Acquired Ambition
In this edition of the Smart Investor newsletter, we spotlight the stock of the world’s largest alternative asset manager. But first, let’s dive into the latest portfolio news and updates.
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Portfolio News and Updates
❖ Emerson Electric Company (EMR) delivered a strong fiscal Q3 2025 results and increased its FQ4 and full fiscal-year guidance.
In FQ3, EMR saw $4.55 billion in revenue – slightly below some expectations, which weighed on the stock – but underlying sales growth (a better operational measure, reflecting business momentum) was up 3% year-over-year and adjusted EPS rising 6% to $1.52, hitting the top end of guidance. FCF came in at $970 million, a 21.3% margin, pushing year-to-date cash generation up 20% versus last year. Backlog climbed to $7.6 billion, reflecting sustained demand across key markets.
Test & Measurement was a standout, with orders up 16% in the quarter and expected to approach 20% in Q4, signaling a broad-based recovery across all regions. Process and hybrid businesses maintained mid-single-digit growth, supported by LNG, power, and life sciences. Emerson’s industrial software portfolio – led by AspenTech – saw double-digit annual contract value growth, with Digital Grid Management up 26% and new AI-enabled tools like Ovation Virtual Adviser gaining traction.
Regional and sector headwinds remain. Europe sales declined 7%, bulk chemicals continue to face overcapacity, and discrete markets and factory automation are showing some softness. Tariffs and FX weighed on margins, with a 40-basis-point drag in the quarter, though pricing actions helped offset part of the impact.
FQ4 guidance now calls for underlying sales growth of 5-6%, an adjusted segment EBITDA margin of about 27%, and adjusted EPS of $1.58-1.62, representing 7-10% growth. The adjusted EPS was raised the top end of prior guidance. Full-year 2025 expectations have been raised to ~3.5% underlying sales growth, adjusted EPS of around $6, and FCF of roughly $3.2 billion. Operating cash flow is expected at around $3.6 billion, and net sales – at approximately $18.1 billion. Management also flagged easing tariff pressures, with FY25’s gross impact now seen at $130 million versus $245 million previously.
Analysts responded positively, with multiple price target increases and no downward adjustments. The stock holds a “Moderate Buy” consensus, with the average target implying 12%+ upside – suggesting analysts are catching up to Emerson’s execution strength.
Emerson’s near-term growth is underpinned by momentum in high-value end markets and its expanding software capabilities, while reduced tariff exposure and sustained order flow position it well for fiscal 2026. Management’s emphasis on AI-enabled innovation, strategic collaborations, and steady margin expansion supports confidence in both earnings resilience and long-term shareholder returns.
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❖ Parker Hannifin (PH) delivered outstanding fiscal fourth quarter performance, with adjusted EPS up 14%, revenue at a record $5.2 billion – both above analyst projections – and adjusted segment operating margin expanding 160 basis points to 26.9%.
The company closed fiscal 2025 with stellar results, posting $19.93 billion in sales, a 26.1% adjusted segment operating margin, and a 26.4% adjusted EBITDA margin – all at all-time highs. Net cash from operations reached a record $3.8 billion, while backlog climbed to a record $11 billion. EPS came in at $27.12, an increase of 24%, or a record $27.33 adjusted, up 7% YoY. Parker repurchased $1.6 billion of shares over the fiscal year.
Aerospace delivered standout results, with sales of $6.2 billion, up 13% organically, and 190 basis points of margin expansion. The segment ended the year with a $7.4 billion backlog and is guiding for 8% organic growth in FY2026, with commercial OEM expected to outpace aftermarket. Industrial margins also reached record levels despite flat sales in North America and softness in international orders – evidence of continued cost discipline and execution under the company’s Win Strategy.
Management issued FY2026 guidance for 2-5% sales growth (midpoint $20.6 billion) and 1.5-4.5% organic growth (midpoint 3%). Adjusted segment operating margin is expected to improve another 40 basis points to 26.5%, while adjusted EPS is projected to rise 6% to $28.90. FCF is forecast at $3-4 billion, with roughly 100% conversion. The outlook excludes the pending Curtis Instruments acquisition, which is expected to close by year-end and is aimed at expanding Parker’s electrification portfolio. Curtis is expected to be initially margin dilutive but EPS accretive in year one, with historical mid- to high-single-digit growth.
While management acknowledged near-term headwinds in the transportation market – where auto and truck are expected to see mid-single-digit organic declines – and softer international order activity, its record backlog, high-margin aerospace momentum, and disciplined cost control position the company for continued earnings growth.
