Bank of America Fund Manager Survey Update
On Tuesday, we put out a summary of the monthly Bank of America “Global Fund Manager Survey.” This month they surveyed 210 institutional managers with ~$589B AUM:
March 2026 Bank of America Global Fund Manager Survey Results (Summary)
Here were the 5 key points:
1) After eight straight months below 4%, fund managers’ average cash levels jumped from 3.4% to 4.3% in March, the biggest single-month increase since COVID. As we have said, this “event,” just like April, started with a tweet and will end with a tweet, with any positive news over the next few weeks catching positioning way offsides and driving the next leg higher.
2) Fund manager sentiment, based on cash levels, equity allocations, and global growth expectations, dropped sharply from 8.2 last month to 5.6 in March. While this marks a new six-month low after a period of frothy bull sentiment, it remains well above the “Liberation Day” low of 1.8 and nowhere near the washed out levels seen at prior cycle troughs. Sentiment has clearly come off the boil, but is far from true capitulation.
3) Fund managers are now the most overweight emerging market equities since February 2021, at a net 53% overweight, up from 49% last month. This rotation is still in the very early innings, as the longest streak of US outperformance on record at 15 years is finally unwinding, with a weakening dollar serving as an added tailwind.
4) Fund managers are now the most underweight consumer discretionary stocks since December 2022, with a net 27% underweight position. If there is one thing we know, as long as unemployment stands at 4.4% and Americans have jobs, betting against the consumer rarely pays off.
5) Unsurprisingly, the March survey saw a big jump in global inflation and rate expectations, with a net 45% of managers expecting higher global CPI over the next 12 months (vs. 9% in February), while only a net 17% still expect lower short-term rates (vs. 46% in February), the lowest reading since February 2023.
National Oilwell Varco Update
Heading into 2026, we made the case for skating to where the puck was going, not where it had already been. That meant looking past the crowded trades that had already worked and beneath the surface of the market where the real money was still waiting to be made.
Energy was one of those sectors.
After delivering less than half the market’s return in 2025, sentiment toward the sector had collapsed back to left-for-dead extremes not seen since the pandemic, when oil briefly went negative, and before that in the early 2000s. Our constructive view didn’t come from genius or any magical ability to predict the future. It came down to a handful of indicators giving the green light for a catch-up move that looked long overdue.
Fund manager exposure to the sector had fallen to record underweight levels, nearly two standard deviations below historical averages. The sector’s weight in the index had dropped to just 2.8%, near record lows. The Oil/S&P 500 ratio sat at historical troughs while short interest climbed to multi-year highs. When the rubber band gets stretched that far extreme, reversion to the mean becomes inevitable.
We laid out the full thesis in detail in the article linked below:
“The Fuel Behind the Future” Stock Market (and Sentiment Results)…
Fast forward to today, and the thesis has played out nicely. Energy is now the top-performing sector YTD, up more than 30% while the S&P 500 has declined ~1.9%.
The conflict in Iran has only extended an already market-leading run, with the Johnny-come-lately crowd suddenly piling into the sector they wanted nothing to do with just months ago. Now that everyone has found religion in Energy, history tells us it’s likely time for the sector to take a breather and shake out the weak hands.
While the knee-jerk reaction to the conflict has rewarded large energy producers on the back of a ~50% swing in oil prices, we think the more durable beneficiaries, once the dust settles, will be found further down the supply chain in oilfield services and equipment providers.
These are the companies supplying the pipes, drilling systems, tubing, and drill bits needed to bring damaged gas fields and energy infrastructure across the Middle East back online. Once rebuilding begins, demand for this equipment is about as close to guaranteed as it gets and offers far more insulation from short-term oil price volatility than owning the producers directly.
All of which brings us to one of our favorite pick-and-shovel ways to play the Energy sector: National Oilwell Varco, a leading provider of oilfield equipment and drilling systems.
For newer readers, here’s a quick overview of NOV and the key drivers of our thesis:
While we can’t predict the next move in oil prices or the next headline out of the Middle East, what we do know is that once the situation diffuses, NOV will be busier than a one-armed paper hanger keeping up with equipment orders.
