10 Undervalued European Stocks For The Rest of 2022

In this article, we discuss 10 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. 

5. STMicroelectronics N.V. (NYSE:STM)

Number of Hedge Fund Holders: 18

P/E Ratio as of November 7: 8.62

STMicroelectronics N.V. (NYSE:STM) is headquartered in Geneva, Switzerland, and the company designs, manufactures, and sells semiconductor products in Europe, the Middle East, Africa, the Americas, and the Asia Pacific. The company operates through Automotive and Discrete Group, Analog, MEMS and Sensors Group, and Microcontrollers and Digital ICs Group segments.  

On October 27, STMicroelectronics N.V. (NYSE:STM) reported its third quarter results, posting GAAP earnings per share of $1.16 and a revenue of $4.32 billion, outperforming Wall Street consensus by $0.11 and $80 million, respectively. The revenue climbed 35% on a year-over-year basis. 

Societe Generale analyst Aleksander Peterc on October 31 reiterated a Buy recommendation on STMicroelectronics N.V. (NYSE:STM) but trimmed the firm’s price target on the shares to EUR 71 from EUR 72. 

According to Insider Monkey’s data, 18 hedge funds were bullish on STMicroelectronics N.V. (NYSE:STM) at the end of Q2 2022, compared to 19 funds in the earlier quarter. Michael Rockefeller and Karl Kroeker’s Woodline Partners is the leading position holder in the company, with 3.17 million shares worth nearly $100 million. 

Here is what Saturna Capital has to say about STMicroelectronics N.V. (NYSE:STM) in its Q3 2021 investor letter:

“STMicroelectronics has a goal of becoming carbon neutral by 2027, and in 2020 reported that their greenhouse gas emissions were down 19% over the previous year. In 2020, STMicroelectronics was the only semiconductor company with targets approved by the Science Based Targets Initiative for limiting warming to 1.5 degrees Celsius, and their 2027 net-zero goal is recognized as one of the most ambitious in the industry. As greenwashing presents a growing concern within the ESG community, and as more and more funds engage in re-branding exercises that have little to do with pursuing sustainable investment practices among others, our definition of sustainability includes financial sustainability, most often demonstrated by intelligent capital allocation leading to solid cash flows that can sustain a business without resorting to excessive leverage.”

4. Nokia Oyj (NYSE:NOK)

Number of Hedge Fund Holders: 20

P/E Ratio as of November 7: 14.57

Nokia Oyj (NYSE:NOK) is a Finland-based company providing mobile, fixed, and cloud network solutions worldwide, operating through four segments – Mobile Networks, Network Infrastructure, Cloud and Network Services, and Nokia Technologies. Nokia Oyj (NYSE:NOK) is one of the best cheap stocks to invest in. On October 20, Nokia Oyj (NYSE:NOK) posted a Q3 non-GAAP EPS of €0.10 and a revenue of €6.2 billion, topping market estimates by €0.01 and €130 million, respectively. The company also raised its FY22 sales outlook. 

On October 25, Societe Generale analyst Aleksander Peterc maintained a Buy rating on Nokia Oyj (NYSE:NOK) but lowered the firm’s price target on the stock to EUR 5.40 from EUR 5.80. 

According to Insider Monkey’s Q2 data, 20 hedge funds were long Nokia Oyj (NYSE:NOK), compared to 22 funds in the prior quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the largest stakeholder of the company, with approximately 24 million shares worth $110 million. 

3. TotalEnergies SE (NYSE:TTE)

Number of Hedge Fund Holders: 20

P/E Ratio as of November 7: 6.56

TotalEnergies SE (NYSE:TTE) is a French energy company that operates through four segments – Integrated Gas, Renewables & Power, Exploration & Production, Refining & Chemicals, and Marketing & Services. TotalEnergies SE (NYSE:TTE) serves customers worldwide. Its Q3 net profit climbed to $6.63 billion from $4.65 billion in the same period last year, and revenues increased to $69 billion from $54.7 billion from the prior-year quarter. 

On October 31, Deutsche Bank analyst James Hubbard raised the price target on TotalEnergies SE (NYSE:TTE) to EUR 54.90 from EUR 51.30 and kept a Hold rating on the shares.

According to the second quarter database of Insider Monkey, 20 funds were long TotalEnergies SE (NYSE:TTE), with combined stakes worth $1.8 billion, compared to 20 funds in the prior quarter worth $1.7 billion. Ken Fisher’s Fisher Asset Management held the largest position in the company, comprising 26.8 million shares valued at $1.4 billion. 

Here is what Artisan Partners specifically said about TotalEnergies SE (NYSE:TTE) in its Q3 2022 investor letter:

“We added one new position this quarter, TotalEnergies SE (NYSE:TTE). TTE is one of the world’s largest energy companies. It develops and produces oil and gas, produces and sells refined products, is one of the largest producers and traders of LNG, and owns a large portfolio of renewable power generating assets. TTE has one of the lowest cost portfolios of oil and gas assets and therefore one of the lowest breakeven points in the industry. It also has one of the best balance sheets in the industry. We estimate it will reach a net cash position sometime in 2023.