Analyst sentiment is overwhelmingly bullish, with a wave of price target increases from major firms and a “Strong Buy” consensus. Although the average target implies about 9% upside, the cluster of upgrades suggests analysts are playing catch-up to Parker’s execution and guidance. The company’s combination of record margins, robust cash generation, and expanding high-growth end markets leaves it well positioned for another year of disciplined growth and shareholder returns.
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❖ Uber Technologies (UBER) posted solid Q2 2025 results, with total gross bookings up 17% year-over-year to $46.8 billion, ahead of consensus, driven by strong delivery performance. Delivery bookings surged 20%, offsetting a minor mobility miss. Profitability continued to improve, with adjusted EBITDA hitting a record $2.12 billion, topping forecasts, while net income rose to $1.36 billion, or $0.63 per share, from $1.02 billion and $0.47 a year ago. Revenue grew 18% to $12.8 billion, exceeding estimates.
Uber also reached a record 180 million active users, with monthly consumers, trips, frequency, and EBITDA margins all at all-time highs, while the delivery business is reaccelerating – signaling strong network effects and pricing power. The company is leaning on its cross-platform “super app” strategy, uniting delivery and mobility under one leader to streamline ads and autonomous planning.
In the earnings call, CEO Dara Khosrowshahi highlighted $10 billion in annualized delivery bookings from the Eats tab in the rideshare app, showing cross-selling drives incremental usage and monetization. In addition, Uber One has reached 36 million paying members, underscoring recurring revenue potential, stickiness, and deeper engagement.
In Q2, Uber’s free cash flow hit a record $2.48 billion, up YoY. Additionally, Uber’s trailing-twelve-month free cash flow hit a record $8.5 billion, underscoring strong cash generation. Following these results, Uber approved a $20 billion share buyback program – representing over 20% of market cap and its largest authorization to date – on top of $3 billion remaining from the prior plan, reflecting confidence in growth and financial position.
Management guided Q3 gross bookings to $48.25-49.75 billion (18-21% growth) and EBITDA to $2.19-2.29 billion, both ahead of expectations.
Analyst reaction was mixed but mostly positive. Multiple firms – including Evercore ISI, UBS, Wolfe Research, Susquehanna, Raymond James, Citi, and others – highlighted accelerating growth, expanding margins, delivery strength, and buybacks as catalysts. Wedbush remained cautious on AV competition despite partnership progress with Waymo and others.
The split among analysts and whipsaw price action reflect Uber’s shift toward mature profitability, with focus on execution and the reliability of future cash returns. The stock holds a “Strong Buy” consensus, with average price targets implying 20%+ upside.
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❖ Taiwan Semiconductor Manufacturing, aka TSMC (TSM) reported a ~26% year-over-year increase in July sales to roughly $10.8 billion, the second-highest monthly total in the company’s history, attributing the strong performance to surging global demand for AI chips. The company noted that with AI applications continuing to gain popularity and computing power requirements rising, global demand for its advanced chips is expected to grow further this year. Following the July results, the chipmaker raised its full-year 2025 sales growth forecast to around 30% from the previous mid-20% range. TSMC also confirmed it will be exempt from the newly announced 100% U.S. import tariffs on certain chips, because it has already established manufacturing facilities in the U.S., particularly its significant Arizona plant, which qualifies it under the administration’s criteria for exemption.
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❖ BlackRock (BLK) shares hit a new record high despite escalating geopolitical tensions over its $22.8 billion bid with Mediterranean Shipping Company (MSC) to acquire CK Hutchison’s global ports portfolio, including two at either end of the Panama Canal. According to media reports, China’s state-owned Cosco Shipping is seeking a 20-30% stake in the deal. Beijing has warned that if Cosco is excluded, it will move to block the sale – meaning its inclusion in the consortium could help ease concerns over Chinese regulatory hurdles and bolster investor confidence in the deal’s prospects. However, President Trump remains a potential obstacle. The sale has been framed as a political win for Trump, who has vowed to “take back” the Panama Canal from alleged Chinese influence. Bringing Cosco into the deal would likely provoke opposition from Trump, particularly in the context of the ongoing U.S.-China tariff dispute.
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❖ Apple has pledged to expand its American Manufacturing Program (AMP) by $100 billion, bringing the total U.S. investment to $600 billion over the next four years. As part of this commitment, the tech giant is partnering with key suppliers to build components for its devices on American soil, including Smart Portfolio holdings Applied Materials (AMAT) and Broadcom (AVGO).
