Welcome back to the Weekly Compounder Update. Each week we track the news that matters most for long-term investors focused on quality compounders that can grow value steadily over time.
This week’s updates span finance, industrials, and technology. Earnings from JPMorgan, Fastenal, and American Express reflected the durability of high-quality franchises even as management teams remain cautious about the broader economy. Meanwhile, Schwab’s rebound continues and TSMC’s dominance in advanced chips shows no signs of slowing.
General Market News
- Manufacturing Data Softens Again. Manufacturing activity in the mid-Atlantic region weakened again in October as new orders slowed and price pressures re-emerged. The report suggests that while inflation is cooling on paper, cost pressures remain sticky across industrial supply chains (Reuters). This matters for industrial compounders like Fastenal or Honeywell, which depend on steady demand and disciplined pricing to protect margins through the cycle.
- AI Infrastructure Strains the U.S. Power Grid. A joint report from Deloitte and The Wall Street Journal highlights how AI-driven data center growth is reshaping the U.S. power grid. Electricity demand from AI data centers could rise more than 30x by 2035, pressuring utilities and regulators to accelerate investment in new capacity (The Wall Street Journal). That buildout has clear implications for compounders tied to electrification, such as TSMC, Nvidia, and utilities investing in grid modernization.
- Tariff Talk Sends a Reminder About Market Fragility. Markets responded after Trump called 100% tariffs on Chinese imports “not sustainable,” while still signaling plans to meet with President Xi. The comment offered momentary relief, but investors and companies must continue to grapple with the reality that trade risk remains (Reuters). Perhaps the real takeaway was that the reaction reminded us expectations are high, and that creates sensitivity to headlines.
Company Spotlights
JPMorgan Chase (JPM)
What happened: JPMorgan reported Q3 2025 net income of $14.4 billion (+12% YoY), or $5.07 per share (+16%), delivering a 20% ROTCE on another strong quarter across all major divisions. Still, the details of the report offered a more cautious depiction of what lies ahead:
- Higher credit provisions:: The bank set aside $3.4 billion for potential loan losses (+10% YoY), reflecting a more conservative stance as credit metrics begin to normalize. Net charge-offs climbed 24% to $2.6 billion, which was driven by credit cards and wholesale lending. The $810 million reserve build, though smaller than last year, was geared toward potential credit card delinquencies.
- Credit event in investment banking: A $567 million loss, including $170 million tied to the bankruptcy of subprime auto lender Tricolor Holdings, led Dimon to warn, “When you see one cockroach, there are probably more.”
Separately, the firm announced a $1.5 trillion “Security and Resiliency Initiative”, a 10-year plan to finance and invest in sectors essential to U.S. national security. The sectors span critical minerals, defense, energy resilience, and frontier technologies like AI, cybersecurity, and quantum computing. The program includes up to $10 billion in direct equity investments. 📖 JPMorgan Launches $1.5T Security & Resiliency Initiative 📖 Q3 2025 Earnings Release
Why it matters: The quarter reflected both financial strength and cyclical realism. JPMorgan continues to generate tremendous returns while also prudently building reserves and acknowledging potential credit headwinds. The firm’s CET1 ratio of 14.8% shows both balance sheet resilience and Dimon’s conservative nature. This should give the company flexibility to maintain dividends, repurchase shares, and invest through volatility. Meanwhile, the Security and Resiliency Initiative positions JPMorgan at the center of America’s industrial and technological renewal, which links the bank’s long-term strategy to national priorities.
My take: JPMorgan remains one of the highest quality banks in the world. Dimon’s caution was not alarmist. Instead, I would argue it was pragmatic, recognizing that banking is cyclical and preparation for a turn in the cycle is what sets JPM apart. The $1.5 trillion initiative demonstrates balance in also deploying capital toward strategic growth opportunities while maintaining exceptional returns. At roughly 15x earnings, the valuation does not demand perfection, but could compress if macro conditions deteriorate. For patient investors, though, this is still one of the most reliable compounders in finance.
