Why I'm Adding These 2 Unlikely Names to My Portfolio
I see these stocks as bargains in an overbought market, as I prepare for options expirations.
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As I prepare to update my buy list, I continue to be cautious within my portfolio.
Growing fears around future AI disruption have hit several different market sectors hard last week. Despite a 2% pullback in the Nasdaq, the Shiller price-to-earnings ratio has only been higher one time -- just before the end of the Internet Boom. Also, on a price-to-free-cash-flow basis, the overall market will get even more expensive in 2026, as the four major hyperscalers will see their combined projected free cash flow go from approximately $200 billion in fiscal 2025 to $50 billion or less in fiscal 2026, thanks to a surge in artificial intelligence-related capital expenditures. Oracle (ORCL) and OpenAI, meanwhile, are projected to have significant negative cash flow for the next several years as they continue their buildout of AI infrastructure.
My Strategy
Approximately 75% of my own portfolio is allocated via covered-call positions around the few stocks in the market I am finding with reasonable valuations. Almost all the rest is in short-term Treasuries and cash. This Friday will be February’s options expiration date. This means my portfolio will have additional dry powder, and I also have some short-term treasuries that will be redeemed this week. In preparation of pushing some more money into an overbought market, I have to update my buy list.
I will be adding to my holding in Upwork, Inc. (UPWK) this week. The stock of the operator world’s largest online platform for freelance talent as measured by gross services volume fell some 30% last week after the company reported mixed quarterly results and offer up quite conservative guidance for fiscal 2026. The drop brought Upwork into bargain territory in my view. The shares have roughly a $1.7 billion market capitalization. The company has just over $300 million in net cash on its balance sheet. Free cash flow rose 60% year-over-year in fiscal 2025 to $226 million. Management also bought back $136 million of its own stock last year.
I am also opening a new and small initial holding in Ford (F) as a covered-call trade. The stock trades at just over nine times forward earnings and sports a dividend yield of just north of 4%. I posted several times on the Daily Diary in 2025 that once it was realized how much electricity AI data centers require, the climate change narrative and its associated EV largess would ebb substantially. These data centers have grown to consume 7% of U.S. electricity generation and that percentage will continue to move higher at a solid pace. EVs already were putting increasing stress on the grid.
Last week the Environmental Protection Agency nixed an endangerment finding that had been in place since 2009. Since that action was originally implemented, it has added huge costs to the auto industry. Since late 2025, Ford, General Motors (GM) and Stellanis N.V. (STLA) have taken write-offs related to their electric vehicle strategies, platforms and pivots to hybrids totaling north of $50 billion. The repeal should help remove a headwind to the industry and let it make more rational capital allocation decisions over the longer term.
At the time of publication, Jensen was long F and UPWK.