Applied Materials is supporting Apple’s partnership with Texas Instruments by supplying U.S.-made chipmaking equipment from Austin, Texas – home to Applied’s largest manufacturing and logistics facility – to TI’s domestic factories. In addition, AMAT plans to invest more than $200 million in Arizona to establish a facility for producing critical components for semiconductor equipment, building on the more than $400 million it has invested in U.S. manufacturing infrastructure over the past five years.
Broadcom underpins Apple’s U.S. reshoring with a multiyear, multibillion-dollar pact to produce 5G and RF components at its Fort Collins, Colorado facility. Additionally, AVGO poured a hefty $9.5 billion into R&D in the 12 months through April 2025, bolstering its domestic innovation capacity and reinforcing its strategic role in Apple’s supply chain.
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❖ Morgan Stanley boosted its price target for Vertiv Holdings (VRT) to $165 from $125 and reiterated a Buy rating, noting re-accelerating orders and easy margin comparisons into fiscal 2026. The AI infrastructure company recently reported solid Q2 2025 results, with revenue growing by 35% year-over-year to $2.64 billion, and raised the full-year outlook. The company ended the quarter with a robust order backlog of $8.5 billion. Morgan Stanley described the company’s first half of the year results as “phenomenal.”
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❖ ServiceNow (NOW) has seen a two-week drop of about 14%, which appears to be driven more by market positioning than by any deterioration in fundamentals. The pullback follows the company’s July 23 Q2 earnings release, where it delivered a beat on revenue and earnings, raised full-year guidance, and highlighted strong AI-driven demand – yet shares have since faced consistent selling pressure.
Analysts suggest the move reflects a “sell the news” dynamic, with investors locking in profits after a strong run-up from April lows. The stock, trading at a relatively high multiple, was vulnerable to profit-taking amid broader rotation out of large-cap software names. Several high-volume insider sales, largely tied to routine vesting and tax obligations, coincided with the weakness, adding to short-term sentiment pressure despite no change in the company’s outlook.
Some of the selling also reflects narrative contagion, as the recent “AI killing software” theme has pulled even AI-beneficiary names like NOW into sector-wide de-risking. A partial credibility discount may also be in play, with markets waiting for several quarters of proven, monetizable AI growth before fully pricing in the upside story.
Still, over the same period, more than two dozen Wall Street firms reiterated bullish ratings and lifted price targets, with consensus estimates still implying significant upside from current levels. Market action also shows a split between retail buying and institutional outflows, suggesting large funds may be rebalancing positions while smaller investors step in on the dip. With fundamentals intact, growth guidance reaffirmed, and analyst confidence high, the recent decline appears to be a technical reset rather than a shift in the underlying story.
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Portfolio Stocks Under Review
❖ We are removing LPL Financial (LPLA) from our “Under Review” bracket.
The stock was placed under review a few weeks ago following a stretch of mid-May through June underperformance after a more than 35% rally from April lows, which suggested heavy profit taking despite strong fundamentals. At the time, mixed analyst opinions reflected caution over near-term performance, even as the long-term outlook remained solid. We opted to watch whether the stock could regain momentum amid ongoing advisor additions, rising advisory assets, and efficient capital deployment.
Q2 2025 results have removed that uncertainty. LPL delivered adjusted EPS of $4.51, up 16% YoY and ahead of consensus, with gross profit up 21% and adjusted pre-tax income up 23%. Total assets reached a record $1.9 trillion, while organic net new assets came in at $21 billion (5% annualized growth) – a moderation driven by seasonal factors and a planned advisor off-boarding. Core G&A discipline remained intact, with management lowering its 2025 outlook before adding Commonwealth-related costs.
Importantly, LPL closed its Commonwealth Financial Network acquisition – which adds approximately $305 billion in assets under administration – retaining leadership continuity under CEO Wayne Bloom and reaffirming its 90% retention target. Conversion is slated for Q4 2026, with run-rate EBITDA projected at ~$120 million at close and ~$415 million fully integrated. Smaller wins, such as onboarding Coastal Wealth Management Group ($175 million in assets under management), show continued advisor capture despite a slower industry recruiting backdrop.
Street sentiment has also strengthened. Since earnings, Morgan Stanley, Wells Fargo, Barclays, KBW, J.P. Morgan, Bank of America Securities, and Keefe Bruyette all raised price targets while maintaining bullish ratings. No downgrades have emerged. Technically, LPLA trades above its 50- and 200-day moving averages, with RSI mid-range, suggesting a neutral-to-constructive setup.
