The Blues trailed 10-20 at the break but worked their way back into the match before ultimately going down 16-23 in their Judgement Day clash at the Millennium Stadium.
It was defeat number 12 for the Blues in the PRO12 this season and left them five places off the bottom with their play-off ambitions long since extinguished.
However, after running defending champions Ospreys close - and leading the game for the first 20 minutes through Leigh Halfpenny's try - Davies is in no mood to panic.
"I thought our performance belied our position. The fact that we were stubborn pleased me," he told Wales Online.
"There's a lot, lot more to come from our side. The average age is only 23, so for us to put in a performance like that tells me we are moving in the right direction.
"I thought we showed a lot of character. They came out as winners, but we picked up a bonus point, which at least meant we had something to show for our efforts.
"It was a good performance against one of the better packs in the league.
"We knew it would be a scrummaging test for us, but we battled in there.
"We were a bit scruffy at times in the first half, but in the second half we worked really hard and did a decent job there, while our lineout went well with and without the ball."
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