Chevron recently reported a horrible fourth quarter, and shares are 9% off the highs, Link said. She added that production fell 3.5%, which is also not very good. However, the company continues to pump money into all sorts of different assets, which should eventually produce higher profits in the latter half of this year.
Link is looking for Chevron to reduce its capital expenditures while increasing its operating leverage. The stock should get a boost if this happens, and she said she wants to be in position before the move occurs.
Luckily, Link and Cramer can wait for the move to occur, with Chevron paying a 3.5% dividend yield and likely raising the quarterly payout in April, she said.
In order to make room for the heavier exposure to energy stocks such as Noble Energy (NBL), Occidental Petroleum (OXY), and National Oilwell Varco (NOV) , Link said AAP is reducing exposure to the financial sector to market-weight from overweight and selling shares of Morgan Stanley (MS).
"I just don't like the way the yield curve is acting in the near term, even if it is temporary," Link said. AAP will buy back Morgan Stanley on a deeper pullback.
-- Written by Bret Kenwell in Petoskey, Mich.