Couple that with the estimated $100B+ required to rebuild Venezuela’s aged and neglected oil infrastructure, and there are plenty of reasons to be constructive on an equipment provider like NOV right now. In fact, in just the past few weeks, NOV has already received new orders out of Venezuela with a value exceeding everything the company generated from the country over the past several years combined.
A lot of unexpected tailwinds are working in NOV’s favor, something the company hasn’t been able to say for a long time. Management spent the recent downturn doing the unglamorous work of exiting underperforming markets, right-sizing the company, and taking over $100M of costs out of the business.
All of that heavy lifting has left NOV well positioned to ride an extended upcycle driven by the return of offshore and international exploration, with Venezuela and the Middle East rebuild sitting as free options on top of the core thesis. In the meantime, management continues rewarding shareholders by returning over 50% of free cash flow in the form of buybacks and dividends, all backed by a fortress balance sheet with $1.55B in cash.
While the stock has certainly been an early winner from our original cost basis, we believe we’re still in the early innings of a much bigger story. Until then, we’re happy to collect the dividend and sit on our hands while the thesis plays out.
Q4 Earnings Breakdown
10 Key Points
1) NOV reported Q4 revenue of $2.28B, $110M above consensus expectations. Revenue increased 5% sequentially and declined just 1% Y/Y, outperforming the 6% drop in global drilling activity during the quarter. For the full year, revenue of $8.74B declined only 1% Y/Y compared with a 7% decline in global drilling activity.
2) Adjusted EBITDA came in at $267M in Q4, down 12% Y/Y with margins contracting 140 bps. For the full year, adjusted EBITDA declined 7% to $1.03B with margins down 70 bps to 11.8%. This marked the third consecutive year of delivering north of $1B in adjusted EBITDA, improving ~3% vs. 2023 despite a 15% decline in the North America rig count, a 10% decline in Saudi Arabia, and a 4% drop in the offshore floater count.
3) The Energy Equipment segment reported Q4 revenue of $1.33B, up 7% sequentially and 4% Y/Y. For the full year, revenue came in at $4.93B, slightly ahead of the $4.89B reached in the prior year, with margins expanding 140 bps Y/Y to 13.8%, marking the fourth consecutive year of revenue growth and EBITDA margin expansion. New orders booked in the quarter totaled $532M, representing a book-to-bill of 73% and bringing the FY25 book-to-bill to 91% on a 15% increase in revenue out of backlog. Total backlog for capital equipment orders stood at $4.34B at year end, down $93M Y/Y, with management expecting a book-to-bill of ~100% in FY26.
4) The Energy Products and Services segment generated $989M in revenue during Q4, up 2% sequentially and down 7% Y/Y. For the full year, the segment generated $3.98B in revenue compared to $4.13B in the prior year, with weakness driven by reduced global activity that led to lower volumes and margins declining 280 bps to 14.2% as tariffs and inflationary pressures weighed on profitability. A bright spot within the segment is the composites business, which saw its highest annual revenue in history in 2025, with Q4 bookings reaching their highest levels in three years.
5) NOV generated $472M of free cash flow in Q4, representing 177% conversion of adjusted EBITDA. For the full year, FCF came in at $876M (vs. $953M in 2024), marking the second consecutive year of over 85% conversion and the best two-year FCF stretch for NOV in over 10 years at over $1.8B combined. This has been driven by dramatically improved working capital intensity, down to just 21.9% (lowest in ~10 years) from 28.8% in 2023, freeing up ~$630M in cash. For FY26, management expects FCF conversion to decrease to 40-50%, implying ~$450M in FCF at the midpoint on a slight decline in adjusted EBITDA.
6) Management sees a massive opportunity in Venezuela to help get the industry back on its feet, which will require significant investment in capital equipment. NOV has a long history in the country, dating back to 1949, and employed more than 450 people there before shutting down operations. The company has continued to sell equipment and spare parts supporting major IOC activity in the region since then. In just the past few weeks, NOV has already received new orders with a value exceeding the total revenue generated over the past several years from supporting that activity. With oilfield assets that have been neglected for years, management expects that once the right guardrails are in place, the opportunity could be meaningfully larger than anything NOV has historically done in the region.
