February 12, 2026

In the Loop – February 6, 2026

“In The Loop” is designed to give you a short update reflecting major developments, earnings, and investment trends across some core Equity Income and Growth holdings. All clients should be aware that individual buy/sell recommendations will be conveyed directly to you on an individual basis. Have a great weekend.

House of Pain

This past week lived up to its “House of Pain” label, with the sharpest losses concentrated in software stocks, crypto-linked assets, highly financialized trades, metals, and unprofitable speculative names. Higher bond yields and fading expectations for quick interest-rate relief pressured long-duration software and growth companies, while renewed volatility in digital assets spilled over into crypto-related equities. At the same time, leveraged and momentum-driven “financialized” assets unwound as traders reduced risk and trimmed crowded positions. Metals weakened as a firmer dollar and concerns about global growth weighed on demand and pricing. Most notably, unprofitable and cash-burning companies saw investors retreat quickly, as the market once again prioritized balance-sheet strength and durable earnings. Overall, the week’s pain was concentrated in the most speculative corners of the market—areas that tend to struggle first when financial conditions tighten and sentiment turns cautious.

Metals Update: Turning to Macro Drivers

Precious metals sold off sharply after Donald Trump nominated Kevin Warsh as the next Federal Reserve chair, easing concerns over central bank independence and driving the U.S. dollar higher. Silver plunged more than 28% in spot markets and over 30% in futures, while gold fell roughly 9% to 11%, as crowded positions rapidly unwound. Some Wall Street Pros have attributed much of the decline to forced selling tied to leverage and margin calls, others noted that markets were initially “trading Warsh hawkish,” supporting the dollar and pressuring metals. Despite the magnitude of the pullback, the move followed an exceptional 2025 rally. Therefore, the selloff could just be a broader reset of crowded trades, similar to past reversals in high-momentum sectors.

What changed from last week… New Fed Chair Announcement

Recent policy discussions suggest that a potential partnership between Treasury Secretary Scott Bessent and Kevin Warsh could signal a shift toward a more disciplined, fundamentals-driven market environment. Both have expressed skepticism about long-term reliance on quantitative easing and market backstops, favoring instead a framework where interest rates, balance sheets, and asset prices are guided more by economic realities than by ongoing stimulus. If supported by the current administration under President Donald Trump, this approach could gradually reduce the “Fed put,” increase market volatility in the short term, and place greater emphasis on earnings quality, cash flow, and balance-sheet strength. Over time, such a regime would likely reward companies tied to infrastructure, energy, defense, financial services, and domestic manufacturing, while reducing dependence on highly leveraged or speculative growth sectors. For long-term investors, this environment may mean fewer bubbles and more disciplined cycles—favoring resilient, income-producing businesses and reinforcing the importance of diversified, fundamentals-based portfolio construction.

Bottom Line

Our “US Resiliency” framework is well aligned with a potential Bessent–Warsh policy environment, which emphasizes economic discipline, reduced reliance on monetary stimulus, and a renewed focus on fundamentals. In this setting, markets are likely to shift from “liquidity beta”—where returns were driven primarily by easy money and rising valuations—to “cash-flow alpha,” where performance is driven by sustainable earnings, dividends, and balance-sheet strength. This favors companies that are investing in domestic manufacturing, energy infrastructure, defense, and automation—firms benefiting from rising capital expenditures, strong ISM manufacturing readings (Monday’s reading of 52.6 was the highest since August 2022), and renewed emphasis on building at home—over capital-burning, narrative-driven growth stocks that depend on cheap financing. As this transition unfolds, we expect leadership to broaden across market caps, rewarding disciplined operators with real pricing power and consistent cash generation. By tilting away from speculative stories and toward resilient, income-producing businesses, our approach is designed to participate in economic strength while reducing dependence on policy-driven market support.

Massey Romans Capital

“We are preparing for a world where markets are driven more by earnings and less by stimulus. That favors companies that build, produce, defend, and finance the real economy—rather than those that depend on cheap money.”

Individual Company Updates

General Dynamics (GD)

General Dynamics delivered a standout Q4 and full-year 2025 performance, exceeding expectations on both revenue and earnings and reinforcing its position as a premier defense and aerospace contractor. Fourth-quarter revenue rose nearly 8% year over year to $14.38 billion, while adjusted EPS reached a record $4.17, supported by a 73% surge in Marine Systems operating income as submarine production accelerated. For the full year, revenue climbed 10.1% to record levels, driven by strong growth in Marine Systems and Aerospace, while EPS advanced 13.4%. The company closed 2025 with a record $118 billion backlog and a robust 1.5x book-to-bill, reflecting exceptional demand across Combat Systems and Gulfstream. Looking ahead, management guides to continued margin expansion, full free-cash-flow conversion, and disciplined investment in shipyard capacity, positioning GD for sustained earnings growth in 2026.

