Posted by Davy Bui on November 7th, 2008 in Reader Questions, Stock Research
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I got a reader email asking about Devon Energy (DVN):

> I have enjoyed your site and updates for sometime, I find them quite
> educational. It has been a while since I had a chance to look @ your
> updated portfolio (too busy trying to keep my own out of the weeds )I
> noticed that you sold you position in DVN in sept. but I couldn’t find any
> info or commentary related to the sale. Just wondering what your thinking
> was and how you view DVN going forward?

Thanks for reading and the email. Understand completely about keeping portfolios out of the weeds.

I think I mentioned selling DVN in the portfolio update post following the month I sold it. Basically, I had valued it around $100 a share based on last year’s reserves number and after watching ESV & CHK come all the way back and then some after hitting intrinsic value, I didn’t want to be greedy and undisciplined.

DVN is still a good company but some of the reasons I haven’t bought into it again:

• every energy stock seems cheap at this point so I have the pick of the litter
• I was starting to run low on cash and everything looks cheap and keeps getting cheaper.
• Adjusting for $60-$100 oil & $5-$10 nat gas, my NAV for DVN ranges from $54 to $100 and I’m probably going to lean more toward the low end. Keep in mind I demand a margin of safety, so I would want to buy at a discount to its NAV so using, say $70 as NAV, I’d look at the stock around $45 – $50.

Another factor I’m weighing is yield. Who knows how bad this recession will be and how long it will last? We may see depressed energy prices for a few years. I think the long-term supply fundamentals will reassert itself eventually ($) but investors may have to be very patient. In the meantime, I want to get paid to wait and since the whole sector is cheap, a bad down day makes available many attractive companies with a decent or good yield.