We recently compiled a list of the 7 Blue Chip Stocks with Low PE Ratios. In this article, we are going to take a look at where Shell plc (NYSE:SHEL) stands against the other blue chip stocks with low PE ratios.
In the current financial landscape, characterized by shifting market sentiments and evolving economic indicators, the spotlight on blue-chip stocks with low price-to-earnings (P/E) ratios has intensified. As investors seek stable and potentially undervalued options, understanding the broader context of interest rate movements, inflation trends, and market performances becomes crucial.
Recent data indicates that bond traders are increasingly skeptical about the Federal Reserve’s likelihood of implementing further rate cuts this year. Current market expectations reflect only a 20% chance that rates will remain unchanged during either the November or December meetings. Just last week, following an unexpectedly strong jobs report, traders had anticipated over 50 basis points in cuts by year-end. This significant shift underscores a growing belief that robust U.S. economic data is diminishing the probability of consecutive cuts, which has implications for investment strategies across the board.
As a result of these evolving expectations, the dollar is currently on track for its second consecutive weekly gain, bolstered by a 0.5% increase this week alone. The Bloomberg Dollar Spot Index has gained 1.7% in October, propelled by resilient economic indicators that suggest a more cautious approach from the Fed. In contrast to other central banks that may pursue additional monetary easing, the Federal Reserve appears to be recalibrating its policy stance from a position of economic strength. This backdrop adds an additional layer of complexity for investors assessing their portfolios, particularly those interested in blue-chip equities.
Furthermore, the recent performance of the stock market has been notable, with major indices reaching new all-time highs as earnings season kicks off. A wide range of sectors within the market has shown improvement, with the S&P 500 extending its winning streak into a fifth consecutive week, the longest since May. The KBW Bank Index also saw significant gains, surging by 3% and reaching its highest level since April 2022. This upward momentum can be attributed to several financial institutions posting better-than-expected earnings, signaling a recovery that is gaining traction across various sectors.
Interestingly, inflation trends are also contributing to the current economic narrative. Recent reports indicate that U.S. producer prices remained unchanged in September, reflecting a more favorable inflation outlook. Although year-on-year increases in the producer price index (PPI) showed a modest rise of 1.8%, the smallest gain in seven months, market analysts predict a potential 25 basis points reduction in interest rates next month. Despite the uptick in inflationary pressures in certain sectors, most economists do not view these trends as signs of a broader resurgence in price pressures, suggesting that the overall economic environment remains stable.
As we navigate through this analysis, it will be vital to consider the backdrop of current economic conditions, including interest rate expectations and inflationary trends, to better understand the investment landscape and identify potential opportunities. With that, let us delve into the profiles of these promising blue-chip stocks that align with the search for stable investments amidst a fluctuating market.
Our Methodology
For this article, we use stock screeners to identify nearly 12 stocks above $200 billion market cap and a forward Price to Earnings (P/E) ratio of less than 15 as of October 11, 2024. Next, we narrowed our list to 7 stocks that were most widely held by institutional investors. The hedge fund sentiment was taken from Insider Monkey’s Q2 database of 912 hedge funds. The seven blue chip stocks are listed in descending order of their forward price to earnings ratio.
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).
A gas refinery lit up against the night sky, showing the scale of the company’s petrochemical operations.
Shell plc (NYSE:SHEL)
Forward Price to Earnings (P/E) ratio: 8.83
Number of Hedge Fund Holders: 49
Shell plc (NYSE:SHEL) is a prominent name in the energy industry, known for its global presence in oil, gas, and renewable energy. As of October 11, 2024, the company boasts a forward price-to-earnings (P/E) ratio of 8.83, making it an attractive blue-chip stock with a low P/E ratio. This low valuation presents a compelling opportunity for value-focused investors, especially when considering the company’s strong financial performance and commitment to capital discipline.
In Q2 2024, Shell plc (NYSE:SHEL) exceeded earnings expectations, reporting an EPS of $1.97, surpassing analysts’ estimates of $1.82. This impressive result was driven by a robust performance across various segments, particularly in Integrated Gas and Upstream operations. Shell plc (NYSE:SHEL) adjusted earnings for the quarter were $6.3 billion, and it generated $13.5 billion in cash flow from operations, underscoring the company’s ability to generate significant cash even amid challenging market conditions.
Shell plc (NYSE:SHEL) strategic investments in liquefied natural gas (LNG) and upstream projects, such as the ADNOC Ruwais LNG project and new ventures in the Gulf of Mexico and Brazil, are expected to drive future growth. These initiatives will add substantial volumes to its LNG portfolio, enhancing its position as a global leader in the LNG market. Furthermore, Shell’s focus on operational efficiency is evident in its continued progress on cost-cutting measures, having already delivered $1.7 billion out of the targeted $2-3 billion in structural operating expense reductions.
The company’s strong balance sheet and shareholder returns strategy are additional points of appeal. In Q2 2024, Shell announced a $3.5 billion share buyback program, marking the 11th consecutive quarter of returning over $3 billion to shareholders. This consistent commitment to buybacks and dividends showcases Shell’s dedication to delivering value to its investors.
In summary, Shell plc (NYSE:SHEL) solid financials, strategic growth initiatives, and low P/E ratio make it a top choice for investors looking for blue-chip stocks with strong fundamentals and long-term growth potential.
Overall SHEL ranks 2nd on our list of the blue chip stocks with low PE ratios. While we acknowledge the potential of SHEL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. 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.