4. Shell plc (NYSE:SHEL)
Shell plc (NYSE:SHEL) is an Anglo-Dutch energy company that has operations across continents and is considered a bargain in the industry by Andrew Barry at Barron’s. The writer highlighted that Shell plc (NYSE:SHEL) owns some of the most attractive assets in the crude oil exploration and production (E&P) industry. Furthermore, the company holds the biggest liquefied natural gas (LNG) and has the largest chain of service networks. At the current price, Shell plc (NYSE:SHEL) stock is trading at a multiple of six times as compared to the expected 2022 EPS of $9. Shell plc (NYSE:SHEL) is down 0.87% as of 2:25 PM ET.
Shell plc (NYSE:SHEL) was mentioned in the Q1 2022 investor letter of Third Point Management. 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.”
Shell plc (NYSE:SHEL) was held by 37 hedge funds as of Q1 2022.