Fastenal (FAST)
What happened: Fastenal reported Q3 revenue of $2.13 billion (+11.7% YoY) and EPS of $0.29 (+12%), just shy of estimates. Gross margins rose 40 bps to 45.3%, with operating margin at 20.7%. Growth was led by fasteners (+14%) and large contracts (+13%), which are now nearly 74% of sales. Fastenal’s digital channels continued their steady climb making up 61% of revenue. Shares fell after management’s cautious Q4 outlook tied to seasonal margin pressure, tariffs, and higher SG&A from incentive resets. 📖 Fastenal Company Reports 2025 Third Quarter Earnings
Why it matters: Despite shares pulling back, Fastenal’s long-term engine made up of its onsite programs, vending, and digital integration continues to gain traction. The company is embedding itself deeper within customer operations and using data to automate replenishment, tightening its grip on market share. While pricing and tariff timing may dent margins short term, the moat remains intact and arguably getting stronger.
My take: Fastenal is the epitome of “boring is beautiful,” and this quarter was better than the market reaction suggests. Fastenal continues to compound through consistent execution. At around 40× forward earnings, the stock still trades above its historical average, but quality like this rarely comes cheap. I would stay patient for an entry closer to the mid to high $30s, where valuation better reflects risks. For now, though, the story holds — Fastenal is one of the few industrials quietly compounding in plain sight.
Johnson & Johnson (JNJ)
What happened: Johnson & Johnson reported Q3 2025 revenue of $24.0 billion (+6.8% YoY) and adjusted EPS of $2.80 (+15.7% YoY), topping expectations. MedTech grew 6.8% on strength in electrophysiology, cardiovascular (Abiomed, Shockwave), and surgical vision, while Innovative Medicine also rose 6.8%. The company raised full-year sales guidance to $93.7 billion (+5.7%), reaffirming adjusted EPS guidance of $10.85. Following the Kenvue separation, J&J’s business mix is now 65% Innovative Medicine and 35% MedTech. 📖 Q3 2025 Earnings Release
Why it matters: Post-Kenvue, JNJ is a two-engine company—Innovative Medicine and MedTech. Our interest is the MedTech engine as a direct competitive foil to Intuitive Surgical (ISRG). While not yet in direct competition with Intuitive Surgical (ISRG), J&J’s upcoming Ottava robotic platform represents a credible long-term challenge in soft-tissue surgery. This is an area to watch for development in JNJ’s narrative. Management is depending on progress in it MedTech segment to drive growth for the company long-term.
My take: JNJ is not a pure-play MedTech name yet, but it’s evolving into one worth tracking. For those interested in the name, shares are up about 33% year to date and now trading at ~18× forward earnings. The stock looks reasonably priced for a healthcare giant repositioning around higher-growth, higher-return businesses. The more interesting story is what lies ahead. If MedTech keeps gaining share and Ottava successfully reaches the market, J&J could emerge as a legitimate procedural competitor to ISRG in the years ahead. While competition is worth watching, ISRG still maintains a considerable lead that drives its wide moat.
Taiwan Semiconductor (TSM)
What happened: TSMC reported Q3 revenue of NT$989.9 billion (+30% YoY) and net income of NT$452.3 billion (+39%), both exceeding expectations. Gross margins rose to 59.5%, helped by cost improvements, higher utilization, and record AI-related demand. 3nm chips made up 23% of wafer revenue, while advanced nodes (3nm and 5nm combined) accounted for 60% of total revenue. Management guided for Q4 revenue of $32.2–$33.4 billion and gross margins between 59–61%, which was credited to continued strength in AI and high-performance computing. 📖 Q3 2025 Earnings Release
Why it matters: TSMC dominates advanced-node manufacturing, an area that now drives most of its revenue and profitability. That leadership gives it pricing power and margin resilience in an otherwise cyclical industry. The company remains the backbone of the global semiconductor ecosystem and the center of the AI supply chain, powering everything from Nvidia’s accelerators to Apple’s iPhones. Notably, management’s tone this quarter was quite confident. They noted that AI-related demand is “stronger than we thought three months ago.” That suggests this investment cycle may still be in its early innings.
My take: TSMC sits squarely at the heart of the AI megatrend, executing at a scale few can rival. The company plans $40–42 billion in 2025 capex, with about 70% devoted to next-generation technologies. This level of investment is accretive to its moat and reflects management’s conviction that AI-driven demand is durable. Expansions across Taiwan, Japan, Arizona, and Europe show TSMC positioning itself for years of growth, not quarters. At roughly 31× forward earnings, the stock is not cheap, but it is hard to argue against paying a premium for a business this indispensable. Still, investors should remain mindful of cyclical swings and customer concentration risk.
