Debt-adjusted cash flow per share. That’s Devon Energy Corp (NYSE:DVN)‘s overarching goal and it couldn’t be a more shareholder-friendly objective. The market’s punishing Devon’s lack of production growth, but the company is smart to let natural gas production decline and to pursue liquids growth instead. Devon Energy Corp (NYSE:DVN) is a nice way to play a natural gas rebound while keeping downside muted thanks to its liquids exposure across the US and Canada.
Little Double Eagle Petroleum is one of the best unknown ways to benefit from a natural gas rebound out there. Moreover, it has its Niobrara oil exploration project, largely unaccounted for in today’s stock price. With the stock pricing in perpetually low gas prices and little to no success in its Niobrara venture, we still like Double Eagle here.
Heineken turned out to be one of our best performers. The world’s second largest beer company (by revenue) – and producer of some of TV’s best commercials (in this Fool’s humble opinion) – is bumping up against our fair value estimate. But Heineken could have more room to run, particularly if its heavy investments in Latin America and Africa start to pay off in the coming years. Heineken is also cheap, trading at less than two times sales, compared to Anheuser-Busch Inbev, SAB Miller, and Grupo Modelo, which all trade above 3.5 time sales.
Loews Corporation is a good ol’ fashioned conglomerate with many different ways to grow. It’s compounded book value at a market-beating rate over the long-term, yet still trades at a discount to book value. Led by CEO James Tisch and team, the company allocates its capital to its highest-return opportunities, which includes oil and gas exploration, midstream energy infrastructure, Loews Hotels, and share buybacks. Moreover, it owns large chunks of publicly traded CNA Financial, Boardwalk Pipelines, and Diamond Offshore. With its history of book value growth and its current cheap valuation, Loews looks good here.
Finally, Ultra Petroleum is one of the lowest-cost natural gas producers out there and is a pure play on natural gas. It’s being punished for today’s low natural gas price, its lack of liquids exposure, and its declining production growth. If the price of natural gas recovers, Ultra will quickly return to growing its production, which will result in more volume at a higher realized price. This would mean huge things for Ultra, which would benefit significantly from such an event.
The article Parting Thoughts for Our Portfolio originally appeared on Fool.com and is written by Paul Chi.
Paul Chi owns shares of Alleghany, Apache, ArcelorMittal, Arcos Dorados, Berkshire Hathaway, Devon Energy, Double Eagle, and Loews. The Motley Fool owns shares of Arcos Dorados Holdings, Double Eagle Petroleum, and Devon Energy. The Motley Fool owns shares of Alleghany, Apache, ArcelorMittal, Arcos Dorados, Berkshire Hathaway, Devon Energy, Double Eagle, Heineken, Loews, and Ultra Petroleum and has Long call on Ultra Petroleum. Motley Fool newsletter services have recommended buying shares of Berkshire Hathaway, Loews, and Ultra Petroleum.
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