In this article, we shall discuss the 10 best undervalued stocks to buy now according to billionaire D.E. Shaw.
David Elliot Shaw, an American billionaire scientist and former hedge fund manager, graduated summa cum laude from the University of California, San Diego, and earned a PhD from Stanford University in 1980. In 1988, he founded his own hedge fund, D.E Shaw and Co.
As part of his investment strategy, Shaw manages a variety of investment funds that deploy quantitative methods and proprietary computational technology developed by his company over 30 years of research and training, to support fundamental research in the management of his investments. Additionally, his company extensively uses qualitative analysis to make private equity investments in technology, real estate, financial services firms, wind power, and distressed company financing. Shaw aims to identify statistically prospective market inefficiencies through hypothesis formulation, testing, and validation based on practical knowledge of markets and advanced computational techniques. His company is organized in a way where teams work together to trade ideas, identify and address risks, build tools, and explore profitable opportunities. Furthermore, several of the strategies adopted by the firm seek to identify and isolate investment opportunities through a carefully-crafted hybrid approach that combines aspects of systematic and discretionary strategies.
David E. Shaw of D.E. Shaw
As of the second quarter of 2022, D.E. Shaw and Co. has an incredibly diversified portfolio with large investments in the technology, services, healthcare, finance, basic materials, and consumer goods sectors. The fund’s Q2 2022 portfolio value stands at more than $85.3 billion for over 6000 holdings, the result of a 0.08% increase as compared to the previous quarter. As of June 1, D.E Shaw has $60 billion in investment and committed capital. The portfolio turnover from Q1 2022 to Q2 2022 was 26.9%. Some of the prominent undervalued stocks to feature in D.E. Shaw’s Q2 2022 portfolio are Meta Platforms Inc. (NASDAQ:FB), AT&T Inc. (NYSE:T), and FedEx Corp. (NYSE:FDX). In this article, we shall zoom in on the 10 best undervalued stocks to buy now according to billionaire David E. Shaw.
Our Methodology
The undervalued stocks mentioned below have been chosen from D.E. Shaw’s 13F investment portfolio from the second quarter of 2022. We checked each stock’s trailing-twelve-month price-to-earnings ratios and narrowed down our selection to the top stocks that had a PE ratio of 15 or less.
Insider Monkey’s extensive database tracking 895 hedge funds was used to gauge hedge fund sentiment around each stock.
Best Undervalued Stocks to Buy Now According to Billionaire D.E. Shaw
10. Occidental Petroleum Co. (NYSE:OXY)
D.E. Shaw’s Stake Value: $244.9M
Percentage of D.E. Shaw’s 13F Portfolio: 0.28%
Number of Hedge Fund Holdings: 66
PE Ratio (TTM): 6.45
Based in Houston, Texas, Occidental Petroleum (NYSE:OXY) is an American company engaged in hydrocarbon exploration in the United States and the Middle East. It also specializes in petrochemical manufacturing in Canada, the U.S, and Chile. The company ranked 670th on the 2021 Forbes Global 2000. As of the second quarter of 2022, Occidental Petroleum (NYSE:OXY) posted an EPS of $3.16, beating estimates of $3.02 by $0.14. The company posted a total revenue of $10.7 billion in Q2 2022. Like Meta Platforms Inc. (NASDAQ:FB), AT&T Inc. (NYSE:T), and FedEx Corp. (NYSE:FDX), Occidental Petroleum (NYSE:OXY) is one of the best undervalued stocks to buy now according to billionaire D.E Shaw.
Investor interest around Occidental Petroleum (NYSE:OXY) has fallen slightly in Q2 2022, with 66 hedge funds long the stock, compared to 67 in the preceding quarter. As of Q2 2022, Warren Buffett’s Berkshire Hathaway is the largest shareholder in the company, owning more than 158.5 million shares valued at $9.3 billion. In the second quarter of 2022, D.E. Shaw owns 4.2 million shares worth more than $244.9 million. Occidental Petroleum (NYSE:OXY) makes up for 0.28% of D.E. Shaw’s 13F portfolio.
