Diamondback Energy

FANG

Market cap $54.6B

Diamondback Energy (FANG) is downgraded to Buy after a ~40% rally, though valuation remains attractive. FANG delivered strong Q1 results, raised production guidance, expects accelerated debt reduction, and increased its dividend and buybacks. Macroeconomic risks from the Iran conflict and potential inflationary shocks warrant a higher margin of safety for oil equities.

Diamondback Energy's shares rose as the sharp rise in oil prices drove a broad rally across US-based oil producers. Consumer finance company Capital One underperformed during the quarter following its announced acquisition of Brex, an AI-native commercial fintech platform. We added global consumer staples leader Kimberly-Clark to the portfolio following its announced acquisition of Kenvue and subsequent share price decline.

Here is how Diamondback Energy (FANG) and Cenovus Energy (CVE) have performed compared to their sector so far this year.

WTI above $95 per barrel is boosting Permian oil and associated gas, acting as a tailwind for FANG, XOM and CVX.

Global oil reserves are being used to offset supply shortages caused by the Middle East conflict. These U.S. "middlemen" continue to transport, store, and process oil like nothing has changed.

WTI above $100 keeps Permian names FANG, XOM and CVX in focus as EIA sees higher basin output, and producers tout efficiency gains.

Middle East tensions are stoking volatility; a low-beta screen spotlights Liquidia, Exxon Mobil, Valero Energy and Diamondback Energy.

CVE is positioned to benefit from strong crude prices as elevated WTI and Brent levels support upstream earnings growth.

When deciding whether to buy, sell, or hold a stock, investors often rely on analyst recommendations. Media reports about rating changes by these brokerage-firm-employed (or sell-side) analysts often influence a stock's price, but are they really important?

Diamond Hill's long positions in software businesses, including Microsoft , Salesforce and Adobe, were among the most notable detractors in the quarter. Exploration and production companies Chevron and Diamondback Energy saw shares rise as the sharp increase in oil prices drove a broad rally across US-based oil producers. Diamond Hill initiated a position in Gartner as concerns around slowing revenue growth and potential disruption from AI created an opportunity to invest at an attractive valuation.