In this article, we discuss 10 undervalued European stocks for the rest of 2022. If you want to see more stocks in this selection, check out 5 Undervalued European Stocks For The Rest of 2022.
On November 7, European markets closed slightly higher as investors braced themselves for the events that will unfold after the U.S. is done with midterm elections, in addition to the latest CPI report. Although European central banks continued with aggressive monetary policies of their own in an attempt to control inflation, travel and leisure stocks were winners on November 7, closing 1.6% higher.
Europe’s energy crisis and rampant inflation will continue to hammer even the most advanced European economies well into 2023, given the Russian invasion of Ukraine and China’s Zero Covid policy impacting the region. Europe’s policymakers face extreme trade-offs as they address a pernicious mix of slow growth and high inflation, which could deteriorate even further.
However, this economic shock has led the valuations of the biggest European firms to decline meaningfully, creating significant buying opportunities in the region. Huge companies like Chubb Limited (NYSE:CB), TotalEnergies SE (NYSE:TTE), and Stellantis N.V. (NYSE:STLA) are trading at record low valuations amid the economic crisis, which makes this an attractive time to pick up these stocks.
Our Methodology
We selected the following undervalued European stocks based on positive analyst coverage, strong business fundamentals, robust earnings profiles, and the capacity to rebound once the market regains momentum. We have assessed the hedge fund sentiment from Insider Monkey’s database of 895 elite hedge funds tracked as of the end of the second quarter of 2022.
Photo by Jacek Dylag on Unsplash
Undervalued European Stocks For The Rest of 2022
10. Eni S.p.A. (NYSE:E)
Number of Hedge Fund Holders: 8
P/E Ratio as of November 7: 3.00
Eni S.p.A. (NYSE:E) is an Italian company engaged in the exploration, development, and production of crude oil and natural gas. It operates through Exploration & Production, Global Gas & LNG Portfolio, Refining & Marketing and Chemicals, Plenitude and Power, and Corporate and Other segments. On October 31, the company reported a Q3 GAAP EPS of €1.67 and a revenue of €37.31 billion, up 96.2% on a year-over-year basis.
On September 29, investment advisory JPMorgan raised the firm’s price target on Eni S.p.A. (NYSE:E) to EUR 19 from EUR 18.50 and maintained an Overweight rating on the shares. Analyst Christyan Malek issued the ratings update.
According to Insider Monkey’s second quarter database, 8 hedge funds were bullish on Eni S.p.A. (NYSE:E), with combined stakes worth $137.65 million, compared to 8 funds in the earlier quarter worth $128.7 million. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the largest stakeholder of the company, with 2.4 million shares valued at $57.8 million.
Like Chubb Limited (NYSE:CB), TotalEnergies SE (NYSE:TTE), and Stellantis N.V. (NYSE:STLA), Eni S.p.A. (NYSE:E) is one of the best undervalued European stocks to invest in.
9. Equinor ASA (NYSE:EQNR)
Number of Hedge Fund Holders: 9
P/E Ratio as of November 7: 5.03
Equinor ASA (NYSE:EQNR) was incorporated in 1972 and is headquartered in Stavanger, Norway. It is an energy company, focused on the exploration, production, transportation, refining, and marketing of petroleum and petroleum-derived products. The company operates through Exploration & Production Norway, Exploration & Production International, Exploration & Production USA, Marketing, Midstream & Processing, Renewables, and Other segments. It is one of the best cheap stocks to buy for the rest of 2022.
On October 28, Equinor ASA (NYSE:EQNR) declared a quarterly dividend of $0.20 per share, in line with previous. Additionally, the board declared an extraordinary cash dividend of $0.70. The dividend is payable on January 25, 2023 to shareholders of record on January 10.
Societe Generale analyst Yoann Charenton on November 1 raised the firm’s price target on Equinor ASA (NYSE:EQNR) to NOK 360 from NOK 345 and reiterated a Hold rating on the shares.
According to Insider Monkey’s data, 9 hedge funds were long Equinor ASA (NYSE:EQNR) at the end of June 2022, compared to 16 funds in the prior quarter. Jim Simons’ Renaissance Technologies is a significant position holder in the company, with 1.20 million shares worth $41.8 million.
Here is what Massif Capital has to say about Equinor ASA (NYSE:EQNR) in its Q2 2021 investor letter:
“We currently have two oil-related positions in our portfolio and believe the oil opportunity set is ripe. As one might expect, both positions, (including Equinor: EQNR) performed well during the second quarter, given the steady march higher that oil has made in recent months. We maintain a positive outlook for both companies, although, importantly, our posture is not predicated on an expectation for continued oil price appreciation. This is not because of our inability to imagine scenarios where that does occur, but more out of an abundance of caution for what is a highly volatile commodity that at current price levels should be more than sufficient to generate ample free cash flow for any investable oil firm.
In the future, we expect both firms in the portfolio to generate significant free cash flow and expect EQNR to reinvest that free cash flow into a combination of offshore oil and wind opportunities with high rates of return. The path forward for AOI is more complicated and does warrant a few comments.”
