Add natural-gas stocks to the select group of sectors that lagged the September rally, Cramer said Monday, making them potential value plays in an otherwise expensive market.
Unfortunately, these stocks have been hammered just like the price of nat gas itself, which closed at $3.70 on Monday. Cramer called the group the “proverbial redheaded stepchild” of the stock family and said he’d been will to recommend only Chesapeake Energy if investors were compelled to own the group. But now Devon Energy , at $64, looks low enough in price to make it attractive, Cramer said.
Cramer praised the company’s, admittedly lucky, timing in getting out of the Gulf of Mexico offshore drilling business just before the BP spill. But the move was part of a larger strategy to turn this international on and offshore outfit into one that’s solely onshore domestic. Thanks to these assets sales, Devon now sits on $7.7 billion to $8.3 billion after-tax dollars it plans to use for paying down debt and funding a “mammoth,” as Cramer described it, $3.5 billion stock buyback.
Sure, this reorganization leaves Devon heavy on the nat-gas exposure, but the company is still emphasizing liquids like oil over gas in the short term, giving it a bit of a hedge against those low prices. Regardless, though, business looks good, as Devon delivered at 13-cent earnings beat on Aug. 4 with US volumes up 11% from the previous quarter.
And best of all, Cramer said, we found out that 80% of capital spending will go toward crude oil and liquids-rich natural gas, a sign that Devon “is not one of those inflexible natural gas companies that's made a suicide pact to keep drilling for gas no matter how low the price goes.”
Cramer’s bullish on this stock, but watch his interview with CEO John Richels and decide for yourself.
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