Jim Stack Sticks with Devon (DVN)

Stack explains, "We stepped up our allocation to the stock in November when the restructuring was announced, and have already seen an 11% increase in our investment -- more than double the market.

"Yet, even after recent gains, Devon continues to look attractive as the full effects of the transition are still materializing.

"Devon grew up as a company in the natural gas shale plays of the Midwest. Through superior technology, a focus on cost discipline, and a consistent track record, Devon has become one of the largest independent exploration and production companies in the United States.

"As the firm has grown, so too has its asset base -- encompassing emerging natural gas fields all over the world.

"In an all too often rare move, Devon's management has realized that the company currently has an overabundance of opportunities.

" To better position itself, Devon has decided to compete where it is most competitive -- North America. As a result, all of the firm's international and Gulf of Mexico production fields will be sold.

"As Devon narrows its focus to North America, the fundamentals of the firm continue to improve. Over the last three years, Devon has been able to grow North American production at 9% per year, while international production has stagnated.

"Besides allowing Devon to refocus on its most profitable fields, the asset sales are expected to raise $4.5 to $7.5 billion in cash.

"With these funds, management plans to take the very positive approach of: 1) paying down debt to strengthen the company's already healthy balance sheet and 2) ramping-up production to further leverage the growth potential of the firm's existing domestic acreage.

"As the fundamental prospects for Devon continue to improve, its valuation remains attractive. In fact, compared to what Exxon Mobil recently agreed to pay for XTO Energy (one of Devon's main competitors), this stock looks downright cheap.

"With a more focused outlook, a strengthening balance sheet, and great valuation, we continue to view Devon as an untapped opportunity with years of growth ahead."

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