Here's Why Devon Energy Is the Stock to Buy Amid Volatile Energy Markets

Just when you thought energy markets had stabilized, they plunged on Thursday amid wild intraday volatility. If you're still looking for reliable growth in the sector, consider this stable producer.
By John Persinos ,

Investors yearning for a sustained energy price recovery are once again playing the eternally hopeful Charlie Brown, who gets the football snatched away by Lucy. The broader stock market careened between sharp gains and losses on Thursday and came to a mixed close. The culprit: a precipitous drop in the price of oil.

In this volatile context, we examine a fast-rising energy stock that's resilient against these price gyrations. We also unveil a time-proven way to make money that works in bull and bear markets.

Stocks fell Thursday after the Energy Information Administration reported that crude oil inventories diminished last week by 2.2 million barrels, a smaller decline than analysts had expected. West Texas Intermediate, the benchmark American crude oil, fell $2.29, or 4.8%, to $45.14 a barrel. Brent North Sea crude, used to price international oils, fell $2.35 or 4.8% percent, to $46.45 a barrel. Natural gas lost 1 cent to $2.78 per 1,000 cubic feet.

Among the biggest losers Thursday were exploration and production giants Exxon Mobil (-1.2%), Chevron (-1.5%), and ConocoPhillips (-0.9%).

But if you're looking for an energy stock that enjoys more stability and better future prospects than its peers, consider often-ignored Devon Energy (DVN) - Get Report , the smartest play on the energy sector's still shaky recovery. Oil and gas producer Devon is up 16% year to date, vs. 3.9% for the S&P 500 I:GSPC and 12% for the Energy Select Selector SPDR ETF (XLE) - Get Report .

Devon's fracking programs in Texas are bearing huge productivity gains. While it taps into prolific shale plays in the U.S., the company is reducing debt and its cost of operations. Devon's peers are struggling with huge debt and shrinking revenue, but low-cost producer Devon is shedding underperforming assets to shore up its balance sheet, while at the same time boosting output.

Deutsche Bank this week raised its one-year price target for Devon to $45 from $41, with a "bull case" for $69. The bank's analysts cited Devon's high-quality but underappreciated energy assets, as well as the company's ability to reduce debt in an energy patch that's awash with souring loans. Devon recently hiked its 2016 forecast for oil production by 3%.

Based in Oklahoma City, Oklahoma, Devon is a momentum stock that you should buy now, before energy prices shake off their current funk to resume their upward trajectory.

With a trailing 12-month price-to-sales ratio of 1.6, Devon's shares are a bargain compared to peer EOG Resources (5.8) and the highly overvalued industry (28.68).

Before the market opened on Friday, Devon was trading at $36.81. The median 12-month price target from analysts is $40.50, which suggests shares can gain 10% in the next year. The highest price target is $54, which suggests Devon stock can gain 47%.

---

Five Years From Now, You'll Probably Wish You'd Grabbed This Opportunity:As we've just explained, Devon Energy is a smart bet now. If you're looking for other growth opportunities, we've found a genius trader who turned $50,000 into $5 million by using his proprietary trading method. For a limited time, he's guaranteeing you $67,548 per year in profitable trades if you follow his simple step-by-step process. Click here now for details. In this crazy market, it's your best chance to make serious money.

John Persinos is an editorial manager and investment analyst at Investing Daily. At the time of publication, the author held no positions in the stocks mentioned.

Loading ...