5 Undervalued European Stocks For The Rest of 2022

In this article, we discuss 5 undervalued European stocks for the rest of 2022. If you want to see more stocks in this selection, check out 10 Undervalued European Stocks For The Rest of 2022. 

5. STMicroelectronics N.V. (NYSE:STM)

Number of Hedge Fund Holders: 18

P/E Ratio as of November 7: 8.62

STMicroelectronics N.V. (NYSE:STM) is headquartered in Geneva, Switzerland, and the company designs, manufactures, and sells semiconductor products in Europe, the Middle East, Africa, the Americas, and the Asia Pacific. The company operates through Automotive and Discrete Group, Analog, MEMS and Sensors Group, and Microcontrollers and Digital ICs Group segments.  

On October 27, STMicroelectronics N.V. (NYSE:STM) reported its third quarter results, posting GAAP earnings per share of $1.16 and a revenue of $4.32 billion, outperforming Wall Street consensus by $0.11 and $80 million, respectively. The revenue climbed 35% on a year-over-year basis. 

Societe Generale analyst Aleksander Peterc on October 31 reiterated a Buy recommendation on STMicroelectronics N.V. (NYSE:STM) but trimmed the firm’s price target on the shares to EUR 71 from EUR 72. 

According to Insider Monkey’s data, 18 hedge funds were bullish on STMicroelectronics N.V. (NYSE:STM) at the end of Q2 2022, compared to 19 funds in the earlier quarter. Michael Rockefeller and Karl Kroeker’s Woodline Partners is the leading position holder in the company, with 3.17 million shares worth nearly $100 million. 

Here is what Saturna Capital has to say about STMicroelectronics N.V. (NYSE:STM) in its Q3 2021 investor letter:

“STMicroelectronics has a goal of becoming carbon neutral by 2027, and in 2020 reported that their greenhouse gas emissions were down 19% over the previous year. In 2020, STMicroelectronics was the only semiconductor company with targets approved by the Science Based Targets Initiative for limiting warming to 1.5 degrees Celsius, and their 2027 net-zero goal is recognized as one of the most ambitious in the industry. As greenwashing presents a growing concern within the ESG community, and as more and more funds engage in re-branding exercises that have little to do with pursuing sustainable investment practices among others, our definition of sustainability includes financial sustainability, most often demonstrated by intelligent capital allocation leading to solid cash flows that can sustain a business without resorting to excessive leverage.”

4. Nokia Oyj (NYSE:NOK)

Number of Hedge Fund Holders: 20

P/E Ratio as of November 7: 14.57

Nokia Oyj (NYSE:NOK) is a Finland-based company providing mobile, fixed, and cloud network solutions worldwide, operating through four segments – Mobile Networks, Network Infrastructure, Cloud and Network Services, and Nokia Technologies. Nokia Oyj (NYSE:NOK) is one of the best cheap stocks to invest in. On October 20, Nokia Oyj (NYSE:NOK) posted a Q3 non-GAAP EPS of €0.10 and a revenue of €6.2 billion, topping market estimates by €0.01 and €130 million, respectively. The company also raised its FY22 sales outlook. 

On October 25, Societe Generale analyst Aleksander Peterc maintained a Buy rating on Nokia Oyj (NYSE:NOK) but lowered the firm’s price target on the stock to EUR 5.40 from EUR 5.80. 

According to Insider Monkey’s Q2 data, 20 hedge funds were long Nokia Oyj (NYSE:NOK), compared to 22 funds in the prior quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the largest stakeholder of the company, with approximately 24 million shares worth $110 million. 

3. TotalEnergies SE (NYSE:TTE)

Number of Hedge Fund Holders: 20

P/E Ratio as of November 7: 6.56

TotalEnergies SE (NYSE:TTE) is a French energy company that operates through four segments – Integrated Gas, Renewables & Power, Exploration & Production, Refining & Chemicals, and Marketing & Services. TotalEnergies SE (NYSE:TTE) serves customers worldwide. Its Q3 net profit climbed to $6.63 billion from $4.65 billion in the same period last year, and revenues increased to $69 billion from $54.7 billion from the prior-year quarter. 

On October 31, Deutsche Bank analyst James Hubbard raised the price target on TotalEnergies SE (NYSE:TTE) to EUR 54.90 from EUR 51.30 and kept a Hold rating on the shares.

According to the second quarter database of Insider Monkey, 20 funds were long TotalEnergies SE (NYSE:TTE), with combined stakes worth $1.8 billion, compared to 20 funds in the prior quarter worth $1.7 billion. Ken Fisher’s Fisher Asset Management held the largest position in the company, comprising 26.8 million shares valued at $1.4 billion. 

Here is what Artisan Partners specifically said about TotalEnergies SE (NYSE:TTE) in its Q3 2022 investor letter:

“We added one new position this quarter, TotalEnergies SE (NYSE:TTE). TTE is one of the world’s largest energy companies. It develops and produces oil and gas, produces and sells refined products, is one of the largest producers and traders of LNG, and owns a large portfolio of renewable power generating assets. TTE has one of the lowest cost portfolios of oil and gas assets and therefore one of the lowest breakeven points in the industry. It also has one of the best balance sheets in the industry. We estimate it will reach a net cash position sometime in 2023.

