In this article, we will look at 5 energy stocks to buy now according to Till Bechtolsheimer’s Arosa Capital. You can see our detailed analysis of these stocks, Arosa Capital Management’s investment philosophy, and go to 10 Energy Stocks to Buy Now According to Till Bechtolsheimer’s Arosa Capital.
5. Shell plc (NYSE:SHEL)
Stake Value of Arosa Capital Management: $9,842,000
Percentage of Arosa Capital Management’s 13F Portfolio: 2.42%
Number of Hedge Fund Holders: 41
Shell plc (NYSE:SHEL) operates as an energy and petrochemical company worldwide. The company was formerly known as Royal Dutch Shell plc (NYSE:RDS) and changed its name to Shell plc (NYSE:SHEL) in January 2022. Arosa Capital Management upped its stake by 75% in the company, from $5.79 million in the third quarter of 2021 to $9.84 million in the fourth quarter of 2021. The investment covers 2.42% of the fund’s 13F portfolio and the stock is ranked at number 11 among the fund’s holdings.
On February 4, 2022, Cowen analyst Jason Gabelman raised his price target on Shell plc (NYSE:SHEL) to $58 from $53 and reiterated an Outperform rating on the shares.
On February 3, 2022, Shell plc (NYSE:SHEL) announced its revenue and earnings per share for the fourth quarter of 2021, beating on both. The company’s revenue was reported to be $85.28 billion, up 93.87% year over year, beating revenue estimates by $26.62 billion. Shell plc (NYSE:SHEL) reported an EPS of $1.66, beating expert estimates by $0.41. The company also announced that its board of directors declared a quarterly cash dividend of $0.24 per share. The stock’s forward yield at the time was 3.61%, and as of March 1, 2022, the yield is 3.66%.
There were 41 hedge funds that held stakes in Shell plc (NYSE:SHEL) by the end of the fourth quarter of 2021. The total value of these stakes crossed $2.63 billion, up from 33 positions in the third quarter of 2021 with stakes of $2.05 billion.
Here is what Goehring & Rozencwajg Associates had to say about Shell plc (NYSE:SHEL) in their third-quarter 2021 investor letter:
“Royal Dutch Shell’s ESG challenges continue unabated. A Dutch court ruled in May that Royal Dutch Shell must cut its CO2 output by 45% by 2030 to align their policies with the Paris Climate Accord. In a statement issued after the verdict, a Shell spokesperson acknowledged that “urgent action is needed on climate change and the company is accelerating efforts to reduce emissions.” If the pressure from the Dutch court system was not enough, an activist shareholder has proposed breaking the company apart to address ESG concerns. On October 27th, Third Point Management announced the following.
“If Shell pursues this type of strategy it would probably lead to an acceleration of carbon dioxide reduction. […] Breaking Shell into two operating units would create a standalone legacy energy business (upstream, refining, and chemicals) that could slow capex beyond what is has already promised, sell assets, and prioritize return of cash to shareholder which can be reallocated into low-carbon areas of the market.”
Shell has already cut spending dramatically over the last decade. After having peaked at $39 bn in 2013, upstream capital spending fell to only $17 bn in 2020 – a drop of nearly 60%. Spending has barely recovered in the three quarters of 2021. A lack of spending has already impacted production. Proforma for the 2016 acquisition of BG Group, Shell’s total production has fallen 13% since capital spending peaked in 2013. These trends are accelerating: Shell’s production over the first nine months of 2021 have fallen 7% compared with the same period last year.
If Royal Dutch Shell’s upstream capital spending remains at today’s depressed levels, we estimate the company will only be able to replace 30% of production with new reserves and that production will fall 40% over the next nine years. If spending is further curtailed (as is being proposed), Shell’s oil and natural gas production would collapse – something that may have already started.”