American Express (AXP)
What happened: American Express reported another strong quarter, with revenue up 11% to a record $18.4 billion and EPS rising 19% to $4.14. Card member spending accelerated to 9% growth, led by premium and international customers, while credit metrics remained stable with net write-offs flat at 1.9%. The company raised full-year guidance to 9–10% revenue growth and EPS of $15.20–$15.50. Demand for the refreshed U.S. Platinum Card exceeded expectations, with new account acquisitions doubling from pre-launch levels and engagement across travel and lifestyle benefits remaining high. 📖 Q3 2025 Earnings Release
Why it matters: American Express continues to defy concerns of consumer fatigue and slowing travel. The combination of premium card demand, growing revolving balances, and resilient spending from affluent customers reinforces the durability of Amex’s fee-based model. That said, expenses rose 10% year-over-year, which is a reflection of higher engagement costs and benefits usage. While competitors are tightening credit, Amex’s margins held up and credit quality looks stable.
My take: This was a classic Amex quarter, one of growth, quality credit, and pricing power. The brand’s grip on premium consumers remains solid, and its global network expansion, now accepted at roughly 160 million merchants, continues to deliver results. Shares trade around 21x forward earnings, which bakes in a lot of optimism. If consumer momentum softens, even with an affluent base, the stock could correct meaningfully. I would view that kind of pullback as a buying opportunity for a long-term compounder.
Charles Schwab (SCHW)
What happened: Schwab delivered a standout quarter that reinforced its scale and earnings power. Revenue climbed 27% year over year to $6.1 billion, and adjusted EPS surged 70% to $1.31. The firm attracted $137.5 billion in core net new assets (+44%) bringing total client assets to $11.6 trillion. Net interest margin expanded to 2.86% as funding costs fell. Similar to other banks, trading volume was strong jumping 30% and wealth solutions inflows rose 40%. Schwab also repurchased $2.7 billion in stock during the quarter. 📖 Q3 2025 Earnings Release
Why it matters: This was the kind of quarter that reminds investors why Schwab belongs on quality watchlists. The business has scale, sticky client relationships, and the ability to grow earnings without heavy reinvestment. After the 2022–2023 funding scare, when Schwab was caught holding long-duration securities as deposits fled, the balance sheet now looks much stronger. The company has stabilized its deposit mix, expanded margins, and proven that its flywheel of asset growth and operating leverage is still intact. I covered the details behind that funding mismatch and capital position in more depth here.
My take: Schwab is a quality compounder in principle but a cyclical one in practice.The long-term growth story remains intact with rising client assets and more ways to deepen relationships across brokerage, banking, and advisory services. Still, this is a rate-sensitive business. If rate cuts come faster than funding costs adjust, margins could tighten and earnings may wobble. Those are the natural hiccups that come with this model. For long-term investors, that is when patience tends to pay off. There will be ups and downs, but Schwab’s scale, trusted brand, and resilient client inflows provide the foundation to create value over time.
Watchlist Movers (±3%)
The overall tone this week was cautious. Financials and rating agencies drifted on credit and rate worries. AI and select consumer names found buyers on clear growth narratives.
Closing Thoughts
There was a lot going on. Some of it will matter for years — like the build-out required to power AI and the industrial backbone behind it. Some of it was just noise — the kind that moves prices without changing intrinsic value. The key is knowing the difference. That’s where discipline pays.
Earnings season is a good reminder of why we check in on quarterly results. It’s not to chase headlines, but to ensure our investment theses still hold. Staying anchored to the thesis helps separate narrative from fundamentals. We are watching for disconnects the market creates, where short-term reactions obscure long-term compounding power. That is where opportunity lives for patient investors focused on quality compounders.
Compounding is quiet. The market rarely is.
👉 Back next week with more in the Weekly Compounder Update series.
P.S.
🗞️ Missed last week’s update? Catch up on prior spotlights and my newly updated Investing Philosophy anytime.
📚 If you want the technical background on Schwab’s 2022 funding misstep, and why it mattered, check out my long-form piece Charles Schwab Stock Analysis: Risks Remain, But There May Be Value.
