In this article, we shall discuss the 5 best undervalued stocks to buy now according to billionaire D.E Shaw. To read our detailed analysis of Shaw’s history, his investment philosophy, and hedge fund performance, go directly and see 10 Best Undervalued Stocks to Buy Now According to Billionaire DE Shaw.
5. Citigroup Inc. (NYSE:C)
D.E. Shaw’s Stake Value: $364.1M
Percentage of D.E. Shaw’s 13F Portfolio: 0.42%
Number of Hedge Fund Holdings: 82
PE Ratio (TTM): 6.48
Based in New York City, Citigroup Inc. (NYSE:C) is an American multinational investment bank and financial services corporation, formed through a merger between banking giant Citicorp and financial conglomerate Travelers Group in 1998. It is the third largest banking institution in the United States. As of the second quarter of 2022, Citigroup Inc. (NYSE:C) posted an EPS of $2.19, beating estimates of $1.68 by $0.51. Furthermore, the company reported a total revenue of $19.6 billion in Q2 2022. It is one of the most prominent undervalued stocks to buy now according to D.E. Shaw.
Hedge fund sentiment around Citigroup Inc. (NYSE:C) has decreased significantly, with 82 hedge funds long the stock in Q2 2022. This is down from Q1 2022, when 88 funds held stakes in Citigroup Inc. (NYSE:C).
Citigroup Inc. (NYSE:C) was mentioned in Diamond Hill Capital’s Q1 2022 investor letter. Here is what the firm said:
“Shares of Citigroup (NYSE:C) declined in the quarter as investors became increasingly negative on capital markets activity. The company is also continuing to divest certain consumer banking geographies which may be dilutive to earnings in the near term.”
4. Chesapeake Energy Corp. (NYSE:CHK)
D.E. Shaw’s Stake Value: $385M
Percentage of D.E. Shaw’s 13F Portfolio: 0.45%
Number of Hedge Fund Holdings: 67
PE Ratio (TTM): 15
Headquartered in Oklahoma City, Oklahoma, Chesapeake Energy Corp. (NYSE:CHK) is an American exploration and production company which engages in the acquisition, exploration, and development of properties, for the production of oil, natural gas, and natural gas liquids from underground reservoirs. On August 1, Benchmark analyst Subash Chandra initiated coverage of Chesapeake Energy Corp. (NYSE:CHK) with a Buy rating and a $137 price target.
Investor interest in Chesapeake Energy Corp. (NYSE:CHK) seems to have skyrocketed in the second quarter of 2022, with 67 hedge funds long the stock, compared to the preceding quarter, when 59 hedge funds were long Chesapeake Energy Corp. (NYSE:CHK). As of the second quarter of 2022, Oaktree Capital Management is the largest shareholder in the company, owning more than 10.5 million shares valued at $851.6 million. D.E. Shaw does not lag too far behind, and with a total stake of $385 million in Chesapeake Energy Corp. (NYSE:CHK), is the second largest shareholder in the company. Shaw decreased his hold over the company by 3% in Q2 2022, leading Chesapeake Energy Corp. (NYSE:CHK) to account for 0.45% of the billionaire’s 13F portfolio.
Chesapeake Energy Corp. (NYSE:CHK) was mentioned in ClearBridge Investments Q1 2022 investor letter, a copy of which can be obtained here. This is what they had to say:
“In the early days of the invasion, we made two measured changes to the portfolio based on longer-term fallout we anticipate from Russia’s invasion of Ukraine. First, we initiated small positions in U.S. natural gas producers Chesapeake (NYSE:CHK).
Given its superior environmental profile compared to other fossil fuels, we have long favored natural gas in our energy holdings. Combustion of natural gas releases 50% less CO2 than coal, 25% less CO2 than gasoline and dramatically less particulate and pollution, per the U.S. Energy Information Administration. With the advances in shale production this century, the U.S. has become a natural gas powerhouse with some of the lowest-cost and largest reserves in the world. But because natural gas is difficult to ship across the ocean (it must be liquefied, which requires expensive infrastructure on both ends of the voyage), America’s gas bounty has ironically proved a burden for U.S. producers.
The surplus of natural gas in North America has resulted in low prices and weak earnings for gas-focused producers. Exports, while growing, are restrained by the high cost of building export infrastructure. Europe, in a Faustian bargain, has relied on abundant, inexpensive Russian gas transported by pipeline.
Despite the abundance of low-cost resources and a superior environmental profile, the investment case for U.S. natural gas producers was previously unfavorable due to oversupply in the domestic market.
In the days preceding the invasion, we were quick to realize the war would change global energy flows. Europe is shifting away from Russia and toward new sources of imported liquified natural gas. We purchased our stakes in Chesapeake to capitalize on these trends. The recently announced energy pact between the U.S. and Europe represents an early positive datapoint in support of this investment thesis.”
