We recently published a list of the 13 Most Undervalued Blue Chip Stocks To Buy According To Analysts. In this article, we are going to take a look at where Shell Plc (NYSE:SHEL) stands against other most undervalued blue chip stocks to buy according to analysts.
“Now is the Time to Revisit Portfolios”
The Fed went through with a 50 basis point cut and as things have started to get clear, investors must give their portfolio another look. On September 20, Matt Stucky, Northwestern Mutual Wealth Management’s chief equities portfolio manager, appeared in an interview on Yahoo Finance to discuss why and how investors must revisit their portfolios.
He suggested that now is the perfect time for investors to sit down and reassess their investments with the help of advisors. Stucky highlights that there is currently $6.3 trillion sitting in money market funds in the asset class, which may not be as attractive after the 50 basis point cut went through. He urged investors to consider a rather diversified portfolio and suggested that sitting on cash alone is risky.
He reiterated that while investors do not need to alter their long-term strategic goals, the ones with idle cash must try to allocate or deploy that money in other investment classes. According to Stucky, garnering a solid yield or return on investment does not come without risk and investors must understand that with the current Fed decision on board, it is impossible to get that kind of yield from cash alone.
What Does the Cut Signal?
On September 19, Dennis Lockhart, Former president of the Federal Reserve Bank of Atlanta, appeared in an interview on Yahoo Finance to discuss the aftermath of the rate cut. According to Lockhart, the rate cut was perfectly balanced and rather optimistic in nature.
He believes that the Fed’s decision was not reactionary to anything going on in the market or the economy. The Fed is particularly confident about the inflation rate, the labor market, and the soft landing of the economy.
Lockhart suggested that the Fed will reroute and remain flexible based on how the economy is performing from meeting to meeting. According to him, the Fed will aim to maintain flexibility and the 50 basis point cut was more like a compensation to what should have happened in July.
Our Methodology
To come up with the 13 most undervalued blue chip stocks to buy according to analysts we examined multiple similar rankings, our own rankings, and ETFs to come up with the best blue chip stocks. We then chose stocks with a forward P/E ratio that was less than the S&P 500’s (22.68, as of September 22). Finally, we ranked the shortlisted stocks in ascending order of the analyst upside potential, as of September 22, 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A gas refinery lit up against the night sky, showing the scale of the company’s petrochemical operations.
Shell Plc (NYSE:SHEL)
Forward P/E, as of September 22: 8.4
Analyst Upside Potential, as of September 22: 23%
Number of Hedge Fund Holders: 49
Shell Plc (NYSE:SHEL) is one of the most undervalued blue chip stocks to buy according to analysts. The global energy company is engaged in the exploration, production, refining, and trading of LNG, crude oil products, and other related products.
In the second quarter of 2024, Shell Plc (NYSE:SHEL) signed new agreements, further enhancing its position in LNG. The company agreed to acquire Pavilion Energy in Singapore and in early July the company initiated two separate investment decisions in LNG projects in Trinidad and Tobago and Abu Dhabi.
The company is also strengthening its position in renewable energy. At the start of 2024, Shell Plc (NYSE:SHEL) had around 2.5 gigawatts (GW) of renewable energy in operations, 4.1 GW under construction, and nearly 40.2 GW of potential capacity.
In the second quarter of 2024, not only did the company initiate a further $3.5 billion buyback program for the next three months, but the company also logged $74.5 billion in revenue. It is evident that despite geopolitical tensions, the company remains resilient and therefore deserves a position on our list.
Analysts are bullish on SHEL and their 12-month median price target of $84.5 points to a 23% upside from current levels. Overall, 49 investors were bullish on the stock at the end of Q2 2024, with total stakes amounting to $6.06 billion. As of June 30, Fisher Asset Management was the largest shareholder with a position worth $1.73 billion.
Third Point Management made the following comment about Shell plc (NYSE:SHEL) in its second quarter 2023 investor letter:
“We initiated a position in Shell plc (NYSE:SHEL) in the summer of 2021 and highlighted the company’s significant discount to intrinsic value as well as to US-listed peers after decades of poor performance. While shares have performed well since we initiated the investment, the company still trades at staggering discount to intrinsic value and represents a compelling investment at current levels. We initially argued (and still believe) that the fastest path to improved performance and better valuation would be a separation of Shell’s business units to better attract shareholders and improve accountability, the latter of which was essential when the company was in the hands of executives who had demonstrated virtually no focus on shareholder value creation.
The most important change at Shell over the past two years has been the upgrade in the management team, with the appointments of Wael Sawan as CEO and Sinead Gorman as CFO. They have demonstrated an unwavering commitment to shareholder value, capital discipline, and improved returns. At their recent analyst day, Mr. Sawan stated “underpinning all that we do will be a ruthless focus on performance, discipline, and simplification.” It was the third time they used the term “ruthless” in their presentation, sending a strong message to shareholders…”
Overall, SHEL ranks 3rd on our list of most undervalued blue chip stocks to buy according to analysts. While we acknowledge the potential of SHEL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SHEL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