On September 6, Morgan Stanley analyst Devin McDermott raised the price target on Occidental Petroleum (NYSE:OXY) to $76 from $70, maintaining an Equal Weight rating on the stock. According to the analyst, the recently passed Inflation Reduction Act provides attractive support for low carbon growth growth across CCS and hydrogen. Furthermore, McDermott sees larger integrated companies like Occidental Petroleum (NYSE:OXY) as best positioned to benefit from the Act, which is a viable path to profitably transition towards a lower carbon business mix over time.
Smead Capital Management mentioned Occidental Petroleum (NYSE:OXY) in their Q2 2022 investor letter. This is what they said:
“For the quarter, our best-performing stocks were Continental Resources (CLR), Merck (MRK) and Occidental Petroleum Corporation (NYSE:OXY). Despite a steep sell-off in June in the oil and gas stocks, two of our oil stocks made the quarterly list.
If you are wondering how we are outperforming the S&P 500 Index in the first half of the year, look no further than our top three performers. Occidental Petroleum (OXY), Continental Resources (CLR) and Conoco Phillips (COP) soared in value and were barely represented in the S&P 500 Index. To quote Jerry Jones, owner of the Dallas Cowboys, “We are in the first quarter on higher energy prices!””
9. Ford Motor Co. (NYSE:F)
D.E. Shaw’s Stake Value: $257.6M
Percentage of D.E. Shaw’s 13F Portfolio: 0.3%
Number of Hedge Fund Holdings: 46
PE Ratio (TTM): 5.37
Headquartered in Dearborn, Michigan, Ford Motor Co. (NYSE:F) is an American multinational automobile manufacturer. It is next on Shaw’s list of the 10 best undervalued stocks to buy now. The company sells automobiles and commercial vehicles under the Ford brand, and luxury cars under its Lincoln brand. As of the second quarter of 2022, D.E. Shaw has a total stake of $257.6 million in Ford Motor Co. (NYSE:F). A result of Shaw decreasing his hold over the stock by 26%, Ford (NYSE:F) makes up for 0.3% of Shaw’s 13F investment portfolio for Q2 2022.
On September 9, BofA analyst John Murphy lowered the price target on Ford Motor Co. (NYSE:F) to $28 from $32, keeping a Buy rating on the stock. Since supply chain issues are likely to pressurize auto volumes in 2023, and the macro environment has become increasingly risky, Murphy expects the next peak in demand in 2028. He is revising estimates and price objectives across all his auto coverages, as he now projects U.S. auto sales to be 13.9 million units in 2022, 15.3 million in 2023, 16 million in 2024 and 16.8 million in 2025, all down from his previous forecasts.
Hedge fund sentiment around Ford Motor Co. (NYSE:F) has remained the same in Q2 2022, with 46 hedge funds long the stock in both, Q1 2022 and Q2 2022. As of the second quarter of 2022, Citadel Investment Group is the largest shareholder in Ford Motor Co. (NYSE:F), owning more than 29 million shares worth at around $323.2 million.
This is what Baron Funds had to say about Ford Motor Co. (NYSE:F) in their Q1 2022 investor letter, a copy of which can be obtained here:
“Ford (NYSE:F) is another example of typical industrial manufacturing business executive mindsets. The April 18, 2022, Bloomberg Businessweek cover story features Ford CEO Jim Farley behind the wheel of an electrified Ford F-150 Lightning. The article is titled, “Hey Elon, THIS is a truck.” I thought the article was terrific. One idea especially stood out to me. Since the F-150 is such a popular vehicle, it “argued for a gradual approach to electrification. Essentially the company retrofitted an existing F-150 with an electric powertrain rather than develop an entirely new truck.” No all-in financial and operation bet by this company on electrification.”