7) NOV continues to see increasing indications that offshore drilling activity is bottoming and nearing the start of a strong extended upcycle, with offshore-related backlog growing more than 10% in 2025 and the offshore cranes segment reaching its highest revenue level in over 10 years. A key driver of the return to offshore is materially lower breakeven costs driven by better technology, much of which is a credit to NOV, with breakevens in many areas now falling below $40/bbl. These lower costs, combined with the growing need to offset structural production declines in North America shale, increasingly position offshore as the next source of incremental supply. While 2026 forecasts call for another year of lower spending (down low to mid single digits), NOV expects the market to improve in late 2026 into 2027, setting the stage for an extended recovery. Management sees potential for up to 10 FPSO FIDs this year and expects demand to remain strong at an average of 8 FIDs per year through 2030, with each representing a $100M to $700M opportunity for NOV.
8) In Q4, NOV repurchased 5.7M shares for $85M and paid $27M in dividends, returning $112M to shareholders. For the full year, NOV repurchased 22.8M shares for $315M and paid $190M in dividends, returning $505M total. Shares outstanding have been reduced by over 8% in the past three years, with the share count now at its lowest level in 18 years. Management remains committed to returning at least 50% of excess FCF annually and expects to hit that threshold for 2025 via a supplemental dividend in 1H 2026.
9) NOV continues to maintain a fortress balance sheet with total debt of $1.72B against $1.55B in cash and $1.5B available on its primary revolving credit facility. Net debt to EBITDA stands at just 0.2x, with management committed to maintaining net leverage below 0.5x and gross leverage below 2x.
10) Looking ahead, management expects Q1 revenue to decline 1–3% Y/Y with adjusted EBITDA of $200–225M. For the full year, management expects slightly lower revenue, with results more weighted toward the back half, and adjusted EBITDA in line to slightly lower vs. 2025. While the near term is expected to remain a challenging market, management sees the mid to longer term outlook as the early innings of an upcycle, driven by higher levels of offshore and international activity and prolonged underinvestment in the industry’s asset base, setting the stage for a much more attractive operating environment in 2027 and beyond.
Earnings Call Highlights
Morningstar Analyst Note
Comstock Resources Update
For newer readers, here’s a quick overview of the key drivers behind our thesis on Comstock Resources, our second energy name and one of our favorite backdoor ways to play the AI and data center buildout at a reasonable valuation:
Q4 Earnings Breakdown
10 Key Points
1) Comstock posted Q4 natural gas and oil sales of $364M, up 8% Y/Y, as higher realized gas prices of $3.27/mcf after hedging offset a 10.4% decline in production to 1,209 MMcfe/d. For the full year, sales totaled $1.45B, up 15.4% Y/Y, with higher realized prices again offsetting a 14.4% decline in production to 1,234 MMcfe/d.
2) CRK continues to maintain its industry-leading low-cost structure, with Q4 production costs averaging $0.77/Mcfe (flat Q/Q) and unhedged and hedged operating margins of 77% (+3% Q/Q). Q4 operating costs were comprised of $0.38 for gathering and transportation, $0.25 for lease operating, $0.07 for production and other taxes, and $0.07 for cash G&A. For the full year, production costs averaged $0.79/Mcfe, with unhedged and hedged operating margins of 75%.
3) In Q4, legacy Haynesville drilling costs increased to $681/lateral foot (vs. $558 in Q3), with completion costs increasing to $721/lateral foot (vs. $671 in Q3). Western Haynesville drilling costs increased to $1,489/lateral foot (vs. $1,385 in Q3), with completion costs declining to $1,542/lateral foot (vs. $1,622 in Q3). For the full year, CRK achieved a total drill and complete cost of $1,347/foot, one of the lowest in the basin and 11% below the $1,510 average in 2024. Management expects drilling efficiencies to continue driving down D&C costs in 2026 across both areas, with new technology (insulated drill pipe, upgraded rigs, and rotary steering drilling systems) expected to cut drill times by two weeks and reduce drilling costs by ~$300/foot in Western Haynesville on top of cost reductions already achieved.
