Latest / Stock Picking with Fexingo: Individual Equities, Research, and Building a Concentrated Portfolio / Why Value Stocks Are Quietly Outperforming Big Tech in June 2026
Transcript
- Lucas: So the NASDAQ just had its worst week in, I think, about eighteen months — down over five percent. Microsoft off nine and a half percent, Nvidia off eight and a half, Amazon off nearly six. Luna: And yet the Dow is basically flat, and Berkshire Hathaway is up nearly four percent this week. Lucas: Right. The S&P 500 is down 2.8 percent on the week, but if you look under the hood, it's a growth-stock massacre while value and financials are holding up. JPMorgan up five percent, Bank of America up five percent. Luna: So if today's conversation helps you think about whether that rotation is real — if you're reconsidering your own portfolio mix — I'll just say, the way we keep these episodes ad-free is through listener support. You can find us at buy me a coffee dot com slash fexingo. Lucas: Yeah. And we mean that genuinely — if you get something useful out of this, that link is how it stays free. Now, let's dig into why this rotation is happening. Lucas: The catalyst was Friday's jobs report. Non-farm payrolls came in hot — the market had been pricing in a rate cut sometime this fall, and now traders are pushing that out to maybe the first quarter of next year. Luna: Higher for longer, essentially. And the market reacts by selling the stocks that depend on low discount rates — the long-duration growth names. Lucas: Exactly. Microsoft and Nvidia have huge expected cash flows far in the future. When you raise the discount rate, the present value of those future earnings shrinks. Meanwhile, banks and insurers — their earnings are more tied to today's interest rates, not ten years from now. Luna: And they directly benefit from a steeper yield curve. JPMorgan can lend at higher rates while keeping deposit costs relatively low. Lucas: Exactly. So the week's headlines scream 'tech wreck,' but the Dow actually gained a little. Berkshire, which is heavily exposed to insurance, railroads, and utilities, is up almost four percent. That's a massive divergence. Luna: I want to push back a little, though. Is this really a rotation, or just a one-week flinch? Because the NASDAQ is still up double-digits year-to-date. Lucas: That's fair. Year-to-date, the NASDAQ is still up something like twelve percent. The S&P 500 value index, VTV, is up maybe three percent on the year. So this isn't a long-term trend yet. But what's interesting is the magnitude of the move. Luna: Eight and a half percent for Nvidia in one week? That's not a normal weekly fluctuation. Lucas: No. And it's happening at a time when the AI narrative is still incredibly strong. Nvidia's earnings last quarter were fantastic. But the market is starting to ask: at a price to earnings ratio of over forty, how much of that is already priced in? Luna: Right. Meanwhile, Berkshire is trading at a P/E of about twenty-two, and they're sitting on over three hundred billion dollars in cash. If rates stay higher, that cash earns more, and they can deploy it opportunistically. Lucas: Exactly. And JPMorgan at a P/E of about fourteen — you're paying much less for current earnings. The market repricing is essentially saying: those future AI profits are less certain than we thought a month ago. Luna: But let's talk about the Fed specifically. Chair Warsh gave a speech last week signaling that they're not in a hurry to cut. The market listened. Lucas: Yeah. The probability of a cut at the September meeting dropped from about forty percent to below twenty percent after the jobs number. The ten-year Treasury yield jumped about fifteen basis points on Friday alone. Luna: And that's the kind of move that hits the high-beta names hardest. The VIX also spiked, though I think it's still below twenty. Lucas: Right. The VIX is around seventeen, eighteen — elevated but not panic level. So this is more of a recalibration than a crash. But for stock pickers, it raises a strategic question. Luna: Which is: do you trim your growth winners and add to value? Or do you hold through the volatility because the long-term thesis hasn't changed? Lucas: That's the million-dollar question. And it really depends on your time horizon. If you're a long-term investor, three to five years out, the ai driven earnings growth at Microsoft and Nvidia is still very real. Cloud revenue is growing, data center spending is booming. Luna: But if you're more tactical, the next six months might favor value. The jobs report suggests the economy is still strong, which supports bank earnings, consumer spending, and industrial activity. Lucas: And energy is hanging in there too. Exxon and Chevron are both up slightly this week, even with oil prices a bit mixed. That's another defensive value play. Luna: Let's also talk about the size component. The Russell 2000 is down two and a half percent this week, which is less than the NASDAQ but more than the Dow. So small caps aren't exactly thriving. Lucas: No, but they're also not getting crushed. And small caps tend to be more domestically focused, so a strong economy should be good for them eventually. But they're also more sensitive to borrowing costs, and with rates staying higher, their financing costs are a headwind. Luna: So the rotation is really within large caps — out of mega-cap tech into mega-cap financials and old-economy value. Not a broad risk-off move. Lucas: Exactly. And that's a subtle but important distinction. If it were a full risk-off event, you'd see gold surging and Treasuries rallying. Gold is actually flat this week, and the ten-year yield is up, not down. Luna: Right. So the market is saying: the economy is fine, I just don't want to pay fifty times earnings for stocks that might not deliver for another three years. Lucas: Nvidia's forward P/E is still around thirty-five, which is high but not insane. Microsoft is at about thirty-one. But those multiples compressed seven or eight points just this week. Luna: And that compression can happen fast when sentiment shifts. I think the key takeaway for listeners is: don't panic, but do reevaluate your exposure to high-duration assets if rates stay higher for longer. Lucas: Yeah. And if you're building a concentrated portfolio, this might be a good moment to ask: are you positioned for the regime we're actually in, or the one you wish we were in? Luna: That's a good framing. So let's look at a specific trade. Berkshire Hathaway — Class B shares at about 488 dollars. Up almost four percent this week. What's the bull case right now? Lucas: The bull case is that Berkshire is a compounding machine that benefits from higher interest rates on its cash pile, has a massive insurance float that generates underwriting profits, and owns businesses like BNSF Railway and Berkshire Hathaway Energy that have pricing power. Luna: And the bear case? Because the stock has also had a good run this year. Lucas: The bear case is that Warren Buffett is 95, and succession uncertainty could weigh on the stock. Also, Berkshire has been buying back shares aggressively, which signals they don't see better deployment opportunities. That could mean they think the stock is undervalued, or it could mean they're out of ideas. Luna: But the buybacks have been a tailwind for the stock price. And with 300 billion in cash, they have enormous optionality if a crisis hits. Lucas: Exactly. It's a defensive growth stock. Meanwhile, JPMorgan at 312 — up five percent this week. The bull case there is net interest income staying elevated because deposits are sticky and loan demand is holding up. Luna: And the bear case is that commercial real estate losses eventually hit, or that consumer delinquencies rise. But so far, Jamie Dimon has been pretty cautious, and the bank has set aside ample reserves. Lucas: Right. Both Berkshire and JPMorgan are high-quality names that offer a margin of safety in a market that's repricing risk. I'm not saying sell everything and go all-in on value, but it's worth having some exposure. Luna: So to bring it back to the listener: if you're heavily weighted in the Mag Seven or the NASDAQ, this week is a reminder that diversification isn't just about asset classes — it's about factor exposure too. Lucas: And that's the real lesson. The market is giving you a signal. It might be noise, or it might be the start of something bigger. Either way, it's worth paying attention. Luna: Alright, let's see what next week brings. If the Fed speakers keep sounding hawkish, this rotation could have legs. Lucas: And if we get a softer CPI print, watch out — growth stocks could rip right back. That's the fun part about this job. Nothing is settled.