The valuation of TTE—and that of Shell—is fascinating. TTE sells at approximately 4X earnings and has a 5% dividend yield. With its current buyback program and a recently announced special dividend, the owners yield is more than 10%. The valuation and owners yield are not dissimilar to those of Shell, which we also own and which trades at just under 5X earnings. To say that a discount is attached to European oil companies relative to US peers is an understatement. ExxonMobil sells at 8X earnings, Chevron 9X and Conoco 8X. If TTE and Shell redomiciled to the US, their share prices would probably double.

We have a few theories for the valuation anomaly. First, as mentioned above, Europe generally trades at a big discount to the US. In the case of TTE and Shell, this makes no economic sense. The oil and gas business is a global one, and TTE and Shell have attractive assets. The main explanation, we believe, is that large sections of the European asset management industry will not invest in oil and gas because of ESG restrictions. Yet if the recent war in Ukraine and the current energy crisis have shown us nothing else, the supply of energy is an enormous social good. Indeed, it is an existential good. Moreover, it is companies such as TTE that will invest billions to supply the LNG that Europe desperately needs to restore its economy and reduce the crushing cost burden on families who must now choose between heating their homes and eating. Finally, TTE is also investing billions per year in renewable power generating assets such as wind and solar. Such assets will likely never replace clean burning natural gas and nuclear as base power suppliers, but they are a valuable and clean adjunct to modern grids. We believe TTE’s renewable portfolio is worth between $25 billion and $35 billion and is moving from almost no profit contribution toward meaningful levels of profit over the next few years. We wonder how it makes sense for investors to disinvest from these kinds of assets on ethical grounds.”

2. Stellantis N.V. (NYSE:STLA)

Number of Hedge Fund Holders: 25

P/E Ratio as of November 7: 2.83

Stellantis N.V. (NYSE:STLA) is a Netherlands-based automaker focused on the design, engineering, manufacturing, and distribution of automobiles, engines, transmission systems, metallurgical products, and production systems worldwide. On November 3, Stellantis N.V. (NYSE:STLA) reported a Q3 revenue of $42.1 billion, up 29.1% year-over-year and global BEV sales jumped 41% as compared to the same period last year. It is one of the best cheap stocks to invest in. 

On October 20, Nomura analyst Anindya Das upgraded Stellantis N.V. (NYSE:STLA) to Buy from Neutral with a price target of EUR 19.80, up from EUR 15.70.

Among the hedge funds tracked by Insider Monkey, 25 funds were long Stellantis N.V. (NYSE:STLA) at the end of June 2022, compared to 29 funds in the prior quarter. John Overdeck and David Siegel’s Two Sigma Advisors is a significant position holder in the company, with 4.7 million shares worth $58 million.

1. Chubb Limited (NYSE:CB)

Number of Hedge Fund Holders: 35

P/E Ratio as of November 7: 14.58

Chubb Limited (NYSE:CB) is a Switzerland-based company that provides insurance and reinsurance products worldwide. On October 25, the company reported a Q3 non-GAAP EPS of $3.17, beating analysts’ estimates by $0.56. The net premiums of $11.54 billion climbed 15.4% year-over-year, topping Street consensus by $830 million. Operating cash flow was $3.43 billion for the third quarter and a record $8.59 billion year-to-date.

On October 27, Raymond James analyst C. Gregory Peters raised the price target on Chubb Limited (NYSE:CB) to $270 from $260 and maintained a Strong Buy rating on the shares following the Q3 results. The analyst believes Chubb Limited (NYSE:CB) is well-positioned to achieve improving underlying results, given several years of solid rate increases as well as the outlook for pricing to remain in-line or ahead of loss cost trends through at least the end of this year. 

According to Insider Monkey’s data, 35 hedge funds were bullish on Chubb Limited (NYSE:CB) at the end of June 2022, compared to 31 funds in the prior quarter. Andreas Halvorsen’s Viking Global is the biggest position holder in the company, with 3.7 million shares worth $742 million. 

Here is what Aristotle Capital Management Value Equity has to say about Chubb Limited (NYSE:CB) in its Q1 2022 investor letter:

“Our investment in Chubb began in the fourth quarter of 2015, shortly after ACE Limited announced it would acquire the Chubb Corporation, creating the largest global property and casualty insurance company by underwriting income. During our nearly seven-year holding period, the company’s combination progressed leading to the realization of main catalysts we had identified. These included cost savings, broadened product offerings and an expanded customer base, as well as enhanced distribution capabilities and improved pricing due to scale. In addition, Chubb successfully grew its profitable high-net-worth personal lines. While we still consider Chubb to be a high-quality business, few catalysts remain after what was, in our opinion, a remarkable run of successful business execution. As such, we decided to step aside in favor of what we believe to be a more optimal investment in Blackstone.”

You can also take a look at Biggest IT Companies in the World and Biggest Logistics and Shipping Companies in the World. 

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