(This is “The Best Stocks on the Market,” presented by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh – Today we’re taking a break from the topic of AI investing expansion and taking a look at another area of the market that’s not as hot. A major energy merger has been completed and the combination of Devon Energy and Coterra Energy has created a gigantic player with the lowest production costs in the industry. Today, Devon Energy and Coterra Energy have officially become one company. We see the stock in a decline, not in a state where it is hitting a new high. The stock fell Wednesday on the report of a mediocre earnings quarter and the typical merger arbitrage pressures that come with closing a deal. This pressure should ease and the stock could find support here. We’re writing about what could end up being a very attractive entry point for people who currently have no energy experience. Now that the companies have merged, it’s important for new investors to understand why they did the deal in the first place. Both operators already owned prime acreage in the Delaware Basin. This is the western Permian subbasin in West Texas and southeastern New Mexico and has become the most productive and economical location for oil drilling in the country. Instead of competing individually for the same stock, they decided to dominate it together. The combined company enters the world as a leading operator in Delaware, with over 10 years of high-quality drilling sites, 1.6 million barrels of oil equivalent per day in production and an enterprise value of $58 billion, putting it in a different conversation than either company could claim individually. The market will be watching to see whether management simultaneously implements two $1 billion efficiency programs: Devon’s standalone optimization plan, which is nearly complete, and the $1 billion merger synergies targeted by year-end 2027. When both are achieved, the free cash flow calculation becomes truly compelling. As Sean will explain in more detail below, the combined company starts with a dividend increase of 31% to $1.26 annualized, new repurchase authorization of more than $5 billion, and a reinvestment ratio of under 50% on a clean balance sheet. The strategic logic is simple. During execution, shares are created or destroyed. Raymond James raised its outlook on Devon, raising its price target from $62 to $72 this week. The analyst believes that projected synergies will exceed the $1 billion benchmark and that this stock could provide shareholders with a total return of 40% including dividend and buyback as non-core assets are sold and AI-driven drilling efficiencies are realized. We talked about Devon in a previous column and the trade worked out then. Now we’ll revisit the story as the combined company takes its place among the larger energy companies in the S&P 500. Best Stock Spotlight: Devon Energy Corp. (DVN) Sean – We wrote about Devon Energy and the possible merger in February. Here’s Josh on the February setup: “When the 50-day level crossed the 200-day mark in late summer, it was an indication that something might have changed here. In November, it reclaimed its 200-day level (sorry, I knew a girl named Devon once. Nothing happened.) and managed to hold it through pullbacks. The RSI in the mid-60s makes this a less extended chart than Targa, I like this one and now.” Kudos to Devon because that call ended up being a good one. The stock is up 17% since then, including an 8% decline from yesterday due in part to the merger, earnings and a -6% swing in oil prices due to de-escalation in Iran. We talked about the merger in February and the narrative is still playing out. This merger creates a dominant player in the Delaware Basin with enormous scale. The larger the oil company, the lower the cost of capital, the better the access to infrastructure and the greater the influence over service companies. A higher return for shareholders is expected as the dividend is set to increase by 31% per share from the second quarter and share buybacks are set to resume (after a pause during the merger). Following the merger, the combined company expects to receive $5 billion in new repurchase authorization, representing approximately 7% of the current float. Coterra also has tremendous buyback credibility, with 75% of free cash returning to shareholders in 2025. The combined company trades at about 10 times earnings, making this stock cheap compared to the market and its own industry. This valuation also makes buybacks more valuable. If you thought we wouldn’t mention AI in an article, you’re wrong. Devon has launched a “Smart Gas Lift” program that uses AI-driven models and sensors to optimize gas lifting without human intervention. This program was piloted in 2025 and saw a 2-3% increase in production. The company aims to apply this technology to 1,500 wells in its portfolio. Now that we’ve gotten our AI mention, Josh talks about the technology. Risk Management Josh – I’m showing you the ultra-long term above to give you an idea of what a long journey this name has been since the heyday of the shale boom in the first two decades of the 21st century. As you can see, this was once a high flyer that was caught in a brutal downtrend for many years and had very little to show for all the volatility. The recent price movement represents a possible trend reversal, although it is still too early to say for sure. But I like the higher low on this monthly chart… Above is the standard one-year technical chart we usually look at, complete with 50 and 200 day moving averages and RSI. That nasty red candle yesterday will test the bulls. There may be some residual weakness related to the merger’s arb dynamic that I described at the top of this column, but I expect that to fade. We usually write about strong stocks that are getting stronger, but this is a different scenario. DVN managed to reach the $50 mark twice, failed to hold it, and formed a pretty significant double top before returning to the current level of around $46. That’s the ceiling the stock must convincingly clear for this to work as a trade. On the other hand, $40 is the line in the sand. That’s where the 200-day moving average lies and the stock found support during the last significant selloff. The RSI at 43 gives you some room to maneuver. The stock isn’t so oversold that it screams “load,” but it’s not overextended either. Risk/reward is defined here. Below $40 the market is telling you it doesn’t believe in the fundamental story. A successful attack on the low $50s and many professional traders would consider adding to their positions on this confirmation. We’ll look at this again. DISCLOSURES: (None) All opinions expressed by CNBC Pro contributors are theirs alone and do not reflect the opinions of CNBC or its parent company or affiliates and may have previously been disseminated by them on television, radio, the Internet or any other medium. 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