LPL’s leverage and integration spend is expected to rise near-term – mainly to merge Commonwealth – and client cash balances have dipped as markets climb. However, both factors appear manageable and temporary in the context of the company’s strong growth and efficiency. With the operating engine strong, integration risk mitigated by leadership stability, and broad Street backing, we are confident in LPL’s positioning and have decided to retain the stock in the portfolio.
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❖ We are keeping Roper Technologies (ROP) under review due to ongoing technical weakness and recent bouts of institutional selling.
Fundamentally, the business remains in excellent shape. ROP continues to deliver solid earnings and revenue growth, with Q2 EPS of $4.87 and revenue up 13% year-over-year, even excluding the $151M boost from unusual items. Guidance was raised again for 2025, and the company’s mix of over 60% recurring revenue, strong pricing power, and consistent cash flow conversion underpins its premium positioning in niche, mission-critical software and industrial markets. The acquisition pipeline remains active, highlighted by the $1.25B Syntellis deal and the AI-enabled Subsplash integration, while the recent $2B notes offering provides additional capacity for disciplined capital deployment.
Valuation is not stretched when assessed against Roper’s own history and true peers. The current forward P/E of ~26.7x sits below its five-year average of ~29.8x, despite improved quality and recurring revenue. Metrics such as PEG and EV/Sales appear inflated only when compared to the broader tech sector, which is not an appropriate benchmark for Roper’s industrial-software hybrid model. Analysts remain constructive, with post-earnings price-target increases from Goldman Sachs, JPMorgan, Truist, and RBC reflecting confidence in the company’s steady growth trajectory and durable cash generation.
Near term, market sentiment remains cautious. ROP has lagged the S&P 500 in recent months, weighed down by weak technical momentum, a MACD death cross, and multiple bearish candlestick patterns. While Technical weakness is real, these are short-term signals that are not rooted in deterioration of the business. The early August drop tied to institutional selling reflects sector rotation rather than a than a vote against ROP’s long-term prospects. Weak investor sentiment may also be a reflection of the stock’s lack of the AI-related momentum that has driven recent rallies in other areas of the market.
Given these dynamics, we prefer to hold ROP and monitor closely. If the stock decisively breaks below $520 on heavy volume, we would consider that a trigger to exit the position, as it could signal a more prolonged sentiment shift. For now, the strength of Roper’s business model, recurring revenue base, and capital discipline outweighs the technical headwinds, making patience the better course while awaiting either a reversal in momentum or a fundamental catalyst to close the gap between performance and quality.
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❖ We are keeping MasTec (MTZ) under review despite an exceptional second quarter marked by record revenue of $3.5 billion, up 20% year over year, and a 50% jump in adjusted EPS to $1.49 – both ahead of guidance. The company’s 18-month backlog surged 23% to a record $16.5 billion, with especially strong momentum in Clean Energy, Communications, and Power Delivery. Federal energy incentives, grid modernization demand, and MasTec’s expansion several verticals reinforce a powerful multi-year growth runway.
Yet despite these fundamentals, post-earnings trading saw the stock soften as operating cash flow collapsed 98% to $6 million and free cash flow turned negative, driven by heavy working capital investments tied to project ramps. The optics of this short-term cash burn, coupled with a recent notable insider sale, appeared to temper investor sentiment.
However, Wall Street’s view remains overwhelmingly supportive. Since the Q2 release, multiple firms – including Goldman Sachs, Truist, KeyBanc, Stifel, DA Davidson, Jefferies, and Baird (which also lifted it from “Hold” to “Buy”) – have raised price targets, with the Street-high now at $227, while only Citigroup made a minimal cut. The consensus rating sits firmly in “Strong Buy” territory, underpinned by expectations for double-digit earnings growth in 2026 and sustained margin expansion in non-pipeline segments.
While the stock has already reclaimed most of its post-earnings losses, we will keep MTZ under review until the performance more closely reflects its fundamentals and the strong analyst conviction supporting its long-term outlook.
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❖ We are placing MACOM Technology Solutions (MTSI) under review following a sharp post-earnings sell-off and subsequent partial rebound, as strong business performance is being overshadowed by near-term sentiment and technical pressures.
