Lange Nelle Lighthouse, Ostend, Flanders, Belgium
This lighthouse is located on the north coast of Belgium on the North Sea. The lighthouse station was established in 1771, and the present lighthouse which stands at 190 feet in height was opened in 1949. The light is visible up to 27 nautical miles.
Cape Hatteras Light Station, Dare County, North Carolina
This lighthouse is located in North Carolina off the coast. The lighthouse is located within the Outer Banks and was originally constructed in 1870. It stands at 210 feet tall and was automated in 1950.
*Feel free to send us your photos of Lighthouses to be featured in our weekly market observations.
Another trade deal
Over the past weekend, the Trump administration announced its most recent trade deal with one of its largest trading partners and closest allies, the European Union. The deal was top of mind for investors across the world as both sides were pushing back against each other. At times, talks became contentious as Trump took shots at the EU and some of its major decision-makers. Nonetheless, a deal was announced.
Trump and President Ursula von der Leyen met in Scotland and agreed that EU goods will face a 15% tariff in the U.S. This is much lower than the 30% tariff rate that Trump threatened the EU with as recently as Friday. Some goods will not attract any tariffs, including aircraft and plane parts, certain chemicals, and some agricultural products. A separate deal on semiconductors may be announced soon.
Under the terms of the deal, the EU will face a 15% tariff like that of Japan. This reconfirms that 15% tariffs are the new baseline for U.S. trading partners. Trump also said that the EU will buy $750 billion in U.S. energy and invest $600 billion more than it already has in America. The EU stated that the 15% tariffs were across the board and there are no exceptions. The EU’s energy pledge will occur over three years and will help Europe decrease its dependence on Russian natural gas. In all, the tariffs will apply to 70% of EU exports worth €380bn a year.
Von der Leyen applauded the deal on Sunday, stating that the deal will bring stability to both allies, who together account for almost a third of global trade.
The deal has been scrutinized by some European leaders, including the French, who do not like the deal. The French Prime Minister stated that it was a dark day for the EU after the deal was announced, stating that the EU should have used more force at an earlier date to improve the deal. This trade deal is a win for the Trump administration, but it allows the EU to avoid the worst case scenario. The deal will bring in approximately $90 billion in tariff revenues annually for the U.S. on top of the investment commitments made by the EU.
The most interesting part of this deal, in our eyes, comes from a potential disruption in Ireland. Ireland will face 15% tariffs, but Northern Ireland will face 10% tariffs, courtesy of the U.S.-UK trade deal announced a few weeks ago. This could be problematic for diplomatic conversations as customs arrangements between the two countries have been a big headache since Brexit.
Regardless of how you feel about the deal, this is a positive sign and will allow for the flow of goods to continue rather than slow down. This deal is the next domino in what we think will be many announced trade deals by the U.S. by the end of this year. Our only hope is that Canada is one of the next deals announced, and Canadians are not greatly impacted by tariffs.
Got energy?
A huge winner in the AI race has been energy companies. Companies across the energy and utilities sectors have greatly benefited from the AI race due to increased energy demand from data centers and companies inking deals that secure a steady supply of energy for their data centers. In 2018, data centers accounted for 1.8% of total energy usage in the U.S.; that number doubled by 2023. According to the Lawrence Berkeley National Laboratory, that number is expected to range between 6.7% and 12% by 2028. That is a massive increase in total share.
We expect data center investment to continue to increase, which will increase their energy demand. Despite many claiming that global energy demand has peaked, there are all sorts of data points that say otherwise. We continue to remain bullish on certain utility providers, nuclear energy companies, and natural gas producers moving forward, as all will greatly benefit from the AI race that is unfolding in front of our eyes. These companies also trade at much more attractive multiples than the likes of Nvidia and other AI giants. Even if AI multiples compress, energy demand will more than likely continue to expand due to the mass investment in data centers, which will continue to benefit some of these energy companies.
Garbage management
An often overlooked industry in financial markets is waste management. The sector is boring, looked down on, and often ignored. We have not ignored the sector. Most of our clients have exposure to a waste management company through Waste Management or Waste Connections. We like these companies for a variety of reasons and have held positions in these companies for numerous years. Our thesis, these are the ultimate defensive names; they provide minimal risk, some upside through consistent growth, and have strong management teams. Essentially, these companies provide a service that is always in demand. No matter the economic period, people have garbage that needs to be disposed of. It might be boring, but both companies are consistent compounders.
We bring this up because Waste Management posted its second-quarter earnings earlier in the week. Waste Management delivered strong results on Monday at market close. The company beat estimates for earnings per share and revenue. Waste Management’s main business unit has grown revenue by more than 10% compounded annually since 2020. Trash continues to be cash.
