Longleaf Partners, managed by Southeastern Asset Management, released its “Small-Cap Fund” fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. Longleaf experienced several environments throughout its experience in small-cap investing. This year, the underlying developments in the Fund’s holdings were more promising than the actual stock price returns when compared to the target of inflation plus 10% and the unusual performance of the Russell 2000. In Q4 2025, the Fund returned ...

February 23, 2026 Clearway Energy, Inc. Safe Harbor This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks, uncertainties and assumptions, and typically can be identified by the use of words such as "expect," "estimate," "target," "anticipate," "forecast," "plan," "outlook," "believe" and similar terms. Such forward-looking statem ...

Core Insights - Analysts have increased their price targets for McDonald's Corp. (MCD) stock following a strong earnings report, indicating positive market sentiment towards the company [1] - MCD's stock has shown significant growth, rising 9.2% from a low of $299.86 on January 5 to a closing price of $327.58 on February 13, despite a slight dip after the earnings release [2] Financial Performance - McDonald's operating cash flow (OCF) margin improved to 39.2% from 36.5%, reflecting a 7.4% increase, while revenue grew by 3.7% to $26.9 billion in 2024, demonstrating enhanced operational efficiency [5][6] - The company's capital expenditures (capex) as a percentage of sales increased to 12.5% from 10.7%, yet free cash flow (FCF) as a percentage of sales also rose to 26.7% from 25.7%, indicating a strong ability to invest while maintaining cash generation [7] Future Projections - A revised price target of $371.30 has been set based on an expected $9 billion in FCF for 2026, representing a 25% increase over 2025, supported by a 40% OCF margin assumption and $3.2 billion in capex spending [8]

Core Insights - Apple, Inc. (AAPL) has experienced significant growth in revenue, free cash flow (FCF), and FCF margins, leading to increased target prices for its stock [1][4][5] Financial Performance - AAPL's revenue increased by 15.65% year-over-year to $143.8 billion, representing a 40% rise from the previous quarter [4] - Free cash flow surged by 91% to $51.55 billion in Q1, attributed to a substantial increase in iPhone sales driven by unprecedented demand [4] - FCF margins improved to 35.86% of sales, up from 21.72% in the same quarter last year [5] Future Projections - Analysts have raised revenue forecasts for AAPL, projecting $464.49 billion for the fiscal year ending September 30, 2026, and $493.77 billion for the following year [7] - The average revenue for the next 12 months is estimated to be $471.81 billion [7] Target Price Adjustments - Target prices for AAPL stock have been revised upwards, with a previous target of $325 per share based on a 25% FCF margin and a 2.393% FCF yield [6] - With the increase in FCF margin to 28.3%, the market is expected to raise the forward FCF multiple to at least 43x [6]

Group 1: Microsoft - Microsoft's free cash flow (FCF) remains the most resilient among the Big 5 hyperscalers, projected at approximately 22%, while peers trend toward negative territory with FCF margins around 5% or lower [1][2] - The Big 5 hyperscalers are expected to spend nearly $700 billion in capital expenditures (capex) this year, reflecting a 65% year-over-year increase [1] - Despite strong FCF, Azure growth is stagnating in the high-30% range, with 365 Commercial Cloud growth at about 14%, while competitors are gaining market share [3] Group 2: Amazon - Amazon's fourth-quarter 2025 results were solid, with $213.4 billion in revenue and $24.98 billion in operating income, slightly above expectations, but the stock dropped about 11% due to lower-than-expected operating income guidance and increased capex for 2026 [4][5] - The backlog for Amazon Web Services (AWS) rose 22% sequentially to $244 billion, indicating strong demand, alongside continued retail momentum and robust advertising performance [5] - Amazon's guidance for first-quarter operating income of $16.5 billion–$21.5 billion is about 15% below consensus at the midpoint, influenced by higher costs related to Amazon Leo and international investments [6]

Core Insights - Tesla Inc. (TSLA) reported strong Q4 earnings, but near-term put options offer high yields, making them attractive for value investors [1] Financial Performance - Q4 revenue decreased by 3.13%, and on a full-year basis, it was down 2.93%. However, it fell by less than 1% (-0.84%) compared to Q3 revenue on a trailing 12-month basis [6] - Free cash flow (FCF) fell 30% to $1.42 billion, with FCF margins lower in Q4 but still relatively strong long-term [6] - FCF represented 5.75% of Q4 revenue, down from 7.91% the previous year. For the full year, $6.22 billion in FCF represented 6.56% of $94.827 billion in revenue, compared to 3.67% in 2024 [7] Stock Performance - TSLA stock was trading at $419.213 on Feb. 3, down over 13% from its peak of $489.88 on Dec. 16, 2025, but up from a recent dip of $416.26 on Jan. 29 [2] - The stock hit a three-month low of $391.09 on Nov. 21, 2025 [2] Investment Opportunities - Selling short one-month put options at $400.00 and $395.00 can yield an average investment return of 2.50%, appealing to value investors [1] - The strategy of rolling over contracts to lower out-of-the-money strike prices is being considered [5]

Group 1: Chevron - Chevron offers a reliable dividend yield of 4% and has increased its dividend for 37 consecutive years, making it a strong candidate for passive income [4][6] - The company has outlined a plan to grow free cash flow (FCF) and earnings per share by at least 10% when Brent crude oil prices are at $70, with a breakeven point at $50 per barrel [5] - Chevron's solid balance sheet provides a cushion during downturns, allowing it to maintain its dividend even if oil prices fall below $50 [5] Group 2: Kimberly Clark - Kimberly Clark, known for brands like Kleenex and Huggies, is currently priced below $100 a share, which is a 12-year low, presenting a potential buying opportunity [9] - The company announced the acquisition of Kenvue, aiming for billions in annual cost synergies and expecting to grow earnings in the second year post-acquisition [9][10] - Kimberly Clark has a 5.2% dividend yield and a forward price-to-earnings ratio of 13.1, positioning it as a strong value stock for passive income [12]

Core Insights - Royal Caribbean Group reported record fourth-quarter earnings, with revenue and adjusted EPS growth of 13% and 72% respectively, despite missing Wall Street's Q4 earnings expectations [2] - The company projected double-digit sales and adjusted EPS growth for 2026, with capacity set to rise nearly 7% [2] - Record bookings were achieved at the start of 2026, marking the best seven booking weeks in the company's history [4] Financial Performance - Royal Caribbean's stock increased by 16% this week, reflecting positive market sentiment [2] - The company earned $6.3 billion in operating cash flow last year and expects to spend $1.8 billion on maintenance capex in 2026 [5] - The current market cap stands at $80 billion, with a gross margin of 39.53% and a dividend yield of 1.20% [3] Future Outlook - Management plans to double the fleet of Celebrity River Cruises ships to 20 by 2031 and invest $5 billion in new initiatives in 2026 [4] - The company experienced a 6% decline in net cruise costs (excluding fuel expenses) over the past year, enhancing profitability [4] - Royal Caribbean's stock is considered reasonably priced at roughly 22 times free cash flow relative to its enterprise value of $100 billion, especially given its growth plans [5]

Core Viewpoint - Raytheon Corp (RTX) reported strong free cash flow (FCF) for Q4 and 2025, projecting further growth in 2026, indicating potential for a 10% increase in stock value to $217.00 or higher [1][6]. Financial Performance - RTX's revenue for 2025 was reported at $88.6 billion, exceeding analysts' expectations of $87 billion by 1.83% [4]. - The company reported $3.195 billion in FCF for Q4, leading to a total FCF of $7.94 billion for 2025, which is 75% higher than the previous year and 51% higher than the previous quarter's TTM figure [5][6]. - For 2026, Raytheon projects FCF to rise to between $8.25 billion and $8.75 billion, based on a revenue forecast of $92 billion to $93 billion [6]. Cash Flow Margins - In Q4, Raytheon's FCF of $3.2 billion represented a record 13.18% of its quarterly revenue of $24.2 billion, significantly higher than last year's 2.3% FCF margin [7]. - For the full year, the FCF of $7.94 billion accounted for almost 9% of sales (8.96%), compared to just 6.09% over the last 12 months as of Q3, indicating improved cash generation from operations [8].

Summary of Key Points from the Conference Call Industry Overview - The focus is on the upcoming 4Q25 earnings season for Europe's Big Oils, starting with Equinor on February 4th, 2026, and the guidance for 2026 is expected to be a key topic [1][9] - The preference ranking for investment is Oil Services > Big Oils > Exploration & Production (E&Ps), with TotalEnergies (TTE) highlighted as the top pick among Big Oils [1] Core Insights and Arguments - The $60/bbl Brent price assumption is challenging for Europe's Big Oils, leading to a projected decline in refining margins by 35% compared to 4Q25 [2] - Capital expenditure (capex) budgets are expected to remain flat, with an average buyback cut of approximately 25% across the sector, except for TTE [2] - TTE and Galp are noted for their organically falling breakeven Brent prices, with TTE's Integrated Power business transitioning from a drag to a contributor to free cash flow (FCF) [3][11] - TTE's recent trading update has positively influenced consensus estimates, contrasting with downgrades from peers like BP and Shell [4] Financial Projections - The aggregate organic cash flow from major companies is projected to show a $16 billion deficit post distributions, which decreases to approximately $5.5 billion after accounting for inorganic cash flows [13] - TTE is expected to have the lowest organic breakeven price in the peer group at around $60/bbl for 2026, with projections of it dropping below $55/bbl by 2027 [14][16] - TTE's capex is anticipated to decline by over 10% year-on-year in 2026, with a significant reduction expected by 2028 [17][20] Balance Sheet and Debt Analysis - The analysis indicates that all Big Oils will reduce shareholder distributions in 2026 compared to 2025, with Equinor expected to see the most significant declines [22] - BP is projected to maintain the highest gearing in the peer group at around 40%, while TTE and Galp are expected to decrease their net debt year-on-year [31][36] Market Sentiment and Consensus - The consensus estimates for 4Q25 earnings have been revised down by 8% year-to-date, with TTE showing a rare positive update that has led to flat revisions compared to an average 8% downgrade across peers [49] - The overall sentiment indicates a cautious outlook for cash flows, with aggregate payouts expected to exceed 140% of organic FCF at the $60/bbl Brent price [10] Upcoming Catalysts - Key upcoming earnings reports include Galp and Equinor on February 4th, followed by several other companies throughout February [62] Additional Insights - The report emphasizes the importance of cash flow cushions and balance sheet strength, particularly for TTE and Equinor, as they navigate the challenging oil price environment [10][11] - The analysis suggests that the market may have already priced in the expected cuts to buybacks, indicating a potential for volatility in stock performance as earnings reports are released [65] This summary encapsulates the critical insights and projections regarding the oil industry and specific companies, particularly focusing on TotalEnergies and its competitive positioning within the sector.