8. The Philips 66 Co. (NYSE:PSX)
D.E. Shaw’s Stake Value: $282.1M
Percentage of D.E. Shaw’s 13F Portfolio: 0.33%
Number of Hedge Fund Holdings: 38
PE Ratio (TTM): 7.59
Based in Westchase, Houston, The Phillips 66 Co. (NYSE:PSX) is an American multinational energy company which specializes in the refining, transporting, and marketing of natural gas liquids and petrochemicals. They also engage in the research and development of emerging energy sources. On July 6, Barclays analyst Theresa Chen raised the price target on The Phillips 66 Co. (NYSE:PSX) to $113 from $95, keeping an Overweight rating on the shares. The analyst raised her Q2 2022 EPS estimate to $6.11, above the consensus of $4.81, mostly driven by a higher refining contribution. Chen’s Q2 refining estimate reflects an “extremely strong” crack spread backdrop, 91% utilization, and recovering margin capture. The company is one of the most prominent entries on billionaire D.E Shaw’s list of the best undervalued stocks to buy now.
On July 23, The Phillips 66 Co. (NYSE:PSX) posted its Q2 2022 returns, reporting a total revenue of $48.6 billion in Q2 2022. Furthermore, the company generated an operating cash flow of $1.8 billion, with the earnings reflecting the strong market environment during the second quarter, driven by a tight global product supply and demand balance. In the second quarter of 2022, the company posted an EPS of $6.77, beating estimates of $5.97 by $0.8.
Hedge fund sentiment around The Phillips 66 Co. (NYSE:PSX) took a hit in Q2 2022, with only 38 hedge funds featuring The Phillips 66 Co. (NYSE:PSX) in their Q2 2022 investment portfolios, compared to 41 in the preceding quarter. As of Q2 2022, D.E. Shaw is the largest shareholder in The Phillips 66 Co. (NYSE:PSX), owning more than 3.4 million shares valued at almost $282.1 million. The result of Shaw increasing his hold over the stock by 56%, the company makes up for 0.33% for Shaw’s 13F portfolio.
Like Meta Platforms Inc. (NASDAQ:FB), AT&T Inc. (NYSE:T), FedEx Corp. (NYSE:FDX), Phillips 66 Co. (NYSE:PSX) is one of the most prominent undervalued stocks to feature in D.E Shaw’s Q2 2022 investment portfolio.
7. JPMorgan Chase & Co. (NYSE:JPM)
D.E. Shaw’s Stake Value: $304.1M
Percentage of D.E. Shaw’s 13F Portfolio: 0.35%
Number of Hedge Fund Holdings: 104
PE Ratio: 9.56
Based in New York City, JPMorgan Chase & Co. (NYSE:JPM) is an American multinational investment bank and financial services holding company which is incorporated in Delaware. As of 2022, JPMorgan Chase & Co. (NYSE:JPM) is the largest bank in the United States, the world’s largest bank by total market capitalization and fifth largest bank in the world in terms of total assets, with total assets of almost $4 trillion. As of the second quarter of 2022, the bank reported a total revenue of $30.7 billion. JPMorgan Chase & Co. (NYSE:JPM) also posted an EPS of $2.76 in Q2 2022, trailing behind estimates of $2.88 by $0.12.
Investor interest around JPMorgan Chase & Co. (NYSE:JPM) has fallen in the second quarter of 2022, with 104 hedge funds long the stock, compared to 110 in the preceding quarter. As of Q2 2022, Fisher Asset Management is the largest shareholder in JPMorgan Chase & Co. (NYSE:JPM), having a total stake of $899.7 million. D.E. Shaw and Co. is much more conservative in their ownership of the stock, owning more than 2.7 million shares valued at $304.1 million. A result of Shaw strengthening his hold over JPMorgan Chase & Co. (NYSE:JPM) by 45%, the company now makes up for 0.35% of Shaw’s 13F portfolio.
Carillon Tower Advisers mentioned JPMorgan Chase & Co. (NYSE:JPM) in their Q1 2022 investor letter, a copy of which can be obtained here. This is what they had to say:
“More cyclical sectors, including technology and consumer discretionary, were among the weakest, likely due to rising interest rates and inflation. It was encouraging to see the quarter finish on a strong note with the S&P 500 only about 5% away from its all-time highs. Shares of JPMorgan Chase (NYSE:JPM) detracted from performance due to the company’s increased expense guidance, announced in January.”
