🗞 6 Best Hidden Subsidiaries In Public Markets

Happy Sunday!

Here’s what’s on the docket for this week’s newsletter:

• 📊 6 Best Hidden Subsidiaries in Public Markets

• 🔈️ Todd Ahlsten - Durable Moats & Increasing Relevance

Let’s dive in!

6 Best Hidden Subsidiaries in Public Markets

Many of the world’s best public companies have hidden divisions that quietly drive a big chunk of profits to the business.

Here are the 6 of the best ones we found through FinChat.

1. Amazon Advertising

Amazon generated $56 billion in advertising revenue this year, primarily from sponsored listings on its marketplace.

This division is boosting the overall profitability of its e-commerce business and may quietly be Amazon's most profitable segment.

2. S&P Global - Indices

S&P Global is often thought of for its Ratings business, but its Indices division is a quiet gem.

With 68% operating margins, S&P Indices requires very little reinvestment in order to grow.

3. Hasbro - Wizards of the Coast

Hasbro is often thought of as a toy and game manufacturer, but they also own a subsidiary called Wizards of the Coast (WOTC).

WOTC operates online role-playing and trading card games and is best known for its Dungeons & Dragons franchise.

The Wizards of the Coast segment accounts for less than 40% of Hasbro’s overall revenue but more than 80% of profits.

4. Alphabet - YouTube

Google acquired YouTube in 2006 for $1.65 billion.

Today the platform is home to 2.7 billion MAUs and is the world’s 2nd largest search engine behind Google itself.

Over the last 12 months, the user-generated video service reported $37 billion in advertising revenue alone.

5. Phillip Morris - Zyn

Phillip Morris is the world’s largest tobacco/nicotine company by market cap. While most people know the company for their traditional cigarettes business, Phillip Morris has successfully diversified into other reduced-risk product categories.

Zyn in particular has increased its shipment volume by more than 10x over the last 5 years, and has superior profit margins to the traditional cigarettes business.

6. Apple - App Store & Safari

Apple generates nearly $100 billion in "Services Revenue" every year.

The bulk coming through ~$30 billion in annual payments from Google to be the default Safari search engine and the App Store's take-rate on all in app transactions.

A.U.M. Podcast

Todd Ahlsten - Durable Moats & Increasing Relevance

Todd Ahlsten is the Chief Investment Officer of Parnassus Investments. An asset management firm responsible for $46 billion in AUM.

On this week’s episode, Todd dives into the Parnassus investment process. He explains how he distinguishes between long shelf-life and short shelf-life information, the common traits he finds in the most innovative companies, and deep dives into the business models of John Deere and Waste Management.

Meme of the week

On Wednesday, US Treasury Secretary Scott Bessent (pictured above) gave a speech on the “State of the Financial System“.

Amidst swirling trade policy, Bessent has become somewhat of a stabilizing voice for investors. Behind closed doors, Bessent reportedly told investors that he expects there to be a de-escalation in the ongoing trade talks between the US and China. The S&P 500 finished up more than 5% this week.