airbnb is leaning into co-hosting, which allows hosts to partner with other individuals to manage the hosting process. This now covers 100,000 listings and has enabled the booking of 10 million nights since its introduction. The company bolsters trust in this process through its $3 million AirCover protection program and identity verification system, which has verified 200 million profiles.
Airbnb plans to onboard more hotels, especially in high-demand markets, as a way to supplement supply during peak travel periods and capture guests who might otherwise be turned away. Additionally, the company stated during its earnings call that it is now ready to pursue acquisitions, having completed a major overhaul of its tech platform and broadened its strategic focus beyond core travel.
Airbnb highlighted the growing role of large-scale events in its expansion strategy, announcing new partnerships with the FIFA World Cup, the Tour de France, Lollapalooza, and the 2026 Winter Olympics in Milan. The company returned $1 billion to investors in buybacks during the quarter. It ended with a sturdy balance sheet, comprising $11.4 billion in cash, just $2.3 billion in debt, and $4.3 billion in cash flow.
Our Target is $170 and our Sell Price is $110. One of these days, Airbnb’s stock will rise to where it truly belongs—closer to our target. Management has been quietly and effectively enhancing the experience of staying in properties that aren’t traditional hotels. The company is currently valued at around $75 billion but is expected to return to the $100 billion-plus range before long.
For comparison, Hilton Hotels is worth about $60 billion and owns thousands of physical properties. At the same time, Airbnb operates without any hotels—and arguably delivers a better experience at a lower cost. In our view, Airbnb represents the far superior investment opportunity.
Twilio (TWLO: $103, up 1%)
LONG TERM GROWTH PORTFOLIO
Cloud communications platform Twilio released its second-quarter results recently, reporting $1.2 billion in revenue, up 13% YoY, compared to $1.1 billion a year ago. Profits were strong at $190 million, or $1.19 per share, against $150 million, or $0.87.
Twilio’s communications business led the way with $1.2 billion in revenue, up 14% YoY, driven by sustained momentum in messaging, alongside a notable return to double-digit voice growth for the first time in two years. Meanwhile, the custom data platform remained steady at $75 million, achieving operating profitability for the first time, which indicates improved operational efficiencies.
Growth was driven by strong momentum across its new AI-driven products, such as Conservation Relay and Conversational Intelligence. These are AI-driven products, as explained in more detail below.
This was one of the strongest quarters for new customer acquisitions, with the latest self-service channel gaining traction. Management notes that the number of deals worth $500,000 or more per annum rose 57% YoY, which is attributed to the reduced onboarding friction and improved conversion rates from free to paid accounts. Platformization and cross-selling have also led to higher deal volumes recently.
The company highlighted several key product innovations during the quarter, with its push into AI-driven customer engagement being the central theme. Conversation Relay, now generally available, completed nearly 1 million voice calls in its debut quarter, enabling developers to build natural language AI agents across channels. Similarly, usage of Conversational Intelligence for messaging jumped 86%
Management called Artificial Intelligence a “once-in-a-generation” opportunity that could significantly expand its addressable market. They further highlighted a new multi-year partnership with Microsoft, aimed at helping developers build conversational AI tools combining Twilio’s platform with Azure and OpenAI’s tools. It now counts several AI-native startups as clients, with annual spends exceeding seven figures.
The stock is down 6% YTD, despite it being reasonably well insulated from any fallout from the recent trade, tariff, and geopolitical uncertainties. Twilio repurchased stock worth $180 million during the quarter and $310 million YTD, as it trades at 20 times forward earnings. The company has a robust balance sheet, comprising $2.5 billion in cash, just $1.1 billion in debt, and $780 million in cash flow.
Our Target is $155 and while our Sell Price was $115, we’re lowering this to $90 instead of recommending an exit because we are firm believers in the company and its prospects. The company has steadily worked toward profitability and has now successfully reached that milestone. The numbers for 2024 were $2.45, and 2025 is projected to be $3.67, representing a substantial increase. Barron’s is projecting $5.20 for 2026.