Net income and revenue jumped year over year, driven by margin expansion. Waste Management improved its reported operating expenses as a percentage of revenue, reflecting strong cost controls. The company confirmed it is on track to achieve the high end of its synergy savings target for 2025, driven by recent acquisitions. The company also maintained its full year adjusted operating EBITDA guidance and exceeded its initial free cash flow forecast for the year, increasing its forecast by $125 million. Waste Management’s cash flows have beaten expectations and are expected to increase due to recent regulations and law changes from the Trump administration. Waste Management reported strong gains in recycling and renewable energy and emphasized sustainability progress and strategic investments to continue to unlock long-term value.
Waste Management decreased its revenue forecast for 2025, attributing the decline to lower volumes in the collection and disposal business segment. Investors shook this negative revision off as margins and free cash flow continue to improve. Shares moved higher on Tuesday on this strong report. Waste Management shares are up almost 18% year-to-date (as of this writing).
Despite Waste Management’s high multiples, we think the company is still quite attractive due to its resilient core business, strong cash flows, and recent successful acquisition. Waste Management continues to reduce its debt and will be in a position for future share buybacks.
All in all, this earnings report supports our thesis for both Waste Management and other companies across the industry. We think, even though these are defensive names, that they will provide investors with growth moving forward.
Disclaimer: MacNicol & Associates Asset Management holds shares of Waste Management (NYSE: WM) and Waste Connections (TSX: WCN) across various client accounts.
GDP data
The Bureau of Economic Analysis released some major economic data on Wednesday morning, including inflation-adjusted gross domestic product (GDP). In the second quarter, the U.S. economy grew by an annualized rate of 3%, well above the 2.6% consensus estimate. This growth rate is a significant reversal from the GDP decline that we saw during the first quarter of this year, when it declined 0.5%. A historic surge in imports caused this lag in the U.S. GDP in the first quarter. Companies were attempting to front-run Trump’s tariffs. This caused a decline in the GDP because imports are subtracted from other figures when calculating the GDP. This trend ended in the second quarter as Trump’s tariffs were less aggressive than initially announced.
The Federal Reserve will consider this data point along with many others when making any monetary policy decisions moving forward. The Bureau wrote that GDP figures jumped during the second quarter due to a decrease in imports and an increase in consumer spending. However, consumer spending came in lower than many economists expected. Trade weighed on the GDP figures in the second quarter, with exports coming in softer than expected. There was also a decline in business investment (which was expected) as companies pulled back on building up inventories and buying equipment.
Wednesday’s report also provided some insight into inflation for the second quarter. The FED’s preferred inflation gauge, the personal consumption expenditures price index, rose 2.1% during the second quarter, compared with 3.7% in the first quarter (both numbers are annualized).
These headline figures look strong, but when you look under the hood to understand the data, it’s a different story. We think that there are severe cracks in the economy, and this strong GDP figure has more to do with trade flows and tariffs and less to do with consumers and businesses spending.
We will continue to digest the data and seek guidance from the globally renowned economists that we chat with weekly.
Acquisitions heating up
Cybersecurity firm Palo Alto Networks announced an acquisition on Wednesday worth $25 billion. The deal sees Palo Alto acquire CyberArk Software. CyberArk shareholders will receive $45 in cash and 2.2005 shares of Palo Alto common stock for each CyberArk they own. The deal is expected to close next year.
Palo Alto shares moved lower after the announcement. Before this deal was announced, CyberArk had a market capitalization of $19 billion. CyberArk is an Israeli-based security company that offers identity management. Its customers predominantly operate in the financial services, energy, healthcare, and government industries.
This acquisition marks Palo Alto’s entry into the security market. The CEO made a statement after the acquisition was announced and stated that, “we are witnessing another inflection point driven by the emergence of AI agents, creating new AI security categories and reshaping the way Identity Security is delivered.”
Palo Alto expects the transaction to be accretive and add to its revenue growth immediately. It also expects its margins to expand. The company also expects the deal to add to its free cash flow per share by 2028.
Palo Alto Networks is a California-based cybersecurity company. Its core business includes advanced firewalls and cloud-based offerings that extend security to cover other needs of businesses.
We think the dip in Palo Alto shares might be overdone, and this deal in the long run could be a huge home run. However, shares trade very expensively and offer more risk than reward in our eyes.
We wish all of our readers a happy and healthy August long weekend!
MacNicol & Associates Asset Management
August 1st, 2025
Download in PDF format:
The Weekly Beacon – August 1, 2025
