Dealing with the Hated

 | May 15, 2012 | 1:46 PM EDT
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When a sector gets hated, it gets hated endlessly.

Take the oil and gas sector. Let's start with EOG (EOG). Here's a company that gets Brent prices for most of its crude and it has so many properties to exploit it can't even get to them. It has the best real estate in both the Bakken and the Eagle Ford, the two biggest discoveries in our country since Prudhoe Bay. It has everything that's needed to become a major. Yet no one cares because we recognize that oil's going to $80 or $70 or some ridiculous price that makes EOG a failed equity.

Or how about Devon (DVN)? Here's a company that sold off a huge number of properties at a high price and just keeps shrinking the company. It's bought back 10% of its shares in the last three years and I think it is about to buy much more. While it is not as aggressive as EOG in switching from nat gas to oil, it has the wherewithal to switch over in good time and it has Canadian assets that are the envy of the industry.

But because it has nat gas at all, nobody can touch it.

Finally there is Chesapeake (CHK). It has so many assets and it has to sell so much -- at least that's what the balance is screaming -- that it will keep a lid on the whole group.

We are trying to be patient with Devon as we buy it on the way down. But I am aghast at how hard it is to stay the course because the stock is for sale every day. Why bother? Because I believe the company's oil assets are worth the price of the company.

More importantly, though, the pain is so great I can see anyone taking the loss and moving on, especially because of the Chesapeake taint. I think that's a mistake, but it's one that many seem to want to make.

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