We recently published a list of 10 Best Major Stocks to Invest In According to Analysts. In this article, we are going to take a look at where Shell (NYSE:SHEL) stands against the other best major stocks to invest in according to analysts.
The Post-Fed Rate Cut Opportunities
The current economic landscape presents a mix of signals as market participants assess the necessity of additional interest rate cuts. Despite overall economic strength, the Fed has hinted at potential rate reductions due to weaknesses in specific sectors. Currency dynamics are also shifting, with the US dollar weakening against the euro, adding another layer of complexity to the market environment. Amidst this backdrop, major stock indices, including the Dow Jones, continue to hover near record highs.
As analysts and market participants navigate these developments, they must consider how these factors may influence investment strategies in the coming months. Recently, discussions have emerged regarding the implications of potential rate cuts and their effects on various sectors of the economy. Some experts argue that further cuts may be necessary to support smaller businesses and consumers who are still adjusting to previous interest rate hikes.
Stephanie Link, Chief Investment Strategist and Portfolio Manager at Hightower thinks that a soft landing for the economy despite market volatility is anticipated, which is a contrasting perspective amidst market volatility and uncertainty. While there are concerns regarding the performance of small-cap stocks and their ability to keep pace with larger assets, she thinks the economy may stabilize without entering a recession. We talked about this in more detail in our article on the 10 Best Young Stocks To Buy Now, here’s an excerpt from it:
“….She believes that the Fed is skillfully guiding the economy towards a soft landing, even amidst the expected market fluctuations before the elections.
Just 3 weeks ago, the S&P 500 had dropped by 4%. Still, it rebounded by 4% the following week. It rose another 1% last week, reaching new highs, and expressed optimism about buying opportunities during any market weakness, citing better-than-expected economic growth driven by recent data, including improved retail sales and manufacturing figures, as well as a decline in weekly jobless claims to a 4-month low. This positive economic backdrop supports an estimated growth rate of 2.9%, which is expected to benefit corporate earnings.
….Link noted a broadening market trend over the past couple of months, indicating that while tech has taken the lead, other sectors such as financials, industrials, materials, and discretionary stocks are also showing strength.”
John Stoltzfus from Oppenheimer Asset Management joined CBNC’s ‘Squawk on the Street’ on September 25 to discuss the difference the Fed’s recent rate cut makes. It was highlighted that the S&P 500 is experiencing a remarkable moment, having just achieved its 41st record close of the year. Oppenheimer’s Chief Investment Strategist has set a target of 5,900 for the index, attributing this optimistic outlook to the recent rate cuts by the Fed.
Stoltzfus explained that the significance of these cuts lies in their actual implementation after a long period of rate hikes and pauses. He described the rate cut as a down payment from the Fed to both Wall Street and Main Street, signaling that further cuts could be on the horizon if necessary. Since this announcement, the market has shown mixed reactions, with defensive stocks performing well at times while technology stocks have also seen gains.
When discussing consumer discretionary stocks, Stoltzfus expressed that this sector is one of their favorites despite its underperformance earlier in the year. He noted that there has been a noticeable improvement in performance over recent months as investors recognize consumer resilience. However, he emphasized that within consumer discretionary, investors should focus on select companies rather than expecting a broad rally across the sector. Retailers leveraging e-commerce effectively are likely to perform better during the upcoming holiday season.
The conversation also touched on concerns regarding discounts in various sectors, particularly electronics. Stoltzfus acknowledged that value has become a key focus for consumers, which has led to increased competition among retailers. This competition allows consumers more options but may also pressure profit margins for some retailers. Nonetheless, he pointed out that many businesses within consumer discretionary, beyond just retail, are likely to maintain healthy margins.
Stoltzfus’ discussion highlighted the positive impact of the Fed’s rate cuts on market sentiment and consumer behavior while recognizing challenges in specific sectors. The outlook remains optimistic as investors navigate through these transitions and prepare for potential opportunities in consumer discretionary stocks and other sectors.
Methodology
We used stock screeners to look for mega cap stocks. We then selected the top 10 stocks with the highest upside potential (more than 15%), that were also the most popular among elite hedge funds, as of Q2 2024. The stocks are ranked in ascending order of their upside potential.
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 (NYSE:SHEL)
Average Upside Potential: 24.36%
Market Cap as of September 26: $211.73 billion
Number of Hedge Fund Holders: 49
Shell (NYSE:SHEL) is a British multinational oil and gas company. It primarily focuses on exploring, producing, and refining crude oil and natural gas, also operating in the areas of renewable energy and chemicals. It is known for its extensive global operations, commitment to providing energy solutions, and efforts to reduce its environmental impact. During the first half of 2024, 92% of its exploration, upstream, and renewable revenue came from natural gas or renewable sources.
The company is investing $10 to $15 billion in low-carbon energy solutions between 2023 and 2025 to transition away from fossil fuels and focus on renewable energy sources like wind, solar, and hydrogen. Management believes LNG will play a key role in the energy transition and plans to expand its LNG business by 20-30%, aiming to increase LNG volumes by 15-25% by 2030. It’s acquiring Pavilion Energy Pte. Ltd., a Singapore-based global LNG trading company for ~$1.2 billion, which is expected to be completed by Q1 2025.
It has invested in technology for exploration purposes, using geophysical data to develop advanced methods for oil and gas discovery. The merger with BG Group provided a significant competitive advantage, particularly in Brazil and Australia. Shell (NYSE:SHEL) expects to increase oil production by ~500,000 barrels per day by 2025.
In Q2 2024, it made $74.46 billion in revenue, although this was a drop of 0.15% from the year-ago period, due to lower oil prices, decreased production levels, and market volatility. Its largest business is its marketing division which includes revenue from selling wholesale commercial fuels, earning the firm $62 billion in sales in H1, which was 42% of the firm’s overall sales.
While its marketing division remains a significant contributor, the company’s pivot to natural gas and LNG positions it well for the future. Its investment in clean energy demonstrates its commitment to sustainability and innovation, again positioning it for long-term growth.
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 4th on our list of best major stocks to invest in according to analysts. While we acknowledge the potential of SHEL 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 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.
