Should You Expect Synergy Boost from Diamondback Energy’s (FANG) Acquisition?

ClearBridge Investments, an investment management company, released its “ClearBridge Select Strategy” first quarter 2024 investor letter. A copy of the letter can be downloaded here. The positive momentum in 2023 continued in the first quarter of 2024, the stocks surged on the expectation of a soft landing of the economy and a slowdown in rate hikes by the Fed. Against this backdrop, the S&P Index surged 10.56% and the Russell 3000 Index gained 10.02%. The strategy underperformed its Russell 3000 Index benchmark in the quarter. IT and industrial sectors were the primary contributors while the real estate sector detracted. In addition, please check the fund’s top five holdings to know its best picks in 2024.

ClearBridge Select Strategy highlighted stocks like Diamondback Energy, Inc. (NASDAQ:FANG), in the first quarter 2024 investor letter. Diamondback Energy, Inc. (NASDAQ:FANG) is an independent oil and natural gas company. The one-month return of Diamondback Energy, Inc. (NASDAQ:FANG) was -1.14%, and its shares gained 52.52% of their value over the last 52 weeks. On June 20, 2024, Diamondback Energy, Inc. (NASDAQ:FANG) stock closed at $192.73 per share with a market capitalization of $34.256 billion.

ClearBridge Select Strategy stated the following regarding Diamondback Energy, Inc. (NASDAQ:FANG) in its first quarter 2024 investor letter:

Our final addition was Diamondback Energy, Inc. (NASDAQ:FANG), a leading oil and gas producer that agreed to acquire fellow exploration and production company Endeavor Energy Resources in the quarter. The deal should allow Diamondback to capture operating synergies and streamline costs by reducing rig redundancies and optimizing production techniques. Endeavor has previously prioritized double-digit production growth over capital discipline, leading to the quick depletion of its core inventory in the oil-rich Midland Basin. Diamondback's focus on free cash flow generation should allow the combined entity, which we consider an evolving opportunity, to rein back its production levels and extend the longevity of this high-quality acreage to fund cash returns. Diamondback replaces the energy exposure the portfolio will lose with the pending acquisition of top 15 holding Pioneer Natural Resources by Exxon Mobil.

A pipeline worker overseeing the flow of crude oil into storage tanks from an integrated water system.

Diamondback Energy, Inc. (NASDAQ:FANG) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 44 hedge fund portfolios held Diamondback Energy, Inc. (NASDAQ:FANG) at the end of the first quarter which was 42 in the previous quarter. While we acknowledge the potential of Diamondback Energy, Inc. (NASDAQ:FANG) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

Diamond Hill Capital Mid Cap Strategy also added Diamondback Energy, Inc. (NASDAQ:FANG) to its portfolio in the first quarter 2024.  In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.