8. CRH plc (NYSE:CRH)
Number of Hedge Fund Holders: 12
P/E Ratio as of November 7: 10.37
CRH plc (NYSE:CRH) is headquartered in Dublin, Ireland, and the company manufactures and distributes building materials. It operates through three segments – Americas Materials, Europe Materials, and Building Products. The company supplies cement, lime, aggregates, ready mixed concrete, asphalt products, architectural windows, storefront systems, doors, skylights, and architectural hardware. On September 20, CRH plc (NYSE:CRH) announced that it had concluded the latest phase of its share buyback program, returning a further $300 million of cash to shareholders. It is one of the best cheap stocks to invest in.
JPMorgan analyst Elodie Rall on September 13 maintained an Overweight rating on CRH plc (NYSE:CRH) but lowered the firm’s price target on the shares to EUR 50 from EUR 59.
According to Insider Monkey’s data, 12 hedge funds were bullish on CRH plc (NYSE:CRH) at the end of the second quarter of 2022, up from 9 funds in the prior quarter. Edgar Wachenheim’s Greenhaven Associates is the leading position holder in the company, with 752,445 shares valued at $26.2 million.
Here is what L1 Capital International specifically said about CRH plc (NYSE:CRH) in its Q2 2022 investor letter:
“CRH plc (NYSE:CRH) was outlined in detail in our December 2021 Quarterly Report. Since then, the tragic war in Ukraine commenced with no signs of resolution. This war and associated sanctions on Russia have led to major disruptions to European energy markets. CRH is a relatively energy intensive business and around 20% of the Group’s operations are in Europe. We expect they will be negatively impacted by higher energy prices and reduced economic activity. Around 75% of CRH’s operations are in North America and will be less impacted compared to the European operations.
We have followed and analyzed the global building products industry for nearly 25 years and the current share price of CRH presents an investment opportunity that rarely arises. CRH recently sold a business for US$3.8 billion, equating to almost 15x EBIT. In comparison, the remainder of CRH which consists of many businesses which are higher quality than the divested operation, is trading on around 9x EBIT, 11x PE, 9% free cash flow, 4% dividend yield and CRH is buying back around 3% of its shares annually. CRH has delivered shareholders a 15% return per annum, compounded over 50 years. The current share price provides compelling value for investors with a longer-term horizon.”
7. Banco Santander, S.A. (NYSE:SAN)
Number of Hedge Fund Holders: 15
P/E Ratio as of November 7: 4.80
Banco Santander, S.A. (NYSE:SAN) was founded in 1856 and is headquartered in Madrid, Spain. The company offers retail and commercial banking products and services to individuals, small and medium-sized companies, and large enterprises worldwide. Banco Santander, S.A. (NYSE:SAN) paid a quarterly dividend of $0.038 per share to shareholders on November 7. On October 26, the company posted a Q3 GAAP EPS of €0.137 and a total income of €13.5 billion, up 12.9% year-over-year.
On October 10, Credit Suisse analyst Pamela Zuluaga raised the price target on Banco Santander, S.A. (NYSE:SAN) to EUR 4.10 from EUR 4 and kept an Outperform rating on the shares.
According to Insider Monkey’s second quarter database, 15 hedge funds reported owning stakes worth $494.4 million in Banco Santander, S.A. (NYSE:SAN), compared to 15 funds in the prior quarter worth $592.7 million. John W. Rogers’ Ariel Investments is the largest stakeholder of the company, with 1.03 million shares valued at $16.8 million.
6. UBS Group AG (NYSE:UBS)
Number of Hedge Fund Holders: 15
P/E Ratio as of November 7: 7.75
UBS Group AG (NYSE:UBS) is one of the best cheap stocks to invest in. UBS Group AG (NYSE:UBS) is a Switzerland-based financial services company that operates through Global Wealth Management, Personal & Corporate Banking, Asset Management, and Investment Bank divisions. UBS Group AG (NYSE:UBS) caters to private, institutional, and corporate clients worldwide. On October 25, the company reported better-than-forecasted Q3 profit and raised its 2022 ordinary dividend to $0.55 per share from $0.51. UBS also expects to repurchase common shares worth nearly $5.5 billion during 2022.
On October 26, JPMorgan analyst Kian Abouhossein raised the price target on UBS Group AG (NYSE:UBS) to CHF 20.70 from CHF 20 and kept an Overweight rating on the shares.
According to Insider Monkey’s data, 15 hedge funds were long UBS Group AG (NYSE:UBS) at the end of June 2022, compared to 12 funds in the prior quarter. Richard S. Pzena’s Pzena Investment Management is the largest position holder in the company, with more than 5 million shares worth $82.5 million.
In addition to Chubb Limited (NYSE:CB), TotalEnergies SE (NYSE:TTE), and Stellantis N.V. (NYSE:STLA), UBS Group AG (NYSE:UBS) is one of the top European stocks trading at a meaningful discount.
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Disclosure: None. 10 Undervalued European Stocks For The Rest of 2022 is originally published on Insider Monkey.