Matt Argersinger and I co-manage the Street Fighter portfolio, where we look for cheap, unloved stocks with home run potential. We've added four stocks to the portfolio thus far, and an update is in order.

Devon Energy (NYSE: DVN)
The reasons we bought were threefold: Devon's diverse set of assets, a strong balance sheet, and a cheap valuation. So far, the story has played out as expected.

During the third quarter, the company increased liquids production 17% and total production 8% year over year. Liquids production was 226,000 barrels per day, while total production was 661,000 barrels of oil equivalent, or BOE. Going forward, liquids production figures to increase as a percent of total production. With liquids production only comprising 34% of total production last quarter and with oil prices far outpacing natural gas, I expect further increases in the future.

The company also returned a good chunk of cash to its shareholders, paying out $69 million in dividends and repurchasing $697 million worth of its stock during the quarter. This allowed the company to reduce shares outstanding by 2.6% in the last quarter, an impressive feat given that oil and gas exploration and production is a very capital-intensive endeavor.

I view Devon's attractiveness as an investment mainly as a combination of cheapness and the strength of its balance sheet, which included $6.9 billion in cash and short-term investments at the end of the quarter. I expect Devon to utilize this competitive strength to buy back additional shares and to continue ramping up its liquids production.

Double Eagle Petroleum (Nasdaq: DBLE)
This company has been my favorite energy play since I first found it late last year. It's not an established company like Devon, but it has plenty going for it. Currently, the stock trades at 3.7 times operating cash flow. For an oil and gas company, that's cheap!

It's still a micro cap at just under $84 million in market cap, but the company is already largely self-funded, a status larger companies such as SandRidge Energy (NYSE: SD) and Kodiak Oil & Gas (NYSE: KOG) have yet to achieve. It's not necessarily a bad thing for E&Ps to outspend operating cash flow as long as they can invest in projects with rates of return far in excess of their cost of capital, but Double Eagle's stable cash flow speaks to the quality of its asset base.

While Double Eagle is indeed cheap, it needs a catalyst to reach the next level in the form of higher natural gas prices or success in its Niobrara exploration program, where it holds more than 70,000 net acres. The company can't exactly control the prices of natural gas in the future, but the fate of its Niobrara shale acreage is in its own hands.

On that front, the company started drilling its first appraisal well in late October. It also has plans to shoot 15-25 square miles of 3-D seismic imaging in 2012, which should help guide future actions in this area. Double Eagle has already identified 20 additional potential well locations, but it'll be next year before the company spuds another exploratory well. For now, we can only wait for results from the current test well.

ArcelorMittal (NYSE: MT)
 This integrated steel and mining giant has been the recipient of a severe beat-down as a result of the crisis in Europe. The company now trades at half of book value, which also happens to be about half of its 52-week high.

Last quarter, the company increased steel shipments by 2.7%, EBITDA by 11.4% to $2.4 billion, and iron ore production by 8.4%. While the third quarter looked reasonably strong, fourth-quarter shipments are expected to be weak as customers adopt a wait-and-see approach with all the economic uncertainty.

Going forward, the steel market is obviously in a tough spot. The company continues to invest in sustainable cost reduction projects, which are expected to reach $4.8 billion by the end of 2012. I also expect further investments in its mining segment, which has been performing well due to the global commodity inflation of the past few years.

Though sustained economic recovery is likely a few years away, it'd be too late to buy a steel company by the time the market sounded the all-clear -- prices would already have shot up by then. As such, I'm content to be early with this steel and mining juggernaut.

Heineken (OTC: HINKY)
 In the third quarter, Heineken saw its beer volume go up 2.7% year over year, helped especially by its African and Russian markets. My co-portfolio manager Matt Argersinger added this stock to our portfolio because of the Dutch beer giant's strong brands, above-average growth, and cheap stock price.

While the current economic climate has been very tough, we expect Heineken's valuation to go upward to fall more in line with its big beer competitors if it can continue paying down its debt and continue its emerging-markets growth. It's not easy right now for companies that derive significant revenue from Europe, like Heineken, but we believe beer is a very stable business and the company's cheap stock price is too pessimistic.

Foolish bottom line
We're very excited about our holdings and are always on the lookout for more opportunities to add to our portfolio. Interested in following these companies? Add them to My Watchlist: