We recently published a list of 12 Most Undervalued Large Cap Stocks to Buy Now. In this article, we are going to take a look at where Schlumberger (NYSE:SLB) stands against other most undervalued large cap stocks to buy now.
On March 4, David Katz, Chief Investment Officer at Matrix Asset Advisors, joined ‘The Exchange’ on CNBC to share his perspective on the current state of the bull market and what February’s mixed action and sector rotation might signal for the rest of the year. Katz acknowledged that while people might not want to hear it, the volatility seen in February is likely to persist throughout the year, with both upside and downside movements. He emphasized that this creates opportunities for investors but also necessitates caution. Katz highlighted several positive factors supporting the market, which included a strong economy and solid corporate performance. However, he expressed concerns about certain policies from the administration, such as tariffs, immigration, and the relationship with the Fed. While these issues have been largely ignored by the market so far, Katz warned that they could eventually lead to a 3-5% correction. Despite this, he remained optimistic about the economy’s ability to navigate these challenges and recommended buying into market dips rather than chasing rallies.
To support his sentiment, Katz pointed to companies that have already experienced significant corrections and are positioned to perform well regardless of broader market movements. He highlighted their strong fundamentals, attractive valuations (most trading at under 13-14 times earnings), and good outlooks. He also noted that last year’s market leaders have slowed significantly, while sectors that underperformed are beginning to show meaningful improvement, a trend he expects to continue. This sector rotation suggests that investors should be prepared to adapt their strategies as different sectors gain momentum throughout the year.
Methodology
We used the Finviz stock screener to compile a list of the top stocks trading between $10 billion and $200 billion. We then selected stocks with a forward P/E ratio under 15 and made a list of 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An aerial view of a well site, depicting the scale of oil and gas operations.
Schlumberger (NYSE:SLB)
Forward Price-to-Earnings Ratio as of March 4: 11.89
Number of Hedge Fund Holders: 80
Schlumberger (NYSE:SLB) is a global technology provider for the energy industry. It offers digital, reservoir, well construction, and production systems. It delivers services spanning field development, hydrocarbon production, carbon management, and well optimization. This includes subsurface evaluation, drilling, completion, and production enhancement.
The company’s Digital and Integration segment’s revenue reached $1.2 billion in Q4 2024, which was a 6% sequential increase. This segment offers digital energy solutions and integrates them into operations. Its growth was driven by a 10% rise in Digital revenue. For the full year 2024, Digital revenue hit $2.44 billion, which was a 20% increase. Customers are adopting cloud computing, AI, and digital operations to improve efficiency, which is contributing to the segment’s success.
Schlumberger (NYSE:SLB) expects Digital revenue to continue its growth trajectory in 2025. This will be supported by ongoing demand for digital operations, data, and AI solutions. While revenue from APS (Asset Performance Solutions) is expected to decline due to the Palliser divestiture (sale of its interest in the Palliser APS project in Canada), the performance of the Digital business will drive the company’s overall growth.
Ariel Focus Fund initiated a position in the company, viewing its current market weakness as a buying opportunity based on its strong fundamentals and expected medium-term demand growth. It stated the following regarding Schlumberger (NYSE:SLB) in its Q4 2024 investor letter:
“Also in the quarter, we initiated a position in Schlumberger Limited (NYSE:SLB), the largest oilfield services company in the world by revenue. SLB provides equipment, services, and digital tools to help oil and gas producers operate more efficiently, including reservoir characterization, rig and well construction and production enhancement. We believe the company’s scale and technical expertise serves as a key differentiator. Weak near-term demand, an oil glut, falling commodity prices and concerns about future spending amid a global shift to renewable energies presented an attractive entry point. We believe there are tailwinds supporting rising demand over the medium-term, as national oil companies invest in long-cycle projects to grow capacity and address the natural decline of production. Additionally, we expect SLB will continue to evolve their capabilities to help clients with rising energy needs going forward.”
Overall, SLB ranks 7th on our list of most undervalued large cap stocks to buy now. While we acknowledge the growth potential of SLB as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SLB 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.