Welcome back to the Weekly Compounder Update, your weekly look at the developments that matter for long-term investors in quality compounders.
Markets had plenty to react to this week. The headlines were noisy, and the macro backdrop remains uneven, yet the companies we track kept moving forward. Prices moved, as they tend to do, yet the fundamentals for many of these businesses remain steady. Staying close to the developments helps us stay aware of where the real opportunities are forming, even when the broader environment feels unsettled. Here is what stood out.
General Market News
- Government Reopens as Trump Signs Bill to End Nation’s Longest Shutdown (The New York Times) → The 43 day shutdown is over. This removes a major policy overhang and allows federal agencies, contractors, and programs such as SNAP to resume more normal operations.
- Manufacturing PMI points to sustained growth in October but expectations worsen (S&P Global / J.P. Morgan Global Manufacturing PMI) → The Global Manufacturing PMI registered 50.8 in October, signaling only modest growth. Backlogs continue to fall and forward expectations remain weak, underscoring a sluggish industrial backdrop.
- Putin Is Turning Eighth-Grade Classrooms Into Army Training Grounds (The Wall Street Journal)
Russia is expanding military style training throughout its school system. It is a sobering development that shows how deeply the country is settling into a long conflict with no clear near term resolution.
My take: The macro picture remains uneven. Ending the shutdown removes one immediate risk, but global manufacturing is still soft and geopolitical tension continues to sit in the background. As long term investors, the goal is to stay informed without being distracted. Focus on companies with durable advantages, resilient earnings power, and reasonable valuations, and remember that broader volatility often creates opportunities rather than threats.
Earnings Spotlight
The Walt Disney Company (DIS)
What happened: Disney reported Q4 revenue of $22.5 billion, flat year over year, and adjusted EPS of $1.11, down 3%. Full-year results were stronger with revenue growing 3%, adjusted EPS rose 19%, and free cash flow increased 18%. Shares fell over 7% following the release and conference call. 📖 The Walt Disney Company Q4 2025 Earnings Release
Key takeaways:
- Streaming profitability improving: DTC operating income rose 39% in Q4 and reached $1.3 billion for the year. Management expects double-digit revenue growth and further margin gains as product integration and international content investment scale.
- ESPN gaining traction: The new ESPN direct-to-consumer service appears to be doing well. Management emphasized that about 80% of new users chose the trio bundle with Disney+ and Hulu This likely supports lower churn and strengthens long-term value for subscribers.
- Cruise driving Experiences growth: Cruise demand remains strong even with added capacity. The launch of the Disney Destiny and Disney Adventure will make cruise a major contributor to the high-single-digit Experiences growth management guided for 2026.
- Linear Networks continues to be a drag: The downward trend in Disney’s Linear Networks segment continued this quarter, though the results were attributed to a loss of political advertising and last year’s Emmy comparison.
- Capital returns accelerating: Free cash flow rose to $10.1 billion. Management doubled the 2026 share repurchase target to $7 billion and raised the dividend 50%.
My take: I last looked at Disney during the tariff scare in April and called the stock a buy below $85 with a bullish case toward $118. Much of that thesis is playing out, but this quarter was mixed. Streaming profitability and the early ESPN traction are improvements, yet momentum is uneven and the linear business continues to drag. Experiences remain a strength, especially cruises, but domestic parks are losing some steam, perhaps because of brand issues or perhaps because prices are high for a stretched consumer.
The investment runway is still there for Disney and the stock does not look expensive at roughly 17x 2026 earnings, but this is no longer the clear mispricing it was in the mid-80s. The long-term case depends on Disney proving that DTC margin expansion and the ESPN pivot can offset linear erosion while Experiences keeps compounding. There is progress, but the burden is now on execution rather than valuation.
