Value Pick of the Week

No Value Pick this week. AppLovin (APP) had good numbers but didn’t survive the deeper dive. Maybe after their next earnings statement.

Market Summary

This past week the S&P 500 rose 0.5% with a few mega-cap tech companies doing the heavy lifting — Salesforce (CRM, +22%), CrowdStrike (CRWD, +13.8%), Meta Platforms (META, +5.1%), Apple (AAPL, +3.3%), and Nvidia (NVDA, +1.3%) leading the way. Fewer than half of all stocks advanced and only 3 of 11 sectors finished higher. That’s how a week with a 22% move in a large-cap name still nets out to half a percent for the index — the gains were concentrated in a handful of names while the broad market drifted lower, and the two roughly cancelled each other out.

📈 Nvidia (NVDA) was the main event, and it delivered

  • Reported Wednesday after the close: revenue up 106.0% year-over-year, EPS up 111.4%, with gross margin of 75.0% against 72.7% a year prior.
  • Q3 guidance of $108 billion ±2% — more than 89% year-over-year growth and above the ~$106 billion Wall Street expected.
  • After a solid surge on Thursday following the report, NVDA fell 4.6% on Friday.

📈 Earnings season is running exceptionally hot

With 483 S&P 500 companies reported, 86% beat EPS expectations — against a four-quarter average of 80% and a historical average of 67%. Q2 earnings growth is tracking +53%, with the full-year 2026 outlook at +34%.

⚠️ The AI trade had been under pressure going in — the two prior weeks saw a notable pullback driven partly by political pushback against data center buildouts in Texas, Tennessee, Pennsylvania, and New York. That’s the same grassroots opposition theme that surfaced in July, and it’s becoming a recurring drag.

How Our Picks Fared

Our past picks lost 1.3% to the S&P 500 — despite the solid showing by CRWD, META, and AAPL. CRWD did particularly well:

📈 CrowdStrike (CRWD) rose 13.8%

  • Fiscal Q2 2027 results (quarter ended July 31), reported after the close August 26.
  • Revenue was up 25.8% year-over-year — a 2.1% beat.
  • Adjusted EPS of $0.31 vs. $0.29 expected, a 6.4% beat.
  • Adjusted operating income was the biggest beat of the three at +6.7%.
  • Q3 revenue guidance of $1.53 billion at the midpoint, 0.7% above consensus.

⚠️ In the week ended Friday, August 21, CRWD dropped 11.5% on news the CTO was leaving — no guidance cut, no pre-announcement, no lost customer, no product failure — a massive overreaction to a personnel move. Combining the two weeks, it looks like CRWD was rewarded with a stingy 2.5% bump for a stellar quarter.

📊 IES Holdings (IESC) completed its two-for-one stock split this past week, with shares beginning to trade on a split-adjusted basis following the August 21 distribution. Shareholders now hold twice as many shares at half the price — the value of the position is unchanged. Splits don’t create value; they lower the per-share price, which makes the stock easier to buy in small lots.

Past Picks Review — Oil & Gas, and Adjacent

Exxon Mobil (XOM) — SELL

Pioneer Natural Resources was recommended on March 5, 2023, at $207.13 per share, and XOM acquired Pioneer in an all-stock deal fourteen months later, on May 3, 2024. At that time Pioneer was trading at $269.62 — a 30.2% gain.

  • The tracker shows XOM trailing the S&P 500 by 14.8%, but if dividends are included it’s only trailing by 1.7%. With that said, the forward consensus puts XOM’s expected 12-month total return (price appreciation plus dividend, pre-tax) at roughly 10.9%, against an aggregate S&P 500 target of about 20.0%.
  • Oil price sensitivity has gone up, not down, since the Pioneer acquisition. That deal added a large, low-cost Permian Basin position specifically to increase production — which increases XOM’s earnings leverage to crude price swings.
  • The forecasts have lower oil prices baked in, so if there’s a big surprise that raises prices significantly, the forecasts will be wrong.
  • A position up this much (+75.8%, $67.56 per share) carries a real tax cost on sale (15% for most people). Worth pairing this decision with the tax-management tools already in the playbook — offsetting losses elsewhere in the portfolio, staging the sale across tax years if the position is large, or directing shares to a donor-advised fund instead of selling outright if charitable giving is part of the plan. Full disclosure: my shares are in a Roth IRA, so the tax ramifications don’t affect me.