Management understands that sustained profit growth is the key to driving the stock higher. Wall Street was very enthusiastic about this company in the early 2020s, when the stock peaked at $450 in 2021, and interest remains strong. Once Wall Street fully embraces it again, the stock could potentially double from its current level. Signs of this upward momentum may start to emerge later this year and into next year.
Stryker (SYK: $371, flat)
HEALTHCARE PORTFOLIO
Medtech company Stryker released its second quarter results recently, reporting $6.0 billion in revenue, up 11% YoY, compared to $5.4 billion a year ago. It posted a profit of $1.2 billion, or $3.13 per share, compared to $1.0 billion, or $2.81, in the prior year. The company’s outperformance during the quarter was primarily driven by strong growth in procedural volumes across key markets and business segments.
Stryker is a global medical technology company specializing in innovative products and solutions for surgery, orthopedics, and patient care. Its business spans surgical equipment, endoscopy systems, neurotechnology, orthopedic implants, and emergency medical devices. Stryker focuses on enhancing clinical outcomes through advanced technologies, including robotic-assisted surgery, high-definition imaging platforms, and minimally invasive solutions. The company sells to hospitals, surgical centers, and healthcare providers worldwide, generating revenue from both product sales and service offerings. With a strong emphasis on research and development, Stryker continuously expands its portfolio to address evolving medical needs and enhance efficiency and safety in healthcare delivery.
Stryker’s MedSurg and Neurotechnology businesses delivered 11% organic growth, followed by Orthopaedics at 9%. The strong demand for operating room infrastructure led to a 19% YoY growth in its Endoscopy business, driven by the Stryker 1788 Video Platform, a surgical visualization system. Finally, Instruments rose 10% YoY, led by surgical technologies such as Neptune and Mako robotics.
The company highlighted several new records during the quarter, with its Mako robotic platform surpassing 2 million procedures, while achieving record new installations worldwide. Management stated that the new Mako 4 system is experiencing strong traction and seamless adoption among both new and existing clients. Additionally, new applications, such as Stryker’s Restoration Modular Revision Hip System, have received strong positive feedback from surgeons.
Other portfolio updates include its OptaBlate bone tumor ablation system, which received approval during the quarter, along with positive initial feedback. The LifePack 35, a next-generation defibrillator platform, has secured European approval and is set for rollout this quarter, with management framing it as a long-tail revenue contributor. It is also set to roll out its Blueprint AI integration, with FDA approval already secured.
Stryker continues to navigate headwinds in the supply chain, with tariff-related costs expected to impact the company by $175 million this year. The reduction in U.S.-China tariffs has resulted in some relief for the company, although higher tariffs on Europe offset some of these benefits. The company expects tariff expenses to become more pronounced during the second half of this year.
The company addressed recent challenges with the $5 billion Inari Medical acquisition, noting that Q2 was impacted by destocking and a transition in the salesforce. On the broader M&A front, Stryker maintains a robust deal pipeline and signaled openness to another Inari-sized acquisition that stands to unlock value. It ended the quarter with $2.5 billion in cash, $17.1 billion in debt, and $4.8 billion in cash flow.
We’d like to see them lower their debt level from here. But the cash position is good, so they offset each other. Our Target is $460 and our Sell Price is $350. Stryker is a big company, clocking in with a market cap of $140 billion. Revenues are steadily growing at a good pace, from $18 billion in 2022 to $24 billion in 2025. Profitability is steady at the $4 billion level.
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SPECIAL REPORT
BlackRock Leads $20 Billion Data Center Acquisition,
Signaling Historic AI Infrastructure Capital Influx
BlackRock (BLK: $1,161) is positioning itself as a central player in the AI infrastructure build-out, with its Global AI Infrastructure Investment Partnership nearing an agreement to acquire Aligned Data Centers for approximately $20 billion (part of an overall enterprise valuation of $40 billion, including debt).
This potential deal is significant for several reasons:
• Massive Capital Mobilization: The acquisition would be the first significant move by BlackRock's new consortium—launched last year with Microsoft and Mubadala Investment Co.’s MGX—which aims to raise $100 billion in total equity and debt to fund AI-specific data center expansion. The name of the business is the Global AI Infrastructure Investment Partnership.