Company Spotlights
Visa, Mastercard, American Express (V, MA, AXP)
What happened: Visa and Mastercard reached a proposed settlement with U.S. merchants that lowers some swipe fees and technically allows retailers to reject certain higher-fee rewards cards. The agreement still needs court approval, and several merchant groups say it doesn’t go far enough, so this 20 year battle may not be over yet. 📖 The Credit-Card Rule That Powers Rewards Cards Just Got Broken
What it means for investors: For long-term shareholders of Visa, Mastercard, and American Express, this reads more like noise than a shift in the model for these companies. The core “honor all cards” experience is effectively preserved at the issuer level. At the KBW Fintech Payments Conference, Mastercard’s CEO reiterated that merchants still have strong incentives to accept premium cards because they do not want to turn away high-spending customers. He described the settlement as balanced and workable.
There is theoretical risk that some merchants experiment with rejecting higher-fee cards or expand surcharging. But looking at the history of similar decisions in Europe suggests actual behavior changes are limited. In the end, the global networks keep their scale, security, and acceptance advantages, which are the real drivers of their economic moats.
In my view, this settlement adds a bit of headline risk but does little to alter the long-term compounding story for these processors.
Nvidia (NVDA)
What happened: SoftBank disclosed that it sold its entire Nvidia stake and will redeploy the capital toward AI investments including OpenAI. The announcement pressured semiconductor stocks, and Nvidia fell about 3% on the day. 📖 SoftBank Says It Sold Its Entire Nvidia Stake. The Chip Stock Is Sliding
What it means for investors: This normally is not the type of headline I would include here because a large shareholder taking profits does not change Nvidia’s fundamentals. I am including it because it illustrates an important point about where we are in the AI cycle. The AI trade remains crowded, and when a holder of this size exits, it exposes how sensitive sentiment has become.
The business itself has not changed. Nvidia still provides the essential hardware and software that power the entire buildout, and its customers continue to spend aggressively on AI infrastructure. What this does change is the near-term setup. Expectations are high, and moves like this can make the stock more volatile.
The takeaway is simple. The long-term story still relies on steady data center demand, sustainable margins, and continued adoption of Nvidia’s platform. The fundamentals look intact. With earnings next week, we should get a clearer read on demand, backlog, and the pace of the next upgrade cycle.
Parker-Hannifin (PH)
What happened: Parker-Hannifin agreed to acquire Filtration Group for $9.25 billion in cash. Filtration Group is expected to generate about $2 billion in 2025 sales with an adjusted EBITDA margin of 23.5%. The price works out to roughly 19.6x 2025 adjusted EBITDA, or 13.4x including an estimated $220 million of cost synergies. Management expects the deal to be accretive to adjusted EPS and cash flow in year one. 📖 Parker Hannifin Announces Acquisition of Filtration Group Corp.
What it means for investors: This deal pushes Parker further toward higher quality, recurring, and aftermarket revenue. Filtration Group strengthens Parker’s position in life sciences, HVAC, and industrial filtration. Management highlighted that Filtration Group has grown at mid single digit rates and has been resilient through recent cycles. This fits the direction Parker has been headed for years.
Management expects meaningful cost synergies and believes the combined platform can reach EBITDA margins above 30 percent and high single digit ROIC within five years. Leverage will rise near term, but Parker has a consistent record of quick deleveraging and plans to return to two times EBITDA within six quarters.
The price of the deal is not cheap, but it makes sense for the company. If the integration goes as planned, the deal expands Parker’s addressable market and supports a longer runway of margin expansion, and cash generation.
Watchlist Movers (±3%)
Markets were choppy this week with a mid-week selloff followed by a Friday rebound. AI-exposed tech stocks moved the most, while steady compounders held their ground.
Closing Thoughts
This week was another reminder that sentiment can move faster than fundamentals. Some high-quality names held up well as money rotated toward stability, while others pulled back for reasons that had little to do with long term earnings power. That is the environment we are navigating. The macro picture remains uneven and geopolitical pressures add to the uncertainty.
The goal is to stay anchored to quality. Durable moats, resilient margins, and rational valuations matter more than day to day swings. Volatility rarely feels comfortable, but it often creates better entry points in companies with predictable growth and strong competitive positions. Having conviction in what we own helps us stay patient and act selectively when opportunities appear.
Back next week with more.
P.S.
🗞️ Missed last week’s update? Catch up on prior spotlights and my newly updated Investing Philosophy anytime.
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