Devon Energy Corp. (DVN) remains on schedule for outsized gains in the current expansion, which is why I'm reiterating my buy rating for the company's shares, first recommended on May 27, 2009 at a price of $60.89. If you bought DVN in May, you're up about 13%. Devon was a late addition to the buy list, for technical reasons: those hurdles – primarily key, psychological resistance at $50 - have been mounted and now this quality, independent oil/natural gas company should head toward much higher levels in 2010.
A strong deepwater portfolio in the Gulf of Mexico, production increases in oil shales/sands and natural gas properties in Canada, the U.S., and overseas, place Devon in an advantageous position in an energy-hungry world. Look for 1-2% oil/natural gas production growth with DVN in FY2010. The First Call FY2009/FY2010 EPS estimates for DVN are $3.73 to $6.39.
Technically, as noted, Devon's stock chart is now strong, having cleared $50 resistance. DVN has above-average volatility, and there is the danger of a head-and-shoulders formation at/near $73, but the calculation here is that it's just static from oil's 4-month $67-80 per barrel trading range. Oil is not headed substantially lower any time soon: neither is Devon.
Stock Analysis: Devon Energy is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in DVN now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your DVN position before February 2010. Sell/Stop Loss if you were to buy shares in this company: $36.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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