• Strategic Partners: The partnership has expanded its influence by adding key industry players, including chipmaker Nvidia, Elon Musk’s xAI, GE Vernova, and Cisco Systems.
• A Sign of Market Intensity: The $20 billion price tag underscores the historic, capital-intensive nature of the AI boom, where the need for physical computing power is drawing "deep-pocketed investors" globally.
• Private Markets Frenzy: BlackRock joins other top private-markets firms like Blackstone (BX), KKR, Apollo, and Blue Owl, all of which are committing colossal sums to AI infrastructure projects. For example, KKR has a $50 billion partnership for data center development, and Blackstone has committed over $25 billion to the sector.
• Financial Implications: This unprecedented spending is fueling growth across the public markets, benefiting companies like Nvidia (NVDA) and Oracle, but is also prompting warnings of potential market excesses and overbuilding, given the uncertainty about future AI resource consumption.
If finalized, the acquisition of Dallas-based Aligned Data Centers (which has 80 locations across the Americas) would be one of the largest private-equity buyouts in 2025. BlackRock is leveraging its 2024 acquisition of Global Infrastructure Partners to lead its entry into this rapidly expanding sector.
Note: We don’t follow BlackRock yet, but we’ll let you in on a secret – You might see a Research Report come out soon on this $180 billion company. It is the largest and most influential asset manager on the planet. No firm commands a broader view—or a more profound influence—over the world’s capital than BlackRock.
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The Bull Market Report High Yield Investor
Every time the federal government shuts down, the implications are unpredictable and take months or years to play out. This time around, one immediate impact is clear: since the Bureau of Labor Statistics (BLS) is shut down, the Fed will be flying blind into its next policy meeting, with no official labor market or inflation data releases before the economists get back to work. We've already missed the September unemployment update. In the event that this drags on past the Columbus Day holiday, we'll lose a round of consumer price numbers as well. While it's far from lethal in the grand scheme of things to skip a report or two, this is not the kind of environment that makes the Fed comfortable (It is notoriously wary of making moves in the absence of data). The longer this drags on, the more likely they will be to drag their feet too.
In the meantime, however, the market is almost unanimously betting on a rate cut at the end of this month, which may be a demonstration of confidence that the shutdown will get resolved fast enough to let Jay Powell and company get back to work, but it might also reflect more basic wish fulfillment at work. Investors are fixated on getting relief on rates, no matter what the rationale or unintended consequences of a rushed loosening cycle might be. Most of us are eager to see lower financing costs. Fast or slow, they're probably on the horizon, as even the Fed projects in its economic forecast.
And as the short end of the yield curve drops, the return on money markets and other "cash" investments generally will drop with it, forcing people who have parked $7.7 trillion on that side of the financial markets to make hard decisions whether to settle for a lower level of after-inflation income or accept a little risk in order to chase higher yields. We've been on the side of equities with higher yields for years now. Never forget that in our view we're getting repaid in real percentage points of income today in return for the small chance that unforeseen factors can interfere with our dividend payments down the road. As every investor learns, a world without risk is a world without the possibility of enhanced returns, especially when you factor in how narrow the spread between ambient inflation (2.9%) and overnight lending rates (4.2%) has gotten. There's not a lot of room for error there, especially when any uptick in inflation can force holders of "safe" securities to swallow a negative real return. Locking in a “safe” coupon return can feel good but it also locks you out of opportunities to stay ahead of persistent inflation.
In our view, stocks like these are in the sweet spot:
Ares Capital (ARCC: $20, down 2%; yield=9.5%)
HIGH YIELD PORTFOLIO
Business development company Ares Capital released its second quarter results recently, reporting $750 million in revenue, down 1% YoY, compared to $760 million a year ago. Profit or FFO during the quarter stood at $350 million, or $0.50 per share, down from $430 million, or $0.61, due to lower transaction volumes resulting in softer-than-expected investment income.
