The Dividend Cafe - Thursday - February 19, 2026

Episode Date: February 19, 2026

Brian Szytel from The Bahnsen Group recaps a modest down day in markets—Dow down 267 points, S&P 500 down 0.25%, and Nasdaq down 0.33%—while noting the market remains up on the week. The 10-year yield edged down to about 4.07% amid expectations that a new Fed chair in May could eventually bring short-term rate cuts. He discusses rising Middle East tensions and increased U.S. presence tied to Iran, which has helped push crude higher (about 6% over two days; up ~15% YTD), but argues energy’s strong performance is primarily driven by supply/demand fundamentals and well-run businesses, with the sector up ~23% YTD and 95% of names above their 200-day moving average. He highlights leadership from defensives like energy, industrials, staples, and materials—often a late-cycle signal—while technology and communication services lag, with only ~40% of names above their 200-day averages; he notes some software valuations have compressed from mid-30s multiples to low-20s. Economic updates include better-than-expected initial jobless claims (206k vs 220k), a wider December trade deficit (over $70B vs ~56B expected), a stronger Philly Fed manufacturing reading, and weaker pending home sales. He closes by answering a question on non-GAAP vs GAAP P/E ratios, explaining non-GAAP adjusts for one-time items to estimate normalized earnings, while cautioning that recurring “anomalies” can make non-GAAP misleading and require careful analysis. 00:00 Market Close Recap: Indexes Dip, Rates Steady 00:52 Energy Sector Strength: Oil Headlines vs Real Fundamentals 02:08 Sector Rotation & Valuations: Defensives Lead, Tech Lags 03:30 Economic Data Roundup: Jobs, Trade, Manufacturing, Housing 04:07 Viewer Q&A: Non-GAAP vs GAAP P/E Ratios Explained 05:28 Wrap-Up & Weekend Sign-Off Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividing Cafe weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Good evening and welcome to Dividend Cafe. This is Brian Sightel from our Newport Beach, California office here at the Monson Group. On the down day overall in markets, although modestly so, and this was the first down day in the last three, and the market is still up on the week. but you had the Dow down on the day at 267 points, S&P was down a quarter percent, NASDAQ was down a third of a percent. There was a good amount of economic data out that I'll walk through. But interest rates didn't move a ton.

You had a basis point off of 10 year, so we closed at 407. So continuing to pull down those interest rates here a little bit, and there's a reason for that as we get new Fed Chair Warsh to come in the next couple of months in May, and then ultimately likely to reduce short-term interest rates. But let me walk through what I had for you today on the market. There's been an increase in tension in the Middle East. So there's been more of a U.S. presence there related to Iran, ongoing negotiations and talks, and more comments today.

And so you've seen the price of crude and Brent and WTI all come up here the last couple of days. It's up about, call it 6% or so the last two days. And then on the year, oil is up about 15%. But the point is that that isn't what's actually fully behind the sector performance. The sector performance is really based on supply demand, favorable fundamentals, and just companies and businesses that were well run and performing on their own fundamental merits. You've got a 23% move up on the year on the sector. It is a larger sector that we hold, but we hold it more from the standpoint of positive fundamentals

and also just in a very attractive income stream, a dividend growth paradigm that we like very much. internally, if you look at the energy sector, 95% of the names in the sector are trading above its 200-day moving average. That's considered very bullish, very strong, and also historically positive for the future. So I just wanted to paint that a little bit that, you know, there is headlines on Iran, but that's not why energy is doing so well. I don't believe that that is the ninth inning in that sector just based on valuation. When you look at across the other parts of the sectors and markets, other big performers, on the year, industrials, staples, and materials. And it's funny because if you look at energy, it's all the defensives and it's historically very much a late cycle sign of what you normally do

see towards the end of a business cycle in a market cycle. So keep that in mind as we go through things when we talk about this rotation. The technology and communication services sectors are the ones that are the big laggards on the year. Both are down. So negative returns. But if you look internally, only about 40% or so, the names are above their 200-day moving average. It just got internal weakness. And again, it speaks to the valuation story as we started the year. And we talked about it a lot. And you're seeing that play out.

The only thing I would note at this point is it's dramatic here to date, number one. So even if it ended today, the point would have been made. But number two, I don't believe it will end today because if I look at the valuation metrics, it's not like the pendulum is swung all the way back to favor, you know, the stuff that has been sold off. In other words, it's not like technology is now cheap. I do think there's components of tech that are names in sectors and things that we're looking at, particularly software, with how much it has sold off. The valuation has gone from mid-30s down to low 20s.

So that's becoming more interesting, but by and large, I don't know that that story is over. So let me run around the horn here real quick. On the economic side, initial jobless claims beat expectations. That's a good thing. 206 versus 223. we had a trade deficit that widened meaningfully in December. We were thinking it would be 56 and we got over 70 billion for the month. So that's a pretty big number and not necessarily a good thing for what this administration is aiming to accomplish.

You had a Philly Fed Manufacturing Survey beat expectations by wide margin. That was good. And then you had pending home sales that missed by a wide margin. So that was bad. So you've got good bad, good bad in there today. The last thing I'm going to go through is a thoughtful question. question on looking at non-GAP versus GAP PE ratios and do they matter, the disparity. He gave an example of a particular stock using Gap earnings was like a 15 multiple.

Using non-gap was 15 and using Gap earnings in the P-E ratio calculation was closer to something like 50. So yeah, that's how that runs. Non-gap just excludes all the anomalies. So if you had things like lawsuits or a business, you know, an acquisition happens. so a company spends a lot of money to buy another company, you know, that affects earnings on the quarter. If you have like a one-time write-down or just different things related to, you know, compensation around stock issuance, things like that, those can affect what gets reported in earnings.

And you've got to normalize that stuff to really get a picture of how much is the company actually earning without the anomalies in there. And that's what Nongap does. That said, the important thing is that accounting trickery and boardroom engineering can exist. And so there's things that will be considered an anomaly that end up happening all the time, in which case we need to be able to adjust for non-gap being a little bit deceiving. So there is a component of analysis that goes into it, but largely speaking, we would be looking at non-gap earnings when we do a PE ratio, because we want to look at what normalized a number would be and get an actual evaluation metric. So a good question. I hope my answer was helpful. But that's what I've got for you today.

It's a rainy day here in Newport Beach, California. I hope it's better wherever you are. But reach out with questions. We always love them. And have a good evening. If I don't speak to you, obviously, have a good weekend. And I'll be back with you soon. Thanks again. The Bonson Group is a group of investment professionals registered with Hightower Security's LLC,

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