We recently compiled a list of the 12 Best Long-term Stocks to Invest in for High Returns. In this article, we are going to take a look at where Shell plc (NYSE:SHEL) stands against the other stocks.

The global economy seems to be at a point where fiscal ambition intersects with market skepticism, says Oakglen Wealth. Donald Trump’s presidential election and the Republican takeover of the US Senate and retention of the House of Representatives resulted in a complicated mix of policy goals. Notably, the broader market’s initial reaction hints at positivity given Trump’s plans for growth, hinting at the continued outperformance of US assets in the year ahead.

Sectors To Focus on in 2025

Fidelity has an optimistic view of the financial sector, primarily because of steady economic growth for the broader US economy. Since the financial sector is cyclical, the sector’s performance is mainly a function of the strength of the broader economy. The US economy has been showing momentum and a path towards the desired “soft landing,” says Fidelity. Therefore, worries about a mild recession (which could have impacted the financial stocks) are alleviated. One significant difference in market dynamics entering 2025, in comparison to recent years, is the outlook on interest rates.

The H2 2024 began a new rate cycle, with the US Fed cutting rates for the first time since the initial days of the pandemic. Banks might benefit from higher interest rates due to higher NIMs. On the other hand, lower rates can help boost confidence and decrease the pressure on economic growth, which is expected to be beneficial for virtually all industries in this sector, opines Fidelity. Within equities, Franklin Templeton has an optimistic outlook on IT, health care, energy, consumer staples, and industrial sectors.

READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.

Growth Drivers Amidst Policy Shifts

As per Russell Investments, the US economy is resilient as it enters 2025, but the road ahead is expected to be affected by shifting policy dynamics. On the positive side, tax cuts and deregulation can offer a meaningful growth boost, mainly to domestic and cyclical sectors. The investment firm believes that companies leveraging AI technologies to enhance productivity—mainly in industrials and healthcare— are expected to see material improvements to operating fundamentals.

Even though the mega-cap AI stocks have fueled the market returns over recent years, leadership has been shifting to companies leveraging AI to develop real-world efficiencies. Russell Investments believes that the Trump administration’s policies offer a delicate balancing act. It assumes that the new administration will not aggressively pursue policies that can create inflation risk.

Our Methodology

To list the 12 Best Long-term Stocks to Invest in for High Returns, we sifted through several financial media reports related to the best long-term stocks to buy. After getting an initial list of 20 stocks, we chose the ones which analysts saw the most upside to. Finally, the stocks were ranked in ascending order of their average upside potential, as of February 6. We also mentioned the hedge fund sentiments around each stock, as of Q3 2024.

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).

Shell plc (NYSE:SHEL)

Average Upside Potential: 21.4%

Number of Hedge Fund Holders: 48

Shell plc (NYSE:SHEL) operates as an energy and petrochemical company. Analyst Roger Read from Wells Fargo maintained a “Buy” rating on the company’s shares, which stemmed from the company’s promising financial outlook and strategic initiatives. Shell plc (NYSE:SHEL) demonstrated robust operational execution, which, together with cost-cutting measures, improved its cash flow and FCF, aiding a positive financial performance. In Q4 2024, despite the lower earnings, the company’s cash delivery remained solid and it generated FCF of $40 billion across the year, higher than 2023, in a lower price environment.

As per the analyst, Shell plc (NYSE:SHEL)’s emphasis on refining its portfolio via divestments and prioritizing value over volume continues to strengthen its position. It remains well-positioned to benefit from the anticipated growth in the global LNG market. Furthermore, Shell plc (NYSE:SHEL)’s commitment to shareholder returns is evident via dividend increases and a share buyback program, aided by robust cash flow forecasts and a reduction in net debt. To provide a brief overview, the company announced a 4% increase in its dividends and another $3.5 billion buyback program on January 30. This marks the 13^th consecutive quarter of at least $3 billion of buybacks.

Elsewhere, DBS analyst Suvro Sarkar has maintained a bullish stance on the company’s stock, giving a “Buy” rating on January 31. The rating was backed by factors including Shell plc (NYSE:SHEL)’s strategic focus on enhancing shareholder returns and maintaining strong cash flows. Also, the analyst believes that the company’s strong earnings potential is fueled by its integrated gas and upstream oil segments, which can benefit from global supply constraints and geopolitical tensions.

Overall SHEL ranks 11th on our list of the best long-term stocks to invest in for high returns. While we acknowledge the potential of SHEL as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.

Disclosure: None. This article is originally published at Insider Monkey.