The company generated nearly $120 million in realized investment gains, with the total value of its portfolio rising 3% from the prior quarter to $28 billion. According to management, the tariff-related policy uncertainty created a temporary lull in transaction volume early in the quarter, limiting income-generating deployments. Still, they note that volumes picked up in June. While policy and macroeconomic outlooks remain cloudy, Ares is optimistic about the near term, with the recent rate cuts and massive AI capital expenditures helping to spur transaction volumes.
The weighted-average yield currently stands at an impressive 10.9%, with nearly 70% of its assets comprising floating-rate securities and 60% being first lien, which gives the company priority over other lenders in the event of default.
Number of Investments: 566 companies as of mid-2025
Portfolio Size: $28 billion in assets under management
Asset Classes: Mostly credit instruments—senior secured loans, first lien, second lien, subordinated, unitranche. They also do non-control equity, high-yield public/private debt
Industry Spread: Industries include software and services, healthcare services, commercial/professional services, consumer services, insurance services
Geographic Exposure: Primarily U.S. ARCC is very focused on the U.S. middle market
Commitment Size: New investments are often in the range of $30 million to $500+ million
As the above statistics suggest, Ares maintains a highly diversified portfolio, with its $28 billion book spread across 560 companies operating in 25 industries. The average size of each position is 0.2%, with no single investment exceeding 2% of assets. This, along with the high interest rates it charges, enables it to deliver steady dividends in a volatile market, particularly in high-risk segments such as middle-market lending. This diversification has allowed the company to maintain non-accruals at 2%, which is significantly below the industry average of 34%. Ares marked its 64th consecutive quarter of increasing dividends, resulting in an impressive annualized yield of 9.5%.
Our Target is $24 and our Sell Price is $20. The stock remains steady, having stayed within the range of $19-$23 over the last year. We like it for its high dividend and intelligent management. We added the stock in 2018 at $17 and have been watching you accrue those big dividends now for eight years.
Omega Healthcare Investors (OHI: $41, down 2%; yield=6.5%)
SENIOR GROWTH STRATEGIES
Healthcare REIT Omega Healthcare Investors released its second-quarter results recently, reporting $240 million in revenue, up 12% YoY, compared to $210 million. It posted a profit, or FFO, of $230 million, or $0.77, against $190 million, or $0.71. The company’s performance was primarily driven by the successful restructurings of several operators in recent months, alongside rent escalators.
The major story during the quarter was the improving health of Omega’s operators, who had been under pressure since the COVID-19 pandemic, followed by new government staffing regulations that impacted margins. Operators, on average, are now earning at least 1.5 times their rent obligations, with improvements on the way as occupancy rates continue to improve, making Omega’s earnings significantly safer.
During the quarter, the company made $530 million in new investments, up from $225 million a year ago. Approximately 93% of this was comprised of real estate acquisitions, with the remainder consisting of loans. A significant portion of this expenditure, at $340 million, was allocated to acquiring 45 care homes across the U.K. and the island of Jersey, which are leased to a mix of new and seasoned operators. There were no dispositions in this period.
Management noted that staffing pressures have continued to ease across Omega Healthcare’s operating base, with wage growth now described as “normal inflationary increases” rather than the steep spikes seen during and immediately after the pandemic. This bodes well for the company’s operators, who had been dealing with tough margins amid low occupancy rates through COVID and the years that followed.
Omega referred to the passage of the “One Big Beautiful Bill” as a major win for the long-term care sector, citing protections for skilled nursing from Medicaid cuts, a 10-year moratorium on staffing mandates, and court rulings that curbed the authority of the Centers for Medicare and Medicaid Services. Management further believes that the 4% Medicare reduction in 2026 will be legislatively waived.
The stock began rallying after the passing of the Big, Beautiful Bill, and is now up 9% YTD, amid substantial volatility and uncertainties in the broader market. The company offers an annualized yield of 6.5%, with a payout ratio of 90%. It will be raising dividends as soon as the payout ratio drops to 85%. Omega ended the quarter with $730 million in cash, $5 billion in debt, and $840 million in cash flow.
Our Target is $50 and our Sell Price is $34. We can’t think of a better investment to capitalize on the demographic certainty of an aging population. With 1,030 properties in the U.S. and the U.K., the firm is well diversified.
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