3. Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 39
Shell plc (NYSE:SHEL) is a London, UK-based diversified energy company that has a presence in over 70 countries and a headcount of over 80,000 employees. The company is at the third position on our list of the ten best European stocks to buy now.
Like other all-energy majors, Shell plc (NYSE:SHEL) is aggressively working towards becoming a net-zero greenhouse emissions company by 2050. Experts think that Shell plc (NYSE:SHEL) has a solid balance sheet with a manageable amount of debt. The company is heavily focused on green energy as it operates 90,000 charging points on its retail sites for electric vehicles. Shell plc (NYSE:SHEL) intends to establish 500,000 charging points by 2025. The company is also working on building the biggest hydrogen plant in Europe that will be able to produce 60 tons of renewable hydrogen per day.
Shell plc (NYSE:SHEL) offers an annual forward dividend yield of 3.82%, translating into a payout ratio of 20.7% as of September 30. The stock is up over 35% YTD, in comparison to the S&P 500’s loss of 22.51% during the same period.
Third Point Management shared its bullish outlook on Shell plc (NYSE:SHEL) in its Q1 2022 investor letter. Here’s what the firm said:
“We have continued to add to our position in Shell, as it trades at the same deeply discounted multiple today that it did last year due to a move up in commodity prices. We are engaged in discussions with management, board members, and other shareholders, as well as informal talks with financial advisors. We have discussed various alternatives with the aim of both increasing shareholder value and allowing Shell to effectively manage the energy transition. We have reiterated our view that Shell’s portfolio of disparate businesses ranging from deep water oil to wind farms to gas stations to chemical plants is confusing and unmanageable. Most investors we have discussed this with agree that the company would be more successful over the long term with a different corporate structure. Discussions among the parties have been constructive and will be ongoing since stakeholders clearly see these corporate changes as instrumental, particularly if Shell wishes to become a leader in the energy transition rather than be left behind as a tarnished legacy brand.
Beyond our discussions around corporate structure, there have been two important developments since our last update. First, Shell announced a plan to redomicile its headquarters to the UK and create a single shareholder class. This move allows greater flexibility to modify its portfolio (either through asset sales or spin-offs) and allows for a more efficient return of capital, specifically via share repurchases. Second, fundamental and geopolitical events have highlighted the strategic importance of reliable energy supplies, especially in Europe. Shell’s LNG business, the largest in the world outside of Qatar, will play a critical role in ensuring energy security for Europe. In our view, the value of this business has increased dramatically since our original investment.
While Shell continues to trade at a large discount to its intrinsic value, with proper management we believe the company can simultaneously deliver shareholder returns, reliable energy and decarbonization of the global economy. We look forward to continued engagement with management and other shareholders and to more strategic clarity from the Company.”