The valuation of TTE—and that of Shell—is fascinating. TTE sells at approximately 4X earnings and has a 5% dividend yield. With its current buyback program and a recently announced special dividend, the owners yield is more than 10%. The valuation and owners yield are not dissimilar to those of Shell, which we also own and which trades at just under 5X earnings. To say that a discount is attached to European oil companies relative to US peers is an understatement. ExxonMobil sells at 8X earnings, Chevron 9X and Conoco 8X. If TTE and Shell redomiciled to the US, their share prices would probably double.

We have a few theories for the valuation anomaly. First, as mentioned above, Europe generally trades at a big discount to the US. In the case of TTE and Shell, this makes no economic sense. The oil and gas business is a global one, and TTE and Shell have attractive assets. The main explanation, we believe, is that large sections of the European asset management industry will not invest in oil and gas because of ESG restrictions. Yet if the recent war in Ukraine and the current energy crisis have shown us nothing else, the supply of energy is an enormous social good. Indeed, it is an existential good. Moreover, it is companies such as TTE that will invest billions to supply the LNG that Europe desperately needs to restore its economy and reduce the crushing cost burden on families who must now choose between heating their homes and eating. Finally, TTE is also investing billions per year in renewable power generating assets such as wind and solar. Such assets will likely never replace clean burning natural gas and nuclear as base power suppliers, but they are a valuable and clean adjunct to modern grids. We believe TTE’s renewable portfolio is worth between $25 billion and $35 billion and is moving from almost no profit contribution toward meaningful levels of profit over the next few years. We wonder how it makes sense for investors to disinvest from these kinds of assets on ethical grounds.”

2. Stellantis N.V. (NYSE:STLA)

Number of Hedge Fund Holders: 25

P/E Ratio as of November 7: 2.83

Stellantis N.V. (NYSE:STLA) is a Netherlands-based automaker focused on the design, engineering, manufacturing, and distribution of automobiles, engines, transmission systems, metallurgical products, and production systems worldwide. On November 3, Stellantis N.V. (NYSE:STLA) reported a Q3 revenue of $42.1 billion, up 29.1% year-over-year and global BEV sales jumped 41% as compared to the same period last year. It is one of the best cheap stocks to invest in. 

On October 20, Nomura analyst Anindya Das upgraded Stellantis N.V. (NYSE:STLA) to Buy from Neutral with a price target of EUR 19.80, up from EUR 15.70.

Among the hedge funds tracked by Insider Monkey, 25 funds were long Stellantis N.V. (NYSE:STLA) at the end of June 2022, compared to 29 funds in the prior quarter. John Overdeck and David Siegel’s Two Sigma Advisors is a significant position holder in the company, with 4.7 million shares worth $58 million.

1. Chubb Limited (NYSE:CB)

Number of Hedge Fund Holders: 35

P/E Ratio as of November 7: 14.58

Chubb Limited (NYSE:CB) is a Switzerland-based company that provides insurance and reinsurance products worldwide. On October 25, the company reported a Q3 non-GAAP EPS of $3.17, beating analysts’ estimates by $0.56. The net premiums of $11.54 billion climbed 15.4% year-over-year, topping Street consensus by $830 million. Operating cash flow was $3.43 billion for the third quarter and a record $8.59 billion year-to-date.

On October 27, Raymond James analyst C. Gregory Peters raised the price target on Chubb Limited (NYSE:CB) to $270 from $260 and maintained a Strong Buy rating on the shares following the Q3 results. The analyst believes Chubb Limited (NYSE:CB) is well-positioned to achieve improving underlying results, given several years of solid rate increases as well as the outlook for pricing to remain in-line or ahead of loss cost trends through at least the end of this year. 

According to Insider Monkey’s data, 35 hedge funds were bullish on Chubb Limited (NYSE:CB) at the end of June 2022, compared to 31 funds in the prior quarter. Andreas Halvorsen’s Viking Global is the biggest position holder in the company, with 3.7 million shares worth $742 million. 

Here is what Aristotle Capital Management Value Equity has to say about Chubb Limited (NYSE:CB) in its Q1 2022 investor letter:

“Our investment in Chubb began in the fourth quarter of 2015, shortly after ACE Limited announced it would acquire the Chubb Corporation, creating the largest global property and casualty insurance company by underwriting income. During our nearly seven-year holding period, the company’s combination progressed leading to the realization of main catalysts we had identified. These included cost savings, broadened product offerings and an expanded customer base, as well as enhanced distribution capabilities and improved pricing due to scale. In addition, Chubb successfully grew its profitable high-net-worth personal lines. While we still consider Chubb to be a high-quality business, few catalysts remain after what was, in our opinion, a remarkable run of successful business execution. As such, we decided to step aside in favor of what we believe to be a more optimal investment in Blackstone.”

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Disclosure: None. 10 Undervalued European Stocks For The Rest of 2022 is originally published on Insider Monkey.