Fiscal Q3 2025 results showcased impressive execution, with revenue up 32.3% year-over-year to $252.1 million, net income climbing 83% to $36.5 million, and adjusted EPS of $0.90 in line with consensus. Growth was broad-based across Industrial & Defense, Data Center, and Telecom, fueled by demand for high-speed optical components, gallium nitride (GaN) technology, and secure communications solutions. Gross margin held firm at 57.6%, operating margins expanded, and guidance for fiscal Q4 – revenue of $256-264 million and adjusted EPS of $0.91-0.95 – points to stable demand and continued operational discipline.
Strategically, MACOM benefits from a strong defense and 5G telecom positioning, a growing data center presence, and the unique advantage of owning a U.S.-based RF fabrication facility. Its China exposure, at roughly 24% of revenue, remains a commercial growth market rather than a security risk, with diversification into Western-aligned supply chains underway. Analyst sentiment is favorable, with a “Strong Buy” consensus and average price targets suggesting ~27% upside over the next year.
However, the market reaction has been less supportive. Shares fell about 14% after earnings, breaking below key technical levels in a “sell the news” pattern despite meeting expectations. Investor focus shifted to margin pressures tied to Wolfspeed RF fab integration delays, cost increases, and muted commentary on medium-term growth. The resignation of board member Susan Ocampo added a minor governance wrinkle, while the lack of a new strategic update limited enthusiasm.
Notably, sentiment improved yesterday as MTSI rallied ~6% amid broader buying of quality names, and index futures are pointing higher. We will hold for now to monitor whether the stock can sustain a rebound or recover to levels that would allow an exit without loss. MACOM’s fundamentals remain strong, but near-term technical and sentiment dynamics warrant a cautious, watchful stance.
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Portfolio Earnings and Dividend Calendar
❖ The Q2 2025 earnings season is winding down, but two Portfolio holdings – Cisco Systems (CSCO) and Applied Materials (AMAT) – are scheduled to release their quarterly results today and tomorrow, respectively. Several other Portfolio companies are expected to report from end-August through mid-September.
❖ The ex-dividend dates for Emerson Electric Company (EMR), RTX Corporation (RTX), LPL Financial (LPLA), and Cognizant (CTSH) are coming this week.
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New Buy: Blackstone Group (BX)
Blackstone is the world’s largest alternative asset manager, overseeing capital in private equity, real estate, credit, infrastructure, and hedge fund solutions. It invests in and manages companies and assets that span multiple sectors and geographies – from financing infrastructure projects and acquiring operating businesses to providing credit and managing income-producing real estate. The firm works with institutional, governmental, and individual investors to meet specific return and portfolio objectives. Its global scale and diversified strategies allow it to deploy capital across different market conditions, adjusting focus as cycles evolve. By combining sector-specific teams with operational and financial expertise, Blackstone seeks to improve the performance of its portfolio companies, support long-term asset growth, and provide investment solutions that align with the varied needs of its client base.
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Built by Buyouts
Blackstone began in 1985 as a specialized private equity shop and by the early 2020s had evolved into a diversified alternative asset manager through a string of transformative acquisitions and platform builds. In 2021, it acquired Medline Industries for approximately $34 billion – the largest disclosed acquisition in its history – and data-center operator Quality Technology Services for about $10 billion, establishing a foundation for its digital infrastructure expansion.
The firm’s acquisition of global hyperscale data-center provider AirTrunk in late 2024 for over $16 billion underscored its confidence in Asia-Pacific demand growth and AI-driven data strategies. Over the first nine months of 2024, Blackstone doubled its real-estate spending – allocating around $22 billion into acquisitions – a sign of its conviction in market recovery and its continued leadership in commercial real assets.
In early 2025, Blackstone acquired Safe Harbor Marinas, the largest marina and super-yacht servicing business in the U.S., for about $5.65 billion, extending its reach into niche infrastructure sectors. It also agreed to acquire Enverus, an energy data and analytics platform, for over $6 billion, marking a move into AI-enabled strategic infrastructure. Around the same time, it completed a landmark secondary acquisition of $5 billion in private-equity holdings from New York City’s pension funds – one of the largest secondary market transactions ever executed.
Additional noteworthy moves include taking Japan’s engineering-staffing firm TechnoPro private for around $3.4 billion – its largest PE investment in Japan to date – and acquiring iconic franchise brand Jersey Mike’s for roughly $8 billion, expanding into scalable consumer platforms. It also grew its Indian retail real-estate portfolio with the acquisition of South City Mall for approximately $375 million. On the exits side, Blackstone sold HealthEdge for about $2.6 billion in 2025.
