We recently compiled a list of the 10 Best Blue Chip Stocks Under $100. In this article, we are going to take a look at where TotalEnergies SE (NYSE:TTE) stands against the other blue chip stocks under $100.
We all are wondering only one thing: Is the U.S. economy headed for a no, soft, or hard landing?
The re-acceleration (or the no-landing) case is being advocated by strong job growth, healthy double-digit expectations for growth in corporate earnings, and inflation remaining above 2.5%. On the other hand, the potential for a soft landing or (below-trend growth) is supported by a slowdown in forward-looking labor market indicators. Such indicators include hiring rates and subdued wage growth which might weigh over real household incomes.
Finally, the case for a hard landing (recession, as you might say) depends on historical precedent. A sustained period of aggressive tightening might push the economy into recession. However, there is enough evidence that the US economy continues to slow and inflation pressure is easing.
Soft Landing or Recession- The Debate Continues
As of now, investors continue to debate between a soft landing or a recession. The macro data is not of much help. This is because a slowdown can be perceived in 2 ways: Firstly, it can be assumed as a healthy rebalancing which enables inflation to cool without prompting negative growth, and secondly, the path to a not-so-severe recession starting in the latter half of 2024 or early 2025.
The broader financial markets are hinting at the soft-landing scenario. This is evident given the optimism about earnings-growth expectations. Apart from this optimism, there is optimism around high-yield credit spreads which are pricing cyclically low levels of defaults.
The conditions are improving in several developed economies, with some positive news coming from China. China’s outlook seems to be brightening with the implementation of policy measures to stabilize the property market and boost the overall Chinese economy. The country faces significant longer-term structural issues associated with high savings, subdued consumption, over-capacity, and dependency on export demand.
The policy moves have aided the near-term outlook and led to the rise in the Chinese benchmark index from deeply oversold levels earlier in the year. Hang Seng Index saw an increase from ~16,224 levels in mid-April to ~19,636 levels in mid-May.
Soft-landing expectations are expected to remain for the next few months as and when inflation worries decline. Since there is asymmetry over the mid-year return outlook, experts should also closely watch for signs of a deeper downturn.
With So Much Uncertainty, What Should Investors Do?
Ever since the inflation and labor market worries started taking a toll on the broader stock markets, investors have decided to flock to recession-proof and high-quality blue-chip companies. They have all the reasons for it, as these companies are capable of weathering economic volatility. The uncertainties about job growth, higher unemployment, and speculations regarding potential Federal Reserve rate cuts are some of the factors weighing over investors’ confidence.
That being said, the latest readings, ranging from inflation to jobless claims and rising retail sales, revived investors’ confidence in the US economy. Experts believe that the US economy might be heading for a “Goldilocks” scenario characterized by contained price pressures along with healthy growth. Despite fading fears, investors continue to prefer making investments in blue-chip stocks.
Even though there are several investing strategies and trends available, nothing can beat the strategy of investing in a blue-chip company that has a strong reputation.
What Are Blue-chip Stocks? An Overview
If you are hunting for some smart investments to add to your portfolio, you might have come across the term “blue-chip stocks.” These stocks are renowned for being reliable investments and they can provide numerous advantages. The blue-chip stocks are the ones having high value and potential for long-term growth.
The term, blue chip, comes from poker in which the highest-value chips are blue. Therefore, blue chip describes some of the highest-quality stocks in the market. Blue-chip stocks are from renowned and well-established companies with consistently strong performance.
More often than not, such stocks tend to have a long history of shelling out dividends and growing their market share. Even in the market downturn, blue-chip stocks remain resilient. Since well-established and renowned companies issue them, the prices of blue-chip stocks rise more slowly as compared to other stocks. Even in the downturns, these stocks are less likely to witness rapid drops. These companies have healthy balance sheets and resilient business models, because of which these are tagged as “one of the safest investments.”
How Can Blue-chip Stocks Help in Current Economic Worries?
The blue-chip stocks are sometimes synonymous with reliability and stability. Such stocks exhibit companies that are leaders in their respective industries. As a result, they boast a history of stable financials and consistent performance. They provide investors with a sense of security whenever there is an economic slowdown.
For example, iShares S&P 100 ETF, a leading bluechip ETF, saw an increase of ~20% on the YTD basis amidst uncertainty in the global markets like higher inflation, uncertain labor market, geopolitical worries, a slowdown in China, etc. In comparison, the broader market, Dow Jones Industrial Average has risen by just over ~7% on a YTD basis.
Besides size, blue-chip companies tend to remain on the front foot of innovation as they invest heavily in R&D. In stormy and difficult market conditions, dividends can offer a source of steady income. These companies possess long histories of paying generous dividends. They also have a policy of consistently increasing their payouts. Blue-chip stocks have also shown their resilience in the past, having a strong track record of weathering market downturns. For example, in 2020, when the global economy came to a standstill due to the deadly COVID-19 pandemic, the bluechip ETF delivered a return of over ~19%. On the other hand, the broader market saw an increase of just ~5%.
Our methodology
To make our list of best blue-chip stocks under $100, we started by using the Finviz screener. We looked for profitable companies with moats that are likely to last for at least the next 25 Years. We then ranked the best blue-chip stocks according to their potential upside, as of August 16.
At Insider Monkey, we are obsessed with 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).
An industrial oil and gas plant, with stacks of pipes issuing steam into the sky.
TotalEnergies SE (NYSE:TTE)
Share Price as of August 16, 2024: US$68.65
Average Upside Potential: 15.08%
TotalEnergies SE (NYSE:TTE) is an integrated oil and gas company, that explores for, produces, and refines oil around the world.
To address the challenges related to the energy transition, TotalEnergies SE (NYSE:TTE) implemented a two-pillar strategy. Firstly, it continues to establish low-cost exploration and production projects, and LNG will play an important role in the transition. Secondly, the company is building an Integrated Power segment with the help of investments in renewable power. Therefore, the company plans to invest more than 30% of its total spending in low-carbon businesses.
The company has a wide economic moat, whereby, it enjoys a low-cost and geographically well-diversified portfolio of upstream assets. Apart from this, the company’s diversified business mix offers balance during periods of hydrocarbon price volatility.
The company’s competitive advantage includes its increased FCF and ROIC. This is because traditional exploration and production assets are being used to finance short-cycle projects. TotalEnergies SE (NYSE:TTE) is focused on divesting its non-core assets as it focuses on advantaged, low-cost, and low-emission projects. This is supported by the fact that it signed a deal to divest its ~10% interest in the major oil and gas player in Nigeria to the locally owned company for $860 million.
In another development, TotalEnergies SE (NYSE:TTE) entered into a definitive agreement to sell its wholly owned subsidiary, TotalEnergies EP (Brunei) B.V., to Malaysia’s Hibiscus Petroleum Berhad for the value of $259 million.
Analysts at Wolfe Research initiated a coverage on the shares of TotalEnergies SE (NYSE:TTE) on 18th July 2024. They gave an “Outperform” rating, with a price target of $87.00 per share.
According to Insider Monkey, the number of hedge funds holding stakes in the company increased to 18 in Q1 2024 from 17 in the preceding quarter. Aristotle Capital Management, LLC, an investment management company, released its first quarter 2024 investor letter and mentioned TotalEnergies SE (NYSE:TTE). Here is what the fund said:
“During the quarter, we sold our positions in Phillips 66 and Sysco and invested in two new positions: Lowe’s Companies and TotalEnergies SE (NYSE:TTE).
Headquartered in Paris, France, TotalEnergies was founded in 1924 and is one of the world’s largest energy companies. The company operates in more than 130 countries and spans the entire energy value chain, producing and marketing oil and biofuels, liquid natural gas (LNG), renewables and electricity.
To meet the challenge of the energy transition and still ensure reliable energy in the short term, TotalEnergies has implemented a two-pillar strategy: on one end, the company continues to develop low-cost exploration and production projects, with LNG playing a vital role in the transition; on the other, it has been building its Integrated Power segment through investments in renewable power. As such, management plans to invest over 30% of total spending in low-carbon businesses and rank among the world’s top five providers of solar and wind energy by 2030. To emphasize this ambition, the company changed its name from Total to TotalEnergies in 2021…” (Click here to read the full text)
Overall TTE ranks 6th on our list of the best blue chip stocks under $100. While we acknowledge the potential of TTE as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than TTE 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.
