Is FANG a good stock to buy? We came across a bullish thesis on Diamondback Energy, Inc. on Mispriced Assets’s Substack by Nick Nemeth. In this article, we will summarize the bulls’ thesis on FANG. Diamondback Energy, Inc.’s share was trading at $183.45 as of April 20th. FANG’s trailing and forward P/E were 32.02 and 9.56 respectively according to Yahoo Finance.
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Diamondback Energy (FANG) is positioned as a high-quality Permian Basin operator offering a compelling asymmetric opportunity amid rising geopolitical tensions. With West Texas Intermediate crude oil trading near $67, the market appears to be pricing in a smooth diplomatic resolution with Iran, despite escalating risks around nuclear negotiations and potential disruption in the Strait of Hormuz.
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Any breakdown in talks or military escalation could push oil prices toward $80+, a scenario where Diamondback Energy stands to benefit significantly due to its high operating leverage. The company recently reported strong operational and financial performance, with Q4 production of 512.8 MBO/d, $2.3 billion in operating cash flow, and $1.2 billion in adjusted free cash flow, contributing to $5.9 billion for the full year.
Despite a GAAP loss driven by a non-cash impairment, the underlying cash generation remains robust. Trading at approximately 12x earnings with a 2.3% dividend yield that was recently increased, Diamondback Energy also continues to return capital through share repurchases, having bought back 5% of shares and maintaining $3.5 billion in authorization.
Following the Endeavor merger, the company controls a large, high-quality acreage position in the Midland Basin, supporting one of the lowest cost structures in the Permian. This allows Diamondback Energy to generate strong cash flows even at $60 oil, while incremental upside above $70 flows efficiently into free cash flow. Even in a stable oil environment, the company offers disciplined capital allocation and consistent shareholder returns, while a geopolitical-driven oil price spike could drive substantial upside and valuation re-rating.
Previously, we covered a bullish thesis on Occidental Petroleum Corporation (OXY) by Magnus Ofstad in May 2025, which highlighted its low-cost Permian assets, diversified operations, and carbon capture upside despite debt and execution concerns. OXY’s stock price has appreciated by approximately 26.57% since our coverage. Nick Nemeth shares a similar view but emphasizes on Diamondback Energy, Inc.’s capital discipline and stronger oil price leverage.
Diamondback Energy, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 46 hedge fund portfolios held FANG at the end of the fourth quarter which was 42 in the previous quarter. While we acknowledge the risk and potential of FANG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than FANG and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