This consistent focus on strategic acquisitions has expanded Blackstone’s reach across multiple asset classes and geographies – from digital infrastructure and AI-driven energy platforms to branded consumer assets and international property holdings – transforming it from a PE-focused operator into a global multi-asset powerhouse.
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The Ascent of Alts
Blackstone earns most of its revenue from management and advisory fees for overseeing client capital, which account for just over half of total revenue. These fees are generated across four main business lines – real estate, private equity, credit and insurance, and multi-asset/hedge fund solutions – each with distinct income characteristics and growth drivers.
Real estate is the largest contributor to fee-related revenue and the biggest share of assets under management (AUM) at roughly 40%. This portfolio spans commercial, residential, industrial, and logistics properties across geographies – from the U.S. to Europe and Asia. It also includes high-demand “AI assets” such as hyperscale data centers and digital infrastructure, which are benefiting from the surge in cloud computing and AI model deployment. Steady rent and lease income, combined with transaction gains, provide durable earnings potential.
Private equity, while representing around 10% of reported fee revenue and roughly 25% of total AUM, is a strategic profit center because it produces a large share of performance fees (“carried interest”) when portfolio companies are sold. This segment targets buyouts, growth equity, and special situations across industries, with long-dated investment horizons that align with BX’s ability to compound value.
Credit and insurance comprise about 30% of AUM and just under 6% of revenue, generating recurring income streams from private credit strategies, direct lending, and insurance premium flows. This business has been scaling quickly as institutional investors shift allocations toward higher-yielding private debt. Multi-asset strategies, representing around 5% of AUM and 3% of revenue, include the firm’s hedge fund solutions platform, which delivers absolute return strategies to institutional and high-net-worth clients.
Looking ahead, all business segments are positioned for structural growth. The ongoing reallocation of capital toward private markets is broad-based – from pensions and sovereign wealth funds to family offices and retail investors. The Trump administration’s decision to allow alternatives in 401(k) plans could significantly expand BX’s retail reach, opening access to trillions in U.S. retirement savings. Blackstone’s scale, brand, and multi-strategy platform give it a unique ability to pivot capital between sectors and geographies, ensuring it captures opportunities across cycles while maintaining a balanced mix of recurring fees and performance-driven income.
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Return on Everything
In Q2 2025, Blackstone posted one of its strongest results in years, with total revenue rising about 33% YoY to roughly $3.71 billion – well ahead of the ~$2.78 billion consensus. Distributable earnings increased 25% to around $1.6 billion, or $1.21 per share, beating the ~$1.09 consensus estimate and marking an 11% earnings surprise. For Blackstone and other alternative asset managers, distributable earnings per share is effectively the non-GAAP EPS equivalent.
Assets under management reached a record ~$1.2 trillion – up approximately 13% YoY – while fee-earning AUM climbed about 10% to ~$887 billion. Fee-related earnings grew 31% YoY to ~$1.5 billion, supported by performance fees that more than doubled from the prior year.
At the segment level, private equity contributed roughly $751 million in distributable earnings, up about 55% YoY, while real estate generated around $564 million, up ~10% despite some portfolio AUM declines. Credit and insurance saw the sharpest growth in distributable earnings, underscoring the benefit of higher rates and robust origination pipelines.
Fundraising momentum remained strong – net inflows in Q2 totaled approximately $52 billion, part of $212 billion over the trailing 12 months – with available capital (“dry powder”) standing at roughly $181 billion. These funds can be deployed quickly when attractive opportunities appear, beating the competition – while a war chest of this size allows BX to be selective, buying assets at more favorable valuations. Deployment reached ~$33 billion in the quarter and $145 billion over the past year, reflecting aggressive positioning in secular growth areas such as data centers, life sciences, and infrastructure.
Portfolio appreciation outpaced many peers: private equity valuations rose ~5.1% in the quarter (17% YoY), infrastructure gained 2.9% (19% YoY), and life sciences appreciated 6.7% (27% YoY). Realization activity also improved – BX completed about $7.3 billion in private equity exits and $10 billion of credit and insurance asset sales. Management noted that IPO and M&A pipelines are now the strongest since 2021.
Looking to H2 2025, Blackstone expects fee-related earnings growth to remain broadly in line with H1 trends, supported by the recent inclusion of alternatives in certain U.S. pension plans – a change expected to gradually open up new capital pools over the next few years. While transaction activity may ease from the unusually strong Q2 levels, management expects steady inflows, a healthier exit environment, and disciplined capital deployment to keep performance on track.
