Devon Energy (DVN) has bounced back from the drop in oil and natural gas prices faster than most of its fellow shale drillers. Michael Liss, portfolio manager for the American Century Value Fund, says the company’s smart moves during the downturn have set it up for a fantastic run to the upside. ‘They got out of their international positions and have strong positions in the Permian Basin the MidContinent Basin and the Eagle Ford shale,’ says Liss. ‘In addition to that, they have a hidden asset of an oil pipeline in Canada. They are going to take that and drop in into an MLP. Then they will take the cash from that transaction and reinvest it into their acreage and be able to produce more oil and gas.’ Liss added that Devon’s strong balance sheet, combined with its revamped portfolio make for a healthy risk/reward trade off, especially now that energy prices have stabilized. Devon Energy shares are up 2% year-to-date. The company pays a 1.5% dividend. The American Century Value Fund, which garners a 4-star rating from fund-tracker Morningstar, is up 5.3% in the past 12 months. Staying in the oil patch, Liss is also bullish on French energy giant Total due to its sizable 5.2% dividend yield, as well as its smart cash management. Liss is also positive on drug giant Pfizer, up 9% so far this year, because of its ‘balance sheet optionality’ in this heady M&A environment. Finally, Liss is a fan of GE shares in the wake of the company’s transformation from a financial giant back to an industrial giant. He expects GE, up 8% in 2015, to return $90 billion to investors between now and 2018 as it reduces its exposure to financial assets.
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