Latest / Stock Picking with Fexingo: Individual Equities, Research, and Building a Concentrated Portfolio / How Chevron Outpaced Big Tech Mid-2026
Transcript
- Lucas: Chevron is up nearly three percent over the past five trading days, while the Dow has dropped about eight-tenths of a percent. That kind of divergence tells you something is shifting beneath the surface. Luna: And it's not just a one-week blip. Year to date, Chevron is handily beating the S&P 500. Meanwhile, Apple and Microsoft are basically flat or down on the week. Lucas: Right. Apple is up two and a half percent over five days, which is solid, but Microsoft is down one point six. So the narrative that big tech always wins is getting challenged. The question is why Chevron specifically, and whether this rotation has legs. Luna: I think the headline numbers are interesting, but the real story is in Chevron's free cash flow. They generated something like thirty-five billion in free cash flow last year, and they're on track to beat that in 2026. Lucas: And that cash flow is being put to work in ways that investors love. Chevron raised its dividend by eight percent earlier this year, and the yield is now around four and a half percent. That's almost three times the S&P 500 average. Plus they're buying back shares aggressively. Luna: So you get income plus capital return. Compare that to Microsoft, which yields less than one percent, or Apple around zero point five. For income-oriented investors, it's a no-brainer. Lucas: But it's not just income. The operational performance has been strong too. Chevron's upstream margins have held up even as oil prices moderated from their 2022 peaks. They've been disciplined about production growth, focusing on returns rather than volume. Luna: That discipline is key. A lot of energy companies in the past would have drilled like crazy when prices were high, then cratered when they fell. Chevron seems to have learned that lesson. Lucas: Exactly. And the market is rewarding that. But let's zoom out. The broader context is that we're seeing a sector rotation in mid-2026. The S&P 500 is up zero point eight percent over five days, but that masks a lot of divergence. Luna: The Nasdaq is up one point four percent, so tech is still leading slightly, but look at the Dow—down zero point eight. That's industrial and consumer stocks dragging. Energy is the bright spot. Lucas: And value stocks broadly are holding up. The iShares Russell 1000 Value ETF, ticker i w d, is down only two-tenths of a percent over five days. So the rotation isn't a stampede yet, but the direction is clear: value and energy are gaining traction. Luna: I think there's also a macro element. The Fed has been on hold, and with inflation still sticky around three percent, the rate cuts everyone hoped for haven't materialized. That's good for energy companies because they benefit from higher nominal GDP and steady demand. Lucas: And bad for high-growth tech that was priced for low rates forever. NVIDIA is up four percent this week, so it's not like tech is collapsing, but the multiples are under more scrutiny. NVIDIA trades at over forty times earnings. Chevron is at about eleven times. Luna: That valuation gap is massive. And when money gets a little tighter, investors start asking which companies can actually deliver cash today, not just promises of future growth. Lucas: Speaking of which, if our money conversations have helped you think about a decision differently or given you a new angle on a stock, there's a small way to keep these episodes ad-free and independent. A couple of dollars a month genuinely makes a difference—buy me a coffee dot com slash fexingo. Luna: Yeah, it's literally what keeps the lights on. No pressure, but if you've gotten value from the show, that's the place. Lucas: Back to Chevron. The other thing I'd highlight is their Permian Basin position. They've got some of the lowest-cost production in the world there, and they're still finding efficiencies. Their Permian output grew eight percent year over year in the last quarter. Luna: So they're not just returning cash, they're also investing in high-return projects. That's a sweet spot. They're not starving the business to pay dividends. Lucas: Right. And their balance sheet is strong. Debt to capital is around fifteen percent, which gives them flexibility. Compare that to some of the big tech companies that are sitting on huge cash piles but also taking on debt for buybacks. Luna: I want to push back a little though. Chevron is still an oil and gas company, and the energy transition is real. Long-term, there's regulatory risk and demand risk. How do you square that with a stock pick? Lucas: It's a fair point. But I'd argue that Chevron is actually positioning for that. They're investing in carbon capture and renewable fuels, but in a disciplined way. They're not chasing unprofitable green projects. They're doing what makes economic sense. Luna: And in the meantime, the world still runs on oil. Global demand hit a record last year, and it's still growing. So the transition will take decades, and Chevron will generate enormous cash in the interim. Lucas: Exactly. So for a stock picker, Chevron offers a combination of current income, valuation support, and a business that's managed conservatively. It's not going to double overnight, but it's a compounder. Luna: And it's a hedge against a lot of the risks in the market right now. If inflation stays hot, energy benefits. If rates stay high, value benefits. If tech gets a correction, Chevron is a safe haven. Lucas: Let's look at how it's trading. At one hundred seventy-four dollars, it's near its fifty-two-week high. But the P/E is still just eleven. So it's not overvalued even after the run. Luna: Though we should note that if oil prices drop sharply, that earnings power goes away. The breakeven for Chevron in the Permian is around thirty-five dollars a barrel, so they've got a big cushion, but it's not zero risk. Lucas: No stock is zero risk. But the margin of safety is wider than most. And for a concentrated portfolio, I think Chevron deserves a spot alongside more growth-oriented names. Luna: So if someone is building a five- or ten-stock portfolio, how much would you allocate to energy? Lucas: It depends on your time horizon and risk tolerance. But I'd say at least ten to fifteen percent. And Chevron would be my top pick in the space. Exxon has also done well, up zero point three percent this week, but Chevron's capital allocation is more shareholder-friendly in my view. Luna: Exxon is more aggressive on production growth. Chevron is more about returns. Different strokes. Lucas: Exactly. And that's the beauty of stock picking. You can choose the management team that aligns with your philosophy. For me, Chevron's CEO has been clear: we're going to generate cash, return it to shareholders, and invest only in high-return projects. Luna: That's a philosophy that works in any market cycle. And right now, it's being rewarded. Lucas: So the takeaway for listeners: keep an eye on sector rotation. It's not about predicting the next quarter, but about finding businesses with durable cash flows and management that treats your capital like their own. Chevron checks both boxes. Luna: And maybe it's time to look beyond the usual tech suspects. There's value in the old economy if you know where to dig. Lucas: Well said. That's our show. Until next time.