Wall Street models also call for continued double-digit growth in distributable earnings for the second half of the year, with margin stability and upside potential if the exit environment remains favorable. The consensus forecast points to fiscal Q3 distributable earnings per share rising by ~23% YoY, with revenue up about 28%.
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Multiple Paybacks
Blackstone’s stock has delivered strong returns over the past year, rising about 32% – outpacing the S&P 500 and matching the average performance of a peer set that spans mega-cap multi-strategy leaders like Apollo, KKR, and Brookfield Asset Management, scaled growth specialists such as Ares Management and Blue Owl Capital, and traditional PE-centric platforms like Carlyle.
Despite the gains, BX remains moderately valued relative to its dominance in alternatives and best-in-class profitability. While coming at the higher end of the peer valuation scale in terms of trailing twelve months EV/EBITDA and EV/sales, the stock trades at about the middle on forward and TTM non-GAAP P/E, as well as on forward PEG – with multiples supported by BX’s superior net income margin and expectations for further earnings growth.
Blackstone’s business mix is tilted toward fee-related earnings and long-duration capital, supporting margin stability and reducing volatility versus transaction-driven models. The combination of a record AUM, strong inflows, and a broad opportunity set across secular growth areas suggests the company can sustain high-teens earnings growth through 2026. While the broader peer group looks expensive compared to the financial sector at large, Blackstone’s scale, diversified earnings streams, and market-leading position across various business lines justify its valuation. When factoring in BX’s ability to consistently outperform on risk-adjusted returns, its current valuation is not stretched, leaving room for further upside. Analysts generally agree, supporting BX with multiple post-earnings price-target upgrades.
Beyond stock price appreciation potential, Blackstone pays variable quarterly dividends based on distributable earnings, after setting aside capital for growth and reserves. While there is no fixed payout amount, BX targets returning the majority of distributable earnings to shareholders over time. Its current dividend yield of 2.5% is nearly double the financial sector average.
BX also performs share repurchases – although these are not the main capital return lever and are used primarily as a tool to offset dilution from equity awards. The company authorized a $2 billion equity buyback program in July 2024, with about $1.4 billion in remaining capacity as of the end of Q2 2025.
With a fortress balance sheet, an unmatched platform in alternatives, and multiple levers for capital return, Blackstone offers investors a rare combination of durable growth, defensive income, and upside optionality – a profile that remains unparalleled in global finance.
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Investing Takeaway
Blackstone offers long term investors a rare combination of scale, diversification, and earnings resilience. As the world’s largest alternative asset manager, it is embedded across private equity, real estate, credit, insurance, and infrastructure – giving it access to durable fee streams and multiple growth vectors. Its long-duration capital base and disciplined deployment approach help smooth performance through market cycles, while exposure to secular growth themes such as digital infrastructure and life sciences enhances upside potential. Management’s track record of expanding margins, growing assets under management, and capitalizing on emerging opportunities reflects a proven ability to compound value. For investors seeking a best-in-class platform with deep market reach, strong competitive positioning, and a strategy aligned to deliver through varying macro conditions, Blackstone stands as a high-quality core holding.
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New Sell 1: Salesforce (CRM)
We are removing Salesforce from the portfolio due to persistent negative sentiment across the enterprise software sector and the risk of further downside ahead of its September 4 earnings report. While we continue to recognize Salesforce’s long-term business potential, its near-term setup has deteriorated to the point where waiting for a potential catalyst risks further capital erosion.
Salesforce remains an industry leader in customer relationship management software, with a broad, defensible platform and consistent innovation in AI, data integration, and vertical-specific solutions. Strategic moves such as the $8B acquisition of Informatica and the purchase of Waii’s natural language-to-SQL platform strengthen its Data Cloud and AI capabilities, while Agentforce and enhancements to Einstein Copilot position the company to capture future enterprise AI demand. Its operating margins remain healthy, the balance sheet is strong, and its valuation – trading far below multiples of peers like Microsoft, Oracle, and SAP – appears moderate. Analyst coverage remains largely favorable, with consensus ratings in “Moderate Buy” territory and average price targets implying 40%+ upside over the next year.
However, these strengths have been consistently outweighed by persistent market skepticism. The stock is down 34% from its January 28 peak, reflecting investor unease over acquisition integration risks, the uncertain monetization path for AI products, and softening growth – with fiscal 2026 revenue and EPS now projected in the single digits. A recent security incident at Google involving a Salesforce CRM instance has further underlined platform vulnerabilities, and institutional flows show divergence, with some large holders sharply cutting positions. Insider selling, though part of pre-arranged trading plans, has added to the perception problem.