Alphabet (GOOGL)

Alphabet continues to demonstrate expanding strategic value beyond core advertising, supported by growing defense, infrastructure, and autonomous-driving exposure. The company stands at the forefront of the Department of Defense’s $15.1 billion cybersecurity initiative, with Google Cloud playing a central role in building quantum-resilient and AI-secured systems. Alphabet has also been named a primary participant in Project Vault, securing critical mineral supplies to support its custom AI chips and hardware roadmap. Meanwhile, its autonomous driving subsidiary Waymo raised $16 billion at a $126 billion valuation, reflecting its successful transition into a scaled mobility platform with 15 million rides in 2025 and rapid geographic expansion planned for 2026. Together, these developments highlight Alphabet’s growing optionality across defense, AI infrastructure, and mobility, reinforcing its long-term growth profile.

Pfizer (PFE)

Pfizer posted solid fourth-quarter results in 2025, beating earnings and revenue expectations with adjusted EPS of $0.66 and revenue of $17.56 billion, though its conservative 2026 outlook weighed on sentiment. The company’s full-year adjusted EPS of $3.22 outpaced expectations despite the lowest-ever COVID-19 season and ongoing losses from products losing exclusivity, while non-COVID operational revenue grew 6% with recently launched and acquired products contributing $10.2 billion in sales. Pfizer’s dividend remains a compelling feature of its shareholder return profile, with a current yield near ~6.5%; the company has increased its dividend for 16 consecutive years and just declared its 349th consecutive quarterly dividend, underscoring a long-standing commitment to returning cash to shareholders. Operationally, margin expansion to 76% reflects progress in manufacturing optimization with ~$600 million in savings realized so far, and a robust pipeline with multiple upcoming pivotal readouts positions Pfizer for potential industry-leading growth beyond 2028.

IBM (IBM)

IBM delivered one of its strongest quarters in years, beating expectations and earning widespread analyst upgrades on accelerating software and AI momentum. Q4 revenue rose 12% to $19.7 billion, while adjusted EPS reached $4.52, marking a third consecutive quarter of strong double-digit growth. Full-year 2025 revenue climbed 6% to $67.5 billion, with free cash flow reaching a decade-high $14.7 billion. Software, now 45% of total revenue, posted its first-ever double-digit quarterly growth, while mainframe sales surged on demand for AI-enabled Z17 systems. IBM’s cumulative GenAI book surpassed $12.5 billion, reflecting rising adoption of watsonx, Granite models, and hybrid cloud tools. Despite near-term dilution from recent acquisitions, management expects accelerating software growth and improving consulting momentum in 2026, supporting a durable multi-year transformation story.

GE Vernova (GEV)

GE reported strong Q4 2025 results, with revenue near $11 billion and earnings per share far above expectations, aided by a significant tax benefit that lifted reported EPS. Underneath the headline beat, the business showed robust demand, with orders climbing sharply and backlog rising to historic levels, reflecting continued strength across its Power and Electrification segments as global energy infrastructure investment accelerates. The company’s book-to-bill ratio remains elevated, signaling that demand continues to outpace delivery capacity, and management has used its momentum to expand shareholder returns — including increasing the quarterly dividend and buyback authorization. GEV shares have reflected this strong operating backdrop, delivering impressive total returns across 2025 and extending gains in early 2026 as analysts and investors digest the outlook and revised longer-term targets.

Honeywell (HON)

Honeywell delivered a mixed but fundamentally constructive Q4, underscoring the resilience of its core industrial franchises. The company reported adjusted EPS of $2.59, exceeding consensus expectations, while revenue grew 6.4% year over year to approximately $9.8 billion. Performance was led by Aerospace, where organic sales surged more than 21% on strong aftermarket demand, highlighting sustained strength in commercial and defense aviation. Orders increased 23% organically, lifting total backlog above $37 billion and providing strong multi-year revenue visibility. Management also accelerated its previously announced separation strategy, confirming plans to spin off the Aerospace business as a standalone public company in Q3 2026, a move aimed at unlocking shareholder value and sharpening strategic focus. Looking ahead, Honeywell guided to midpoint 2026 adjusted EPS of $10.50 and reaffirmed its commitment to disciplined capital allocation and margin management despite ongoing cost pressures.

We remain focused on navigating market trends and positioning portfolios for long-term growth and resilience.
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Formidable Asset Management (“Massey Romans Capital”) is an investment adviser registered under the Investment Advisers Act of 1940. The information presented in the material is general in nature and is not designed to address your investment objectives, financial situation or particular needs. Prior to making any investment decision, you should assess, or seek advice from a professional regarding whether any particular transaction is relevant or appropriate to your individual circumstances. Although taken from reliable sources, the Firm cannot guarantee the accuracy of the information received from third parties.

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