6. Qualcomm Inc (NASDAQ:QCOM)
D.E. Shaw’s Stake Value: $355.5M
Percentage of D.E. Shaw’s 13F Portfolio: 0.41%
Number of Hedge Fund Holdings: 71
PE Ratio (TTM): 11.7
Headquartered in San Diego, California, Qualcomm (NASDAQ:QCOM) is an American multinational corporation which specializes in the production of semiconductors, software, and services related to wireless technology. As of September 11, the company has a market capitalization of $148.3 billion, and a price-to-earnings ratio of 11.7. As of Q2 2022, Qualcomm (NASDAQ:QCOM) posted an EPS of $2.96, beating estimates of $2.87 by $0.09. On July 29, DZ Bank analyst Ingo Wermann downgraded Qualcomm (NASDAQ:QCOM) to Hold from Buy, keeping a price target of $150 on the shares. Alongside prominent stocks like Meta Platforms Inc. (NASDAQ:FB), AT&T Inc. (NYSE:T), FedEx Corp. (NYSE:FDX), Qualcomm (NASDAQ:QCOM) is one of the most eminent undervalued stocks to appear in D.E. Shaw’s 13F portfolio.
Investor interest around Qualcomm (NASDAQ:QCOM) has decreased in the second quarter of 2022, with 71 hedge funds having a collective stake of more than $2.8 billion. This is down from 73 hedge funds in Q1 2022, which had a total stake value of $3.6 billion in Qualcomm (NASDAQ:QCOM). As of Q2 2022, Citadel Investment Group is the largest stakeholder in the stock, owning more than 5 million shares worth $644.1 million. Shaw does not trail too far behind, owning more than 2.8 million shares valued at $355.5 million. A result of Shaw loosening his grip over the stock by 3% in Q2 2022, Qualcomm (NASDAQ:QCOM) makes up for 0.41% of Shaw’s 13F investment portfolio.
This is what ClearBridge Investments had to say about Qualcomm (NASDAQ:QCOM) in their Q4 2021 investor letter, a copy of which can be obtained here:
“Market strength continued in the fourth quarter, with only the communication services sector down in the Russell 1000 Value Index. Portfolio returns benefited from the strong performance of semiconductor maker Qualcomm, which has executed exceptionally well in pursuing the transition to 5G, growing both content and share due to its leadership position in cellular technology. The chipmaker recently outlined a number of peripheral growth opportunities outside of mobile markets, including automotive (where it hopes to leverage its strong presence in the automotive infotainment space into advanced driver assistance systems), Internet of Things (including opportunities in the PC market, VR/AR market, and factory automation) and radio frequency (where mmWave adoption globally, including China, would drive substantial upside).”
5. Citigroup Inc. (NYSE:C)
D.E. Shaw’s Stake Value: $364.1M
Percentage of D.E. Shaw’s 13F Portfolio: 0.42%
Number of Hedge Fund Holdings: 82
PE Ratio (TTM): 6.48
Based in New York City, Citigroup Inc. (NYSE:C) is an American multinational investment bank and financial services corporation, formed through a merger between banking giant Citicorp and financial conglomerate Travelers Group in 1998. It is the third largest banking institution in the United States. As of the second quarter of 2022, Citigroup Inc. (NYSE:C) posted an EPS of $2.19, beating estimates of $1.68 by $0.51. Furthermore, the company reported a total revenue of $19.6 billion in Q2 2022. It is one of the most prominent undervalued stocks to buy now according to D.E. Shaw.
Hedge fund sentiment around Citigroup Inc. (NYSE:C) has decreased significantly, with 82 hedge funds long the stock in Q2 2022. This is down from Q1 2022, when 88 funds held stakes in Citigroup Inc. (NYSE:C).
Citigroup Inc. (NYSE:C) was mentioned in Diamond Hill Capital’s Q1 2022 investor letter. Here is what the firm said:
“Shares of Citigroup (NYSE:C) declined in the quarter as investors became increasingly negative on capital markets activity. The company is also continuing to divest certain consumer banking geographies which may be dilutive to earnings in the near term.”
4. Chesapeake Energy Corp. (NYSE:CHK)
D.E. Shaw’s Stake Value: $385M
Percentage of D.E. Shaw’s 13F Portfolio: 0.45%
Number of Hedge Fund Holdings: 67
PE Ratio (TTM): 15
Headquartered in Oklahoma City, Oklahoma, Chesapeake Energy Corp. (NYSE:CHK) is an American exploration and production company which engages in the acquisition, exploration, and development of properties, for the production of oil, natural gas, and natural gas liquids from underground reservoirs. On August 1, Benchmark analyst Subash Chandra initiated coverage of Chesapeake Energy Corp. (NYSE:CHK) with a Buy rating and a $137 price target.
Investor interest in Chesapeake Energy Corp. (NYSE:CHK) seems to have skyrocketed in the second quarter of 2022, with 67 hedge funds long the stock, compared to the preceding quarter, when 59 hedge funds were long Chesapeake Energy Corp. (NYSE:CHK). As of the second quarter of 2022, Oaktree Capital Management is the largest shareholder in the company, owning more than 10.5 million shares valued at $851.6 million. D.E. Shaw does not lag too far behind, and with a total stake of $385 million in Chesapeake Energy Corp. (NYSE:CHK), is the second largest shareholder in the company. Shaw decreased his hold over the company by 3% in Q2 2022, leading Chesapeake Energy Corp. (NYSE:CHK) to account for 0.45% of the billionaire’s 13F portfolio.
Chesapeake Energy Corp. (NYSE:CHK) was mentioned in ClearBridge Investments Q1 2022 investor letter, a copy of which can be obtained here. This is what they had to say:
“In the early days of the invasion, we made two measured changes to the portfolio based on longer-term fallout we anticipate from Russia’s invasion of Ukraine. First, we initiated small positions in U.S. natural gas producers Chesapeake (NYSE:CHK).
Given its superior environmental profile compared to other fossil fuels, we have long favored natural gas in our energy holdings. Combustion of natural gas releases 50% less CO2 than coal, 25% less CO2 than gasoline and dramatically less particulate and pollution, per the U.S. Energy Information Administration. With the advances in shale production this century, the U.S. has become a natural gas powerhouse with some of the lowest-cost and largest reserves in the world. But because natural gas is difficult to ship across the ocean (it must be liquefied, which requires expensive infrastructure on both ends of the voyage), America’s gas bounty has ironically proved a burden for U.S. producers.
The surplus of natural gas in North America has resulted in low prices and weak earnings for gas-focused producers. Exports, while growing, are restrained by the high cost of building export infrastructure. Europe, in a Faustian bargain, has relied on abundant, inexpensive Russian gas transported by pipeline.
Despite the abundance of low-cost resources and a superior environmental profile, the investment case for U.S. natural gas producers was previously unfavorable due to oversupply in the domestic market.
In the days preceding the invasion, we were quick to realize the war would change global energy flows. Europe is shifting away from Russia and toward new sources of imported liquified natural gas. We purchased our stakes in Chesapeake to capitalize on these trends. The recently announced energy pact between the U.S. and Europe represents an early positive datapoint in support of this investment thesis.”
3. ExxonMobil Corp. (NYSE:XOM)
D.E. Shaw’s Stake Value: $484.6M
Percentage of D.E. Shaw’s 13F Portfolio: 0.56%
Number of Hedge Fund Holdings: 72
PE Ratio (TTM): 10.54
Based in Irving, Texas, ExxonMobil Corp (NYSE:XOM) is an American multinational oil and gas corporation. It is one of the largest companies in the world by revenue and market capitalization and as of 2022, ExxonMobil Corp (NYSE:XOM) ranks sixth and twelfth on the Fortune Global 500. As of the second quarter of 2022, hedge fund sentiment around ExxonMobil Corp (NYSE:XOM) has declined, with 72 hedge funds reporting stakes in the company, as compared to 83 in the preceding quarter. As of Q2 2022, Rajiv Jain’s GQG Partners is the largest shareholder in the stock, owning more than 47.5 million shares worth $4.1 billion. D.E. Shaw and Co. is much more conservative in their ownership of ExxonMobil Corp (NYSE:XOM), having a total stake of $484.6 million.
2. Bank of America Corp. (NYSE:BAC)
D.E. Shaw’s Stake Value: $516.1M
Percentage of D.E. Shaw’s 13F Portfolio: 0.6%
Number of Hedge Fund Holdings: 99
PE Ratio (TTM): 10.89
Headquartered in Charlotte, North Carolina, the Bank of America Corp. (NYSE:BAC) is an American multinational investment bank and financial services holding company. It is the second largest banking institution in the United States, and the second largest bank in the world by total market capitalization. On July 19, RBC Capital analyst Gerard Cassidy lowered the price target on Bank of America Corp. (NYSE:BAC) to $40 from $45, keeping an Outperform rating on the shares.
Investor interest around Bank of America Corp. (NYSE:BAC) has virtually remained the same in Q2 2022, with 99 hedge funds long the stock in Q1 and Q2 2022. As of the second quarter of 2022, Warren Buffett’s Berkshire Hathaway is the largest shareholder in Bank of America Corp. (NYSE:BAC), having a stake worth $31.4 billion. D.E. Shaw comes in not far behind, owning more than 16.5 million shares which award him a stake of $516.1 million. Shaw strengthened his hold over the stock by 196%, causing Bank of America Corp. (NYSE:BAC) to make up for 0.6% of Shaw’s 13F investment portfolio for Q2 2022.
Here is what ClearBridge Investments had to say about Bank of America Corp. (NYSE:BAC) in their Q2 2022 investor letter:
“In the second quarter we made a sizable add to our position in Bank of America (NYSE:BAC) as our bank holdings have significant leverage to rising interest rates. The Fed, unfortunately, was late to realize inflation’s magnitude, maintaining for far too long that inflationary pressures were merely transitory. This mistake caused inflation to accelerate, necessitating a larger intervention than if the Fed had moved sooner.”
1. Meta Platforms Inc. (NASDAQ:FB)
D.E. Shaw’s Stake Value: $568.2M
Percentage of D.E. Shaw’s 13F Portfolio: 0.66%
Number of Hedge Fund Holdings: 184
PE Ratio (TTM): 13.94
Headquartered in Menlo Park, California, Meta Platforms Inc. (NASDAQ:FB) is an American multinational technology conglomerate. In 2021, the company generated 97.5% of its revenue from the sale of advertising and as of September 2022, it is one of the most valuable companies in the world.
As of September 11, Meta Platforms Inc. (NASDAQ:FB) had declined 50.3% year-to-date. Hedge fund sentiment around the company has also declined drastically, with 184 funds reporting a cumulative stake of $18.2 billion in Q2 2022. This is down from 200 hedge funds having a stake of $19.3 billion in Q1 2022. D.E. Shaw owns more than 3.5 million shares which are valued at $568.2 million.
Baron Funds, an asset management firm, mentioned Meta Platforms Inc. (NASDAQ:FB) in their Q2 2022 investor letter. This is what they had to say:
“Shares of Meta Platforms, Inc., the owner of Facebook, the world’s largest social network, fell 28.4% during the second quarter due to quarterly results that missed consensus estimates, driven by the impact of Apple’s new privacy changes in its iOS operating system. These changes have made it harder for Facebook to measure the effectiveness of its advertising across its mobile apps.
In the longer term, we expect Facebook to continue utilizing its leadership in mobile to provide global advertisers targeted marketing capabilities at scale, with substantial monetization optionality ahead in newer areas such as Reels (Meta’s competing solution to TikTok) and e-commerce.”
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Disclosure: none. 10 Best Undervalued Stocks to Buy Now According to Billionaire DE Shaw is originally published on Insider Monkey.