In addition, CRM has been caught in the narrative contagion sweeping the software sector, where the “AI killing software” theme has led to broad de-risking even of companies with credible AI strategies. The stock also suffers from a partial credibility discount, as investors wait for concrete, monetizable AI results before rewarding the story with a higher multiple. This puts Salesforce in a difficult position – execution may be progressing, but sentiment is unlikely to improve until the company can demonstrate that its AI investments directly translate into revenue acceleration.
Market sentiment is currently dominated by doubts about whether Salesforce’s AI strategy can deliver tangible near-term ROI, or if it will remain a costly, long-horizon bet. The company’s multiple acquisitions and expanding scope may be strategically sound, but they increase complexity and execution risk at a time when enterprise software demand is moderating. With three weeks until earnings, the lack of a near-term catalyst leaves the stock exposed to further selling pressure if market sentiment worsens further.
Given the combination of strategic strength but weak short-term positioning, we prefer to exit now, avoid further drawdown risk, and preserve capital. Should upcoming earnings or subsequent quarters show improved execution, clear AI monetization, a shift in broader market perception toward enterprise software resilience, and a better understanding of where Salesforce sits in the AI-driven software hierarchy, we would be open to reestablishing a position at a more favorable entry point.
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New Sell 2: Cognizant Technology Solutions (CTSH)
We are removing Cognizant from the portfolio due to persistent technical weakness, sector-wide sentiment headwinds, and the lack of a near-term catalyst despite solid fundamental performance. The decision reflects both company-specific caution and the broader AI-disruption narrative weighing on IT services stocks.
Cognizant remains a well-established IT services leader with a growing portfolio in digital transformation and AI-led solutions, positioning it to capture market share over time. The company is leveraging its scale, client relationships, and increasing AI integration – with 30% of Q2 code generated by AI versus 20% in Q1 – to win major contracts, including two recent mega deals of over $1 billion each, and deepen penetration in core verticals such as Financial Services, Health Sciences, and Communications, Media & Technology.
Q2 2025 results beat analyst expectations on both revenue and EPS, with constant currency revenue up 7.2% year-over-year to $5.2 billion and non-GAAP EPS up 12% to $1.31. Bookings rose 18% YoY, adjusted operating margin improved 40bps to 15.6%, and management raised its full-year revenue growth outlook to 4-6% and EPS growth to 7-10%. Capital return remains robust, with $521 million returned to shareholders in the quarter and a $2 billion full-year plan. However, guidance was seen as conservative compared to peers given large-deal momentum, Health Sciences posted a 1.3% sequential revenue decline, and margin guidance was left unchanged at 15.5-15.7%, signaling no upside surprise on cost leverage.
Post-earnings, analyst reaction was mixed: JPMorgan and Nomura raised price targets and remain constructive, while Mizuho and Baird maintained neutral ratings with muted targets. Technically, CTSH has drifted lower, trades in a neutral momentum range, and continues to see institutional outflows despite some retail buying. Oversold RSI conditions have yet to produce a convincing rebound, underscoring the absence of clear buying conviction.
Cognizant has also been caught in sector contagion risk, with the “AI killing software” narrative spilling over into IT services. While the company is actively integrating AI, investors remain cautious toward outsourcing and services models seen as vulnerable to automation. This has created a partial credibility discount, with markets waiting for concrete, monetizable AI-driven growth before re-rating the stock.
While Cognizant’s long-term positioning, recurring client wins, and operational discipline remain intact, the current environment reflects an execution confidence vs. perception gap. Fundamentals are sound, but sentiment and technicals argue for caution. We prefer to preserve capital now and would reconsider a position if momentum improves, the market gains clarity on AI’s net impact on IT services, and sector perception shifts toward recognizing Cognizant as a net AI beneficiary.
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Smart Investor’s Winners Club
The 30% Winners Club includes stocks from the Smart Investor Portfolio that have risen at least 30% since their purchase dates.
Markets have been down but mostly up, and VRT has returned to the ranks. The Winners are now 12 stocks: GE, AVGO, ANET, ORCL, EME, HWM, TSM, APH, IBKR, PH, CRWD, and VRT.
The first contender for the Club’s entry is now UBER with a 28.19% gain since purchase. Will it gain this rite of passage, or will another stock outrun it to the finish line?
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