3. ExxonMobil Corp. (NYSE:XOM)
D.E. Shaw’s Stake Value: $484.6M
Percentage of D.E. Shaw’s 13F Portfolio: 0.56%
Number of Hedge Fund Holdings: 72
PE Ratio (TTM): 10.54
Based in Irving, Texas, ExxonMobil Corp (NYSE:XOM) is an American multinational oil and gas corporation. It is one of the largest companies in the world by revenue and market capitalization and as of 2022, ExxonMobil Corp (NYSE:XOM) ranks sixth and twelfth on the Fortune Global 500. As of the second quarter of 2022, hedge fund sentiment around ExxonMobil Corp (NYSE:XOM) has declined, with 72 hedge funds reporting stakes in the company, as compared to 83 in the preceding quarter. As of Q2 2022, Rajiv Jain’s GQG Partners is the largest shareholder in the stock, owning more than 47.5 million shares worth $4.1 billion. D.E. Shaw and Co. is much more conservative in their ownership of ExxonMobil Corp (NYSE:XOM), having a total stake of $484.6 million.
2. Bank of America Corp. (NYSE:BAC)
D.E. Shaw’s Stake Value: $516.1M
Percentage of D.E. Shaw’s 13F Portfolio: 0.6%
Number of Hedge Fund Holdings: 99
PE Ratio (TTM): 10.89
Headquartered in Charlotte, North Carolina, the Bank of America Corp. (NYSE:BAC) is an American multinational investment bank and financial services holding company. It is the second largest banking institution in the United States, and the second largest bank in the world by total market capitalization. On July 19, RBC Capital analyst Gerard Cassidy lowered the price target on Bank of America Corp. (NYSE:BAC) to $40 from $45, keeping an Outperform rating on the shares.
Investor interest around Bank of America Corp. (NYSE:BAC) has virtually remained the same in Q2 2022, with 99 hedge funds long the stock in Q1 and Q2 2022. As of the second quarter of 2022, Warren Buffett’s Berkshire Hathaway is the largest shareholder in Bank of America Corp. (NYSE:BAC), having a stake worth $31.4 billion. D.E. Shaw comes in not far behind, owning more than 16.5 million shares which award him a stake of $516.1 million. Shaw strengthened his hold over the stock by 196%, causing Bank of America Corp. (NYSE:BAC) to make up for 0.6% of Shaw’s 13F investment portfolio for Q2 2022.
Here is what ClearBridge Investments had to say about Bank of America Corp. (NYSE:BAC) in their Q2 2022 investor letter:
“In the second quarter we made a sizable add to our position in Bank of America (NYSE:BAC) as our bank holdings have significant leverage to rising interest rates. The Fed, unfortunately, was late to realize inflation’s magnitude, maintaining for far too long that inflationary pressures were merely transitory. This mistake caused inflation to accelerate, necessitating a larger intervention than if the Fed had moved sooner.”
1. Meta Platforms Inc. (NASDAQ:FB)
D.E. Shaw’s Stake Value: $568.2M
Percentage of D.E. Shaw’s 13F Portfolio: 0.66%
Number of Hedge Fund Holdings: 184
PE Ratio (TTM): 13.94
Headquartered in Menlo Park, California, Meta Platforms Inc. (NASDAQ:FB) is an American multinational technology conglomerate. In 2021, the company generated 97.5% of its revenue from the sale of advertising and as of September 2022, it is one of the most valuable companies in the world.
As of September 11, Meta Platforms Inc. (NASDAQ:FB) had declined 50.3% year-to-date. Hedge fund sentiment around the company has also declined drastically, with 184 funds reporting a cumulative stake of $18.2 billion in Q2 2022. This is down from 200 hedge funds having a stake of $19.3 billion in Q1 2022. D.E. Shaw owns more than 3.5 million shares which are valued at $568.2 million.
Baron Funds, an asset management firm, mentioned Meta Platforms Inc. (NASDAQ:FB) in their Q2 2022 investor letter. This is what they had to say:
“Shares of Meta Platforms, Inc., the owner of Facebook, the world’s largest social network, fell 28.4% during the second quarter due to quarterly results that missed consensus estimates, driven by the impact of Apple’s new privacy changes in its iOS operating system. These changes have made it harder for Facebook to measure the effectiveness of its advertising across its mobile apps.
In the longer term, we expect Facebook to continue utilizing its leadership in mobile to provide global advertisers targeted marketing capabilities at scale, with substantial monetization optionality ahead in newer areas such as Reels (Meta’s competing solution to TikTok) and e-commerce.”
You can also take a peek at 10 Best Vanguard Stocks to Buy Now and 15 Best Security Stocks to Buy Now.