ConocoPhillips (COP) — SELL

Similar to XOM, ConocoPhillips was not an independently chosen pick — they bought Marathon Oil through an all-stock acquisition, and Marathon was a Pick of the Week on December 17, 2023. It was the smaller, more nimble operator, and that distinction matters for how this position should be judged today.

  • The forward numbers don’t clear the bar. Consensus analyst targets put COP’s expected 12-month total return (price appreciation plus dividend) at roughly 14.1% — a $145.33 target against a $130.35 current price (+11.5%), plus a 2.61% dividend yield. That’s well short of the aggregate S&P 500 target of roughly 20.0%, a gap of about 6 points.
  • This position was never an independent conviction pick, so it doesn’t get the benefit of the doubt an original selection would. Existing holdings that were deliberately researched and chosen get held through a “nothing’s changed” standard. A position acquired passively through someone else’s merger deserves fresh scrutiny on its own current merits — and on those merits, COP doesn’t clear the bar today any more than it would as a brand-new candidate.
  • There’s a longer-tail integration risk that hasn’t shown up in the numbers yet. The synergy wins reported so far are the easy, mechanical kind — eliminating duplicate capital programs and overhead. Whether COP preserves the operational efficiency that made Marathon attractive in the first place, or dilutes it into a larger, more bureaucratic operating model, is a question that historically takes two to three years post-close to answer — well after the “ahead of schedule” headlines fade.
  • With a real gain of 36.6%, selling COP could have tax consequences as well. Like XOM, my shares are in a retirement account, so no taxes on the sale.

Devon Energy (DVN) — HOLD

  • Devon Energy is the strongest case of the three oil & gas names reassessed this round — the numbers and the analyst conviction both support staying put, with one real caveat on the income side.
  • The forward case actually clears the benchmark. Consensus targets put DVN’s current price at $47.35 against a $59.46 target, an implied upside of +25.6%, plus a 2.73% dividend yield — a total expected 12-month return around 28.3%. That beats the aggregate S&P 500 target of roughly 20.0% (including dividends) outright, not just by a small margin.
  • Analyst conviction is the strongest of any name in this round of reviews. 24 of 27 analysts are bullish (21 Strong Buy, 3 Buy), 3 Hold, zero Sell — an outright “Strong Buy” consensus, not a split or lukewarm one.
  • The size of the upside also reflects the stock’s volatility. DVN is a smaller, more binary name than COP or XOM — the kind of stock where a single quarter’s results can move the price sharply in either direction. Some of that 25.6% target gap is likely compensation for that added risk, not a free lunch.
  • Oil price remains the dominant swing factor, same as with every pure-play E&P in this portfolio — DVN carries that exposure with no downstream or midstream cushion at all.

Targa Resources (TRGP) — HOLD (the “Adjacent”)

  • Targa runs a largely fee-based midstream network — gathering, processing, transport, and fractionation — earning off Permian volumes moving through its system rather than off commodity prices directly.
  • 2025 adjusted EBITDA hit a record ~$5.0 billion, up 20% year-over-year, and management is guiding 2026 EBITDA to $5.40–5.60 billion — continued growth off an already-strong base, not a number being defended.
  • Targa secured 20-year acreage dedications with ExxonMobil across the Permian Delaware and Midland basins, running through 2046. Long-dated, fee-based contracts from one of the basin’s largest operators are about as much forward visibility as midstream infrastructure gets.
  • A 25% dividend increase to $1.25/quarter ($5.00 annualized) plus $642 million in completed share buybacks — management putting free cash flow behind the thesis rather than just the growth narrative alone.
  • LNG export and pipeline capacity is expanding across the sector, and if industry-wide supply growth outpaces demand, margins could compress even for a well-contracted operator. After a 260% three-year run against a 56.5% industry benchmark, a good deal of the good news is already in the price — the case from here depends on the new capacity actually filling up as planned, not on the story continuing to sound good.

Have a great week!

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