4) Proved natural gas and oil reserves at year end stood at 7.0 Tcfe under SEC rules (vs. 3.8 Tcfe in the prior year), and 7.2 Tcfe using year-end NYMEX prices (vs. 7.0 Tcfe in the prior year). Comstock spent $1.05B in 2025 to add 1 Tcfe of proved reserves, replacing 229% of 2025 production under NYMEX pricing. PV-10 value stood at $4.5B using $3.07/Mcf and $61.98/barrel, and $5.2B at NYMEX prices. Beyond proved reserves, Comstock maintains 1.9 Tcfe of proved undeveloped reserves, 2.5 Tcfe of probable reserves (2P), and 7.7 Tcfe of possible reserves (3P), for a total of 19.3 Tcfe on a P3 basis. Importantly, P3 estimates include only a highly conservative 5.4 Tcfe for Western Haynesville, leaving a substantial portion of that acreage unaccounted for.
5) Comstock’s Western Haynesville acreage, their “holy grail” asset, has grown to over 535,000 net acres with an estimated drilling inventory of 3,343 gross and 2,561 net locations. CRK turned four successful wells to sales in the Western Haynesville during Q4, bringing the FY25 total to 12 wells at an average production rate of 33 MMcf/day and average lateral length of 9,481 feet. Comstock now has 30 wells currently producing in the acreage and expects to drill 19 wells and turn 24 to sales in 2026. Management continues to expect the acreage to yield significantly more resource potential per section than legacy Haynesville, with recoverable reserves in the Western Haynesville now estimated at 99 Tcf, with Comstock holding nearly 50 Tcf net to its working interest in the play.
6) Comstock generated $277M of EBITDAX in Q4 (+10% Y/Y), bringing full year adjusted EBITDAX to $1.08B (+27% Y/Y). Operating cash flow in Q4 came in at $222M or $0.75 per diluted share (flat Y/Y), bringing FY25 operating cash flow to $861M (+28% Y/Y).
7) Comstock completed the sale of its Shelby Trough assets in east Texas and legacy Cotton Valley assets for total gross proceeds of $445M, with proceeds used to reduce debt and improve leverage. Net leverage improved to 2.6x at year end, with $24M in cash, total liquidity of $1.26B, and $2.85B in total debt. Management expects additional production in 2026 combined with an improved gas price outlook to substantially drive down leverage during the year, with no further divestitures planned.
8) Comstock’s Western Haynesville data center partnership with NextEra is expected to commercialize in 2026, with plans to build new behind-the-meter power generation to support hyperscaler data center development at an initial capacity of 2 GW with potential expansion to 8 GW. Management is confident in the prime location of the acreage, ~100 miles from both Dallas and Houston, offering a speed-to-market solution for hyperscalers with initial power expected as early as 2027.
9) Management is planning to recapitalize its Pinnacle Gas Services midstream subsidiary in 2026 with a new bank credit facility, redeeming its expensive preferred units held by Quantum for a common equity structure. The goal is to have the recapitalization in place by May 2026, with Pinnacle expected to be largely self-funding going forward, already generating significantly higher EBITDAX and expected to turn free cash flow positive in 2H.
10) Management is planning to aggressively rebuild production in 2026, targeting 1,250 to 1,400 MMcfe/day and $1.4-$1.5B in development and exploration spending. An additional operating rig will be added during the year, bringing the total rig count to 9, with 4 rigs devoted to the Western Haynesville to continue delineating the new play. For the full year, management expects to drill 47 wells and turn 48 to sales in legacy Haynesville, and drill 19 wells and turn 24 to sales in Western Haynesville.
Earnings Call Highlights
General Market
The CNN “Fear and Greed Index” ticked down to 22 this week from 29 last week. You can learn how this indicator is calculated and how it works here: (Video Explanation)
The NAAIM (National Association of Active Investment Managers Index) (Video Explanation) fell to 66.99% equity exposure this week from last week’s 79.29%.
Our podcast|videocast will be out sometime today. We have a lot of great data to cover this week. Each week, we have a segment called “Ask Me Anything (AMA)” where we answer questions sent in by our audience. If you have a question for this week’s episode, please send it in at the contact form here.
Congratulations to all of the new clients that came in intra-quarter (Q1) with larger sized accounts, and to those existing clients who upsized their contributions to their accounts.
We will re-open to smaller accounts $1M+ again starting April 1st.
Those interested in “going-live” on April 1 can begin the on-boarding and application process ahead of time.
To see if you qualify and to take advantage of this opening click here, or go to GreatHillCapital.com for more details. Larger accounts $5-10M+ can access bespoke service anytime here.
Not a solicitation.
*Opinion